Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
When running your own business, it's crucial to monitor your financial data. It means keeping track of your expenses and income and making sure that your books are in order. If you're using Shopify to run your business, you might be using QuickBooks Online to manage your finances. But if you're not knowledgeable, it can cost your business a lot of money.
In this post, we'll show you the seven biggest Shopify bookkeeping mistakes that sellers make with QuickBooks Online.
Recording Net Sales into QuickBooks
Essentially, you're not collecting any sales deductions, any sales taxes, or other information that would provide insight into the details of those transactions. One of the things to consider is that Shopify isn't simply about sales; it also includes returns and refunds and sales taxes and deductions. All of these figures need to be analyzed to see what is going on with your business.
Returns and refunds can eat into your profits, and if you're not careful, they can even put you in the red. The same goes for sales tax. You could overpay or underpay if you aren't paying attention, and neither one is good for your bottom line. Deductions are a bit more complex, but essentially they're any expenses that can be directly attributed to generating revenue.
All of these need to be in the financial report when looking at your profitability. Otherwise, you might think you're doing better than you are, or worse, and no one wants that.
Assuming Everything is Automated
You may think that if you just connect the Shopify app with QuickBooks, then it should all be automatic, and you won't have to worry about doing any bookkeeping. Wrong! You still have to work on the bookkeeping. So you may save some time on data entry, but it doesn’t eliminate the need to do bookkeeping.
Just because an app can automate some of the processes doesn't mean you don't need to put in any effort. You still need to monitor what's going on and ensure that everything is accurate. So, don't be fooled into thinking that automation is a panacea for all your ills. It's not! You still need to do your part, even if you're using cloud accounting software to help you out.
Using the Wrong Apps
There are several Shopify-to-QuickBooks apps, but some include a lot of unnecessary information from Shopify. You don't need to migrate every transaction from Shopify to QuickBooks, and these applications will sync over every transaction. If you're a high-volume Shopify seller, that's a lot of financial data to handle. It is possible to get away with it as long as you're a startup, but this is not the best course of action as your business grows.
Bad Account Mapping
When you're utilizing integrated applications, you won't be able to control how each sale moves from Shopify. There are certain integrations that are quite limited, allowing you to post Shopify transactions into only a few accounts. Others, on the other hand, offer considerably more freedom in terms of how those payments are transferred.
Many Shopify merchants neglect to pay attention to account mapping. That's why it's critical to double-check that transactions are correctly linked into the appropriate account and that they won't create a mess by putting them in the incorrect one.
Syncing Inventory with QuickBooks
You don't have to sync your inventory with QuickBooks. It is rather limited when it comes to inventory tracking and management like advanced inventory analytics. It also needs extra apps to bridge the gaps, and, ultimately, that won't work for you. If you're expanding a business, the ideal approach is to use cloud inventory software such as Xero or Vend with multi-channel inventory enabled. It'll be incredibly stressful at that point, and you certainly wouldn't want to handle your stock using QuickBooks.
Forgetting to Reconcile Accounts
The next blunder is not reconciling transactions in the bank with Shopify data. So you may have a Shopify-QuickBooks Online integration, and it's bringing over money from Shopify. But are those figures identical to what gets deposited into your bank account? That's where reconciliation comes in handy.
Doing the Accounting on Your Own
Finally, a grave mistake is assuming you can set up and maintain your accounting without the assistance of a qualified ecommerce accountant. We understand that purchasing a cloud accounting software subscription is simple and that you're probably eager to get started with your company's bookkeeping. However, if you don't have the proper system infrastructure to manage all of the various Shopify transactions you'll encounter, you're certainly going to have issues such as failing tax compliance and messy financial liabilities.
Bookkeeping for Shopify is one of the most daunting aspects of running your store. Not only do you have to keep track of all your income and expenses, but you also have to make sure that you are complying with all the relevant tax laws. You also have to deal with managing inventory and shipping orders.
Fortunately, there is a solution to this problem: you can hire a bookkeeper or an accounting firm to take care of all the gory details. It will free up your time to focus on scaling your business, and you can rest easy knowing that your business finances are in capable hands.
If you're making any of these mistakes, don't worry—you're not alone. We see this all the time with our clients using QuickBooks Online for their Shopify accounting. So we put together this list to help you identify where you might be going wrong and how to get back on track.
Still having trouble figuring your business accounting out? Our team of seasoned ecommerce accountants can assist you in getting your books in order and ensuring that your Shopify store is running as smoothly as possible. Give us a call at 877-421-7270.