When you’re just starting out as a Shopify seller, it can be easy to neglect the numbers side of things. After all, who needs to worry about taxes before they’ve made any sales?
But suppose you’re not proactive about accounting early on. In this scenario, it’s pretty easy to catch a serious case of never-got-around-to-it-itis: A nasty disease that can lead to legal problems, thin profit margins, and financial bottlenecks for your business.
So, the solution?
Set yourself up for success, right from the start.
That means:
Learning the basics of ecommerce accounting
Switching from spreadsheets to cloud-based accounting software
Seeking advice from an accountant or financial advisor
Considering GST and other taxes when setting your pricing
But first, let’s make it clear why accounting is so important – and tricky – for ecommerce sellers.
Unlike ordinary retail or service-based businesses, Shopify stores typically generate high volumes of sales. This is because shopping online is frictionless, affordable, and fast when compared to traditional checkout processes.
On top of that, ecommerce platforms like Shopify tend to group together all the individual expenses, fees, and extra costs associated with a sale on the statement they send when you get paid.
Without ecommerce accounting software and a reliable accountant to manage it, you’ll have to manually work out how much from each sale can be expensed, how much is actual profit, how much should be set aside for tax, and much more.
And that’s not all.
The final challenge is that the payouts and statements posted by Shopify (and Amazon) can come at arbitrary times, leaving it up to you to figure out which sales and costs fit into which calendar month.
The good news is that thanks to some techy people a lot smarter than me, there are plenty of software solutions out there to help you manage ecommerce accounting.
If you’re selling on Shopify, there are only two software tools you’ll need to get started: Xero + A2X.
Xero is a cloud-based accounting software that automates and streamlines much of the accounting process.
Instead of spending hours updating spreadsheets and performing manual calculations, Xero lightens your weekly workload by automatically importing sales transactions and allowing you to reconcile them in a few simple clicks.
For example, imagine a customer places an order in my store for one of our bucket hats for men. Xero will then automatically import the sales information from that transaction without my having to type or write anything out manually.
Check out Xero’s pricing plans and features.
A2X is a connector app that runs between Shopify and Xero.
As I mentioned above, ecommerce accounting can present some unique challenges – even for a robust accounting system like Xero. A2X helps solve some of these challenges by providing further automation and shaving a few hours of painful reconciliation off your weekly calendar.
A2X automatically posts settlement summaries to Xero from Shopify. Income and expenses auto-correspond with your payouts, making for quick and accurate reconciliation.
Check out A2X’s pricing plans and features.
In addition to these two software platforms, there are a number of other helpful resources and tools to help you get the most out of your Shopify accounting.
Here’s a short list:
You might be starting to realise there’s quite a lot to manage when it comes to Shopify accounting. That’s where the help of an expert can save the day.
Time is the most valuable asset in any business. When you spend it doing the things you aren’t an expert at, your efficiency and productivity can suffer.
While it’s important to get a basic grasp of all aspects of running a business, outsourcing repetitive tasks to someone with more experience will enable you to keep your focus on whatever it is you’re best at.
When you hire a specialist ecommerce accountant, you’ll get:
Expert, personal accounting advice when you need it
Access to resources and knowledge to help you grow your business
An ally: The more successful you are, the more work they get
Confidence in knowing your tax obligations are met and your books are 100% accurate
Someone with the experience to guide you during major financial decisions
Interested in speaking with an ecommerce accounting specialist to better understand your needs? Get in touch with a Wise Advice expert today.