Shopify Bookkeeping Best Practices

Shopify Bookkeeping Best Practices

Shopify is an ecommerce platform that has taken the world by storm and gained tremendous popularity during the COVID-19 global pandemic.

However, for bookkeepers and business owners, Shopify presents a new challenge for small businesses. As an international ecommerce platform, it means that small business owners now must contend with international pressures; and must understand how to run this new side of business.

The following blog seeks to dive into the complex worlds of bookkeeping and Shopify, and understand where these two worlds collide.

This blog will highlight what bookkeeping is for small businesses, what the Shopify platform and concept is, how it works, why bookkeeping is important on this platform, and the top 10 best bookkeeping practices on the platform.

First, what exactly is bookkeeping (why is it important)

Simply put, bookkeeping is the process of recording, classifying, and organizing financial transactions and data for a business. It is an essential part of accounting and helps business owners keep track of their income, expenses, assets, liabilities, and equity.

By keeping accurate and up-to-date financial records, bookkeeping enables small business owners to make informed decisions and stay on top of their finances.

Bookkeeping involves a range of tasks, including recording transactions in a ledger, categorizing expenses, reconciling bank accounts, preparing financial statements, and tracking accounts receivable and accounts payable.

It is important to keep these records accurate and up-to-date to ensure the financial health of your business in the short- and long-term.

Good bookkeeping practices provide several benefits for small businesses.

Firstly, it helps business owners keep track of their cash flow and financial performance. By monitoring their income and expenses, business owners can identify areas of their business that are profitable or in need of improvement.

Secondly, bookkeeping enables business owners to file accurate tax returns and avoid penalties for late or incorrect filings. Keeping accurate financial records also makes it easier to apply for loans or financing in the future.

Thirdly, bookkeeping provides a clear picture of the financial health of your business. By reviewing financial reports and statements, business owners can identify areas where they may be overspending, where revenue is lagging, or where profitability could be improved.

In short, bookkeeping is an essential part of running a successful small business.

By keeping accurate and up-to-date financial records, business owners can make informed decisions, manage their cash flow, and ensure compliance with tax and regulatory requirements.

It is important for small business owners to implement good bookkeeping practices from the start to set their business up for financial success.

What is the Shopify platform?

Shopify is a popular ecommerce platform that enables entrepreneurs and businesses to set up online stores and sell products and services. Founded in 2006, Shopify has become a leading platform for ecommerce, powering over 1 million businesses in more than 175 countries.

It is a platform that provides a range of tools and services to help businesses set up and manage their online stores. These include customizable templates and themes, payment processing, shipping and fulfillment services, and marketing and analytics tools.

It also provides a range of features and integrations to help businesses grow and scale their ecommerce operations.

Simply put, Shopify is an ecommerce platform that allows small and large business owners to host their own websites, and more seamlessly sell products online all around the world.

Shopify has become a popular platform during the pandemic for ecommerce businesses looking to establish an online presence and sell products and services to customers around the world. The reason for this is that during the pandemic, people were forced to work from home and find unique and innovative solutions to earn money.

How Shopify works?

Shopify works by providing a comprehensive ecommerce platform that allows businesses to set up and manage their online stores.

Businesses can create their online store by choosing from a range of customizable templates and themes, adding products and services, and configuring payment and shipping options. Shopify provides built-in payment processing and shipping services, as well as marketing and analytics tools to help businesses grow and optimize their ecommerce operations.

Shopify also offers a range of integrations and apps to extend the functionality of the platform, allowing businesses to tailor their online store to their specific needs. Overall, Shopify simplifies the process of launching and managing an online store, making it accessible to businesses of all sizes.

Why bookkeeping is important on Shopify

Bookkeeping is important for Shopify business owners for several reasons.

Firstly, it allows business owners to keep track of their income and expenses, which is essential for managing cash flow and making informed decisions.

On a digital platform that generates sales from around the world, it is incredibly important to accurately track where cash flow comes and goes from.

With accurate and up-to-date financial records, business owners can identify areas of their business that are profitable or in need of improvement and adjust their strategies accordingly.

Secondly, bookkeeping enables Shopify business owners to stay on top of their tax obligations. By keeping accurate financial records, business owners can ensure they file accurate tax returns and avoid penalties for late or incorrect filings.

Thirdly, bookkeeping provides a clear picture of the financial health of the business. By reviewing financial reports and statements, business owners can identify areas where they may be overspending, where revenue is lagging, or where profitability could be improved.

Lastly, bookkeeping is important for Shopify business owners when applying for loans or financing.

Lenders often require businesses to provide financial statements and other financial records as part of the loan application process. With accurate and up-to-date financial records, business owners can improve their chances of securing the financing they need to grow their business.

Overall, bookkeeping is an essential part of running a successful Shopify business. It enables business owners to make informed decisions, manage their cash flow, and ensure compliance with tax and regulatory requirements.

What bookkeeping concerns are there with Shopify?

An important piece with regards to Shopify to note is that there are several bookkeeping concerns that Shopify business owners should be aware of.

Firstly, it is important to ensure that all transactions and financial data are accurately recorded and reconciled in the bookkeeping system.

This includes sales transactions, refunds, discounts, and shipping fees.

Secondly, Shopify business owners need to ensure that their bookkeeping system is set up to properly handle sales tax.

Shopify provides built-in tax calculation and reporting features, but it is important to ensure that the correct tax rates and rules are applied based on the location of the customer and the business.

Thirdly, Shopify business owners need to ensure that their bookkeeping system is integrated with their payment gateway and bank accounts to ensure accurate recording and reconciliation of payments and refunds.

Lastly, Shopify business owners need to ensure that their bookkeeping system is set up to accurately track inventory levels and costs.

This includes recording the cost of goods sold, tracking inventory levels, and ensuring that inventory adjustments are properly recorded.

Shopify business owners should ensure that their bookkeeping system is set up to accurately record and reconcile all financial transactions, handle sales tax, integrate with payment gateways and bank accounts, and accurately track inventory levels and costs.

By addressing these concerns, Shopify business owners can ensure that their bookkeeping system is accurate and up-to-date, enabling them to make informed decisions and manage their finances effectively.

The 10 best practices for Shopify bookkeeping

As a small business owner in Canada (specifically, economies like Vancouver), keeping your financial records in order is crucial for the success of your business. As illustrated above, this is incredibly important on the Shopify platform.

The following list highlights the top 10 most cited bookkeeping tips and best practices for Canadian small business owners:

  • Keep accurate records
  • Keep bank records separate
  • Closely track expenses
  • Consistent reconciliation
  • Use technology
  • Closely track taxes
  • PLAN for taxes
  • Keep organized records
  • Regularly review reports
  • Hire a bookkeeper or accountant

Keep accurate records

Accurate record-keeping is the foundation of good bookkeeping practices. You should keep track of all your transactions, including sales, expenses, refunds, and returns.

This will help you stay on top of your finances and make informed decisions about your business. Shopify makes it easy to keep accurate records by providing sales reports, order reports, and financial reports.

Set up a separate business bank account

Something that Valley Business Centre has talked about in other blogs on this site is that it’s important to closely keep track of personal and business finances, and separate these finances.

Setting up a separate business bank account will help you keep track of your income and expenses, and make it easier to reconcile your accounts at the end of the month. This will also make it easier to apply for a business loan or credit card in the future.

Track your expenses

Tracking your expenses is essential for good bookkeeping practices. It is important to keep receipts and invoices for all your business expenses, including office supplies, equipment, and advertising costs.

Shopify allows you to upload and attach receipts to each transaction, which makes it easy to keep track of your expenses.

Reconcile your accounts regularly

Reconciling your accounts means checking that the transactions in your financial records match the transactions in your bank account.

This ensures that your records are accurate and up to date. You should reconcile your accounts on a monthly basis, and Shopify provides reports that make it easy to do so.

Use accounting software

Accounting software is a topic that is so commonly discussed today, because it is incredibly important, no matter the size of business or industry.

There are countless accounting software tools that are on the market today that can help streamline accounting, bookkeeping and even strategic operations.

Tools like QuikBooks, Xero, and Freshbooks can help streamline cash flow and expense tracking; and other softwares like SolveXia, BlackLine, SAP and salesforce can help automate accounting and bookkeeping practices as well.

In any case, accounting and bookkeeping software can help Canadian business owners make informed decisions about your business and save you time and effort.

For Vancouver Shopify business owners, these technologies can often seamlessly be plugged into the websites, making cross-border purchases and international business management much more seamless.

Keep track of your sales tax

In Canada, businesses are required to collect and remit sales tax on their sales. It is important to keep track of the sales tax you collect and remit, and to ensure that you are following the regulations in your province.

Shopify provides a sales tax report that can help you stay on top of your sales tax obligations, which helps reporting and projections for Canadian Shopify business owners.

Plan for taxes

Canadian Shopify business owners not only need to keep track of sales tax, but they need to make sure they plan for them too.

It is important to plan for your taxes throughout the year, rather than waiting until tax season. Set aside a portion of your income each month to cover your tax obligations, and keep track of your deductions and credits. This will make tax season much easier and less stressful.

Keep your records organized

Keeping your records organized is essential for good bookkeeping practices. You should have a system in place for organizing your receipts, invoices, and other financial documents. This will make it easier to find the information you need when you need it.

Review your financial reports regularly

Reviewing your financial reports regularly can help you stay on top of your finances and make informed decisions about your business.

Shopify provides a range of financial reports, including sales reports, order reports, and financial summaries. Reviewing these reports on a regular basis can help you identify trends and opportunities for growth.

Hire a bookkeeper or accountant

If you are not confident in your bookkeeping skills, or if you simply do not have the time to manage your finances, you should consider hiring a bookkeeper or accountant.

A professional can help you keep your records accurate and up-to-date, and can provide valuable advice about your business finances.

At Valley Business Centre – Bookkeeping & Payroll, we know that online business can be a complex subject. That’s why, for over 30 years, Valley Business Centre – Bookkeeping & Payroll has been providing comprehensive bookkeeping, tax, and remote bookkeeping services to our clients in Whistler, Squamish, the Sea to Sky Corridor and metro Vancouver B.C. areas. Valley Business Centre – Bookkeeping & Payroll provides reliable and effective services to all clients.

Disclaimer

This article is written for informational purposes only. It is current at the date of posting and changes to laws and regulation may result in the information becoming outdated. It is not intended to provide legal, tax, or financial advice. It is recommended that readers get advice from a tax professional before making any final decisions.

 

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