Running an eCommerce store on Shopify is exciting, but with growth comes responsibility—especially when it comes to accounting. Whether you’re tracking inventory, managing payments, or keeping up with tax requirements, staying on top of your finances can quickly become overwhelming. But with the right approach, you can simplify your Shopify accounting process and stay focused on growing your business.

1. Syncing Your Shopify Store with Accounting Software

Integrating accounting software can make managing the finances of your Shopify store much more efficient. Instead of manually tracking sales, expenses, and inventory, accounting software simplifies the process by automating these tasks, making everything simpler and more efficient.

What does it mean to “sync” your store with accounting software?

Syncing means connecting your Shopify store directly to an accounting platform like QuickBooks or Xero so that your sales data, expenses, and inventory are automatically updated in real time. Without this integration, you’d have to manually enter every sale, expense, and inventory change into a separate system, which can be time-consuming and prone to mistakes.

How does this help?

Syncing your Shopify store with accounting software pulls all the important financial information directly from Shopify. Every time you make a sale, the transaction is automatically recorded in your accounting system. If you buy inventory, that purchase is logged, and your inventory levels are updated. This integration keeps all your financial data in one place and updates it instantly.

Why is this important?
Here’s why syncing your Shopify store with accounting software is such a game-changer:

• Reduces Manual Work: You don’t have to spend hours manually entering sales, receipts, and inventory updates. The system does it automatically, saving you time and reducing the risk of errors.
• Real-Time Accuracy: Since your sales, expenses, and inventory are updated automatically, your financial reports are always up to date. This means you can quickly see how much money you’re making and spending without having to wait for someone to update your books.
• Minimizes Errors: Manual data entry can lead to mistakes—whether it’s entering the wrong sales figure or forgetting to update your inventory. Automated syncing makes less room for human error, which helps ensure your financial data is accurate.
• Easy Reporting: With all your financial data in one place, you can generate reports that show how your business is performing. Whether it’s a profit and loss statement or a balance sheet, having accurate, up-to-date information allows you to make smarter business decisions.

2. Managing Inventory and Cost of Goods Sold (COGS)

Keeping track of your inventory is one of the most important parts of running a successful Shopify store. But it’s not just about knowing how many products you have in stock—accurately managing your inventory is key to understanding how much money you’re really making. This is where Cost of Goods Sold (COGS) comes into play.

What is COGS?
COGS refers to the direct costs involved in producing or purchasing the products you sell. This includes things like the cost of materials, manufacturing, and even shipping to get the product into your hands. It’s crucial because it directly affects your profits. If you don’t know how much each product costs to make or buy, it’s hard to determine how much profit you’re making on each sale.

How does accounting software help?
Shopify has built-in tools to track how much inventory you have, but it doesn’t always give you a full financial picture. That’s where accounting software comes in. When you pair Shopify with accounting software like QuickBooks or Xero, the software automatically tracks and calculates your COGS for each product.

Here’s how it works: Every time you sell a product, the accounting software not only logs the sale but also adjusts your inventory levels and updates the cost associated with that sale. It takes into account things like discounts, shipping costs, and any other expenses related to the product, so you get an accurate calculation of your profit.

3. Sales Tax Compliance Simplified

Sales tax can get complicated on the Shopify platform. Different states and regions each have their own rules about when and where sales tax needs to be collected. It’s not as simple as applying one tax rate to every sale—local laws and thresholds vary depending on where your customers are located, making the process more complex than it seems.

For example, in some states, you might be required to collect sales tax if your sales exceed a certain amount, but in others, you might not have to collect anything unless you have a physical presence there. Keeping track of these varying rules while also running your business can quickly become overwhelming.

How can sales tax automation tools help?
Sales tax automation tools, such as Avalara or TaxJar, integrate directly with your Shopify store and handle the heavy lifting for you. These tools are designed to track all of the different rules in each state or region and calculate the correct amount of sales tax for each purchase automatically. You won’t have to manually calculate tax rates for each customer or worry about changes in tax laws. The software stays updated with the latest rules, so you always collect the correct amount.

Here’s how it works:
Let’s say a customer in New York buys a product from your store. Instead of you having to figure out what the current tax rate is for New York and whether you’re required to collect tax there, Avalara or TaxJar will automatically calculate the exact amount and apply it to the transaction. It will even update your records in real time, so every sale is properly accounted for.

Why is this important?
Sales tax compliance is not something you want to overlook. If you’re not collecting the correct amount, you could face penalties or audits from tax authorities, which can be costly and time-consuming. By using automation tools, you avoid these risks and ensure that your business is always in compliance.

4. Understanding Payment Gateways and Fees

When running a Shopify store, you’re likely using payment gateways such as Shopify Payments, PayPal, or Stripe to process customer transactions. While these gateways make it easy for your customers to pay, it’s important to understand that each one comes with processing fees. These fees are typically a small percentage of every sale, but over time, they can add up and affect your overall profits if not properly accounted for.

What are payment gateway fees?
Payment gateway fees are the charges you pay to the service provider (like PayPal or Stripe) for processing each transaction. These fees usually range from 2% to 3% per transaction, depending on the gateway and your sales volume. For example, if you sell a product for $100, and the gateway charges a 2.9% fee, you’re paying $2.90 just to process that payment.

Why are these fees important to track?
At first glance, these fees might seem small, but if you’re processing hundreds or thousands of transactions a month, they add up quickly. Let’s say your store processes $50,000 worth of sales in a month. If you’re paying a 3% fee, that’s $1,500 in processing fees for that month alone. If you’re not keeping track of these fees, they can quietly eat into your profits without you even realizing it. By integrating your Shopify store with accounting software like QuickBooks or Xero, you can automatically track these fees and gain better insight into how they’re affecting your bottom line.

What are the benefits of tracking these fees?
Tracking your payment gateway fees gives you several advantages:

• Clear Profit Margins: By recording these fees, you get a true sense of your profit margins. Instead of just looking at the sales amount, you’ll also see how much of that sale is going to fees, which helps you better understand your bottom line.
• Compare Gateways: If you’re using multiple payment gateways (for example, Shopify Payments and PayPal), tracking fees allow you to compare which one is more cost-effective for your business. You may find that one gateway charges lower fees for the majority of your transactions, and you can shift more sales toward that option to save money.

5. The Benefits of Working with a Bookkeeping Expert

If managing your Shopify accounting feels overwhelming, you’re not alone. Partnering with a bookkeeping expert who understands the unique challenges of eCommerce businesses can take the load off your shoulders. A trusted accountant or bookkeeping service will ensure that everything from taxes to payroll is handled accurately and on time, allowing you to focus on what you do best—growing your business.

With Xendoo, you get a dedicated team of professionals who specialize in Shopify bookkeeping and accounting. We handle everything from bookkeeping to taxes, ensuring your financials are accurate and on time. Let us take care of the numbers so you can focus on growing your business and reaching new heights.