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Choosing the Right Accounting System for Your Shopify Business

Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness.

Whether you’re brand new to online retail and trying to decide how to set up your eCommerce business, or you’ve been around a while and simply reached the point where your DIY accounting solution just isn’t cutting it anymore, Xendoo’s innovative suite of business offerings can help you. Xendoo can get your small business accounting running like a well-oiled machine so you can focus on what’s important – growing your business. To be competitive in the new economy, cloud-based accounting is no longer a luxury; it’s a necessity. Here are some of the best accounting systems for Shopify that can help get your business on track.

QuickBooks Online

QuickBooks Online is the cloud-based version of the popular and versatile QuickBooks business accounting software. Quickbooks Online accounting system for Shopify allows you to access your account information from any web browser, and the API creates a seamless interface that links directly to Xendoo’s platform. That means you can easily organize and sync all of your critical financial data with no tedious manual data entry. Additionally, Quickbooks Online for Shopify allows you to easily create and send invoices, receive payments, pay bills, and manage payroll. 

  • Track income and expenses
  • Capture and organize receipts according to your chart of accounts
  • Download and organize bank account and credit card transactions
  • Print checks
  • Create and send invoices, as well as receive payments
  • Print financial reports
  • Tax organization

A person holds their phone lookig at a recent Shopify order

Xero for E-commerce

QuickBooks is a popular accounting system for Shopify, but it may not be the best choice for everyone. Xero is another cloud-based accounting solution that will appeal to a lot of Shopify store owners. Xero is fast, simple, and powerful. It can sync with hundreds of third-party applications for point-of-sale, inventory, and much more. It also offers a mobile app for convenience and allows customers to create an unlimited number of users. From within the Xero accounting software for Shopify, you can manage your accounts payable, accounts receivable, budget, and category or division tracking. 

  • Customizable dashboard
  • Create invoices and quotes and receive payments
  • Track inventory
  • Bill payment
  • Expense management and project management
  • Create and print financial reports
  • Bank account reconciliation
  • Highly scalable for small or growing businesses

A2X for Shopify

A popular middleware, or “connector,” application that links your Shopify store with your cloud-based accounting system is A2X for Shopify. It automatically posts your Shopify sales and fees directly into QuickBooks or Xero, saving you hours of tedious work each week. That also means no more stressing over why transactions don’t match your bank deposits because A2X eliminates data entry mistakes.

  • Automatically post store data into QuickBooks or Xero
  • Automatically reconcile bank statements
  • Automatically make adjustments for fees and refunds
  • Create and print summarized statements

Coins spills out of a glass jar on a table

TaxJar for Shopify

A major time vampire for business owners who sell on Shopify is state sales tax compliance in the wake of Wayfair, Inc. v. South Dakota (2018), which requires online sellers to comply with sales tax requirements in each state where they do business. TaxJar accounting system for Shopify will streamline your sales tax compliance process by showing you where you should be collecting sales tax according to economic nexus laws and generating return-ready reports. It can even auto-file your returns for you if you want.

  • Calculate sales tax based on each state’s nexus
  • Daily updates allow for timely return filing
  • AutoFile option for automated return filing
  • Display fines and penalties for delinquent filing
  • Compare actual collections to what should have been collected

Shopify Apps

In addition to your accounting software, Shopify offers over 1,000 plug-in applications from their app store to help you with managing inventory, shipping, reporting, and much more. However, we suggest that you fully explore the capabilities of QuickBooks, Xero, A2X, and TaxJar before making any decisions about additional applications. A lot of functionality might be duplicated, and you certainly don’t want to pay for the same thing twice.

In addition to tons of helpful plug-ins, Shopify also features a profit margin calculator. Just plug in your cost of the item and a markup percentage, and Shopify will calculate the sale price, your gross profit in dollars, and your gross margin.

Outsourcing Your Bookkeeping and Accounting

Even though these accounting systems for Shopify can make life much simpler for sellers than even just a few years ago, it can still sometimes feel overwhelming. If you begin to feel like you might be in over your head, you should consider outsourcing your accounting and bookkeeping to a small business accounting firm like Xendoo.

There are a lot of good reasons to outsource your accounting for your Shopify eCommerce business, and it’s more affordable than you might think. Xendoo’s accounting team works with small business owners just like you to provide expertise and insight into the accounting needs of e-commerce businesses. Xendoo can take care of everything from weekly bookkeeping to filing business taxes for you, and our flat monthly fee is less than half of what you’d probably pay an accountant. Xendoo’s mission is to give you the peace of mind of knowing it’s being done right, and free your time to focus on what’s important – growing your business. Sign up for a free trial today.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

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eCommerce Trend Report: 2020 Recap & 2021 Forecasts

Editor’s Note: This post was originally published in March 2020 and has been updated for accuracy and comprehensiveness.

For all the challenges the economy faced in 2020, it may come as something of a surprise that overall domestic retail sales saw their highest rate of growth in over two decades during 2020. What probably isn’t much of a surprise to anyone who has been paying attention is that that strong growth was driven entirely by eCommerce trends in 2020, with online sales accounting for 101% of that growth. 

The COVID-19 pandemic drove more and more shoppers to online retailers in lieu of brick-and-mortar stores, and the good news is that that movement shows no sign of slowing down in the eCommerce trends for 2021. The bad news is that sales tax compliance continues to be a thorny issue for online retailers as they struggle to keep up with state regulations. Figures represent US domestic sales unless specifically noted as global figures.

Consumer Migration to E-commerce

Overall retail sales in 2020 topped $4.04 trillion, representing a 6.9% increase over 2019 sales of $3.78 trillion. That was driven by a massive 44% increase in online shopping, nearly three times the previous record eCommerce year-over-year growth in 2019 of 15.1%. A significant portion of that increase was due to first-time online shoppers, as well. E-commerce market penetration leaped from 15.8% in 2019 to 21.3%, representing a sharp increase from its previous trend of 1-2% growth per year. In 2020, eCommerce transformed from being a convenient alternative to brick-and-mortar stores for some consumers to an essential part of daily life in an age of pandemic.

A person checks his phone for sales during Black Friday

Holiday Shopping

Following along with the overall trend toward online shopping, domestic holiday shopping showed similar rates of year-over-year growth. Out of $861 billion spent online in 2020, over $200 billion of sales occurred during the holiday shopping months of November and December. 

  • Thanksgiving Day online sales rose 21.5% to $5.1 billion 
  • Black Friday online sales rose 21.5% to $9 billion
  • Cyber Monday online sales rose 15% to $10.8 billion
  • Total Cyber-week domestic online sales reached $60 billion 

Hottest E-commerce Segments in 2021

Fashion and online apparel remained the largest segment of online shopping globally in 2020, followed by toys and electronics. 

  • Online apparel sales rose 15% to $760 billion globally, projected to reach $1 trillion by 2025
  • Toys rose 12% to $590 billion in global online sales, projected to reach $766 billion by 2025
  • Consumer electronics saw $542 billion in global online sales, a 28% increase over 2019.
  • Food and personal care items came in fourth at $468 billion
  • Furniture and household appliances totaled $362 billion globally.

Largest Retailers

Unsurprisingly, Amazon retained its throne as the undisputed king of online retailers, with a whopping 38% of all domestic sales, down slightly from its 2019 share of 43.8% share in 2019. Other online retailers like Walmart and Target managed to chip away at Amazon’s lead, but are still behind by a wide margin. 

  • Amazon – 38%
  • Walmart – 5.3%
  • eBay – 4.7% 
  • Apple – 3.7%
  • Home Depot – 1.7%

Smartphone Sales

Smartphones continued to increase in popularity as a platform for online shopping, representing 54% of online sales in 2020 and projected to reach 73% in 2021. 79% of smartphone owners have made at least one online purchase with the device, and 80% of smartphone owners have used a smartphone to look up product information or reviews while shopping in a traditional brick-and-mortar store. It’s clear that the prevalence of smartphones will continue to be a driving force in eCommerce for the foreseeable future. 

A man pays for an item using his digital wallet on his phone

Trends to Watch

Whether you have something like a Shopify store or sell through your own website, it’s imperative to stay on top of technology and predict online consumer product trends so that you can stay one step ahead of the competition. To that end, we’ve identified some eCommerce future trends that are definitely worth keeping an eye on in 2021.

BOPIS (Buy Online, Pick-Up In-Store) and Curbside Pickup

This was the trend that dominated much of 2020 because it combined the convenience of online shopping with the immediacy of in-store shopping. While some shoppers will revert to in-store shopping, this trend is here to stay.

Augmented Reality (AR)

Augmented reality emerged as a player in eCommerce in 2020, with, for example, some furniture retailers allowing consumers to upload a photo of their living room and see how a particular piece would look in it.

Digital Wallets & One-Touch Purchase

Many consumers have been hesitant to make the move to online shopping due to concerns about fraud, while others were put off by the inconvenience of having to enter a credit card number. Digital wallets like ApplePay and GooglePay have alleviated many of those concerns by making secure one-touch purchases from smartphones. However, most security concerns are pushed to the wayside for convenience, and this eCommerce trend is probably here to stay. 

Cryptocurrencies

Although controversial and not widely adopted currently, cryptocurrencies are poised to become a force in eCommerce in the not-too-distant future. Because Bitcoin is both a currency and a payment processor, it can facilitate secure transactions across borders at transaction fees of 1%, as opposed to the typical 2-3% merchant fees charged by credit card processors. Some large online retailers like Overstock.com already accept Bitcoin.

More Sales Tax Headaches

In response to declining state sales tax revenues from the move to online shopping, the US Supreme Court ruled in South Dakota v. Wayfair (2018) that each state had the power to individually tax online retailers to create a replacement revenue stream. Online retailers must now monitor and comply with 50 different sets of sales tax laws, creating an enormous amount of accounting overhead. 

This is yet one more reason to outsource your bookkeeping service and accounting to a professional firm like Xendoo as a cost-effective solution to this regulatory nightmare. Sales tax processing is just one of the many affordable services available in Xendoo’s suite of small business offerings. Xendoo can also make sure that you are getting all the eCommerce tax deductions that you are entitled to as an online retailer.

It’s clear that eCommerce will only continue to grow by leaps and bounds in the years to come. Consumers were already growing accustomed to the convenience of online shopping, and the COVID-19 pandemic was the impetus that pushed many holdouts to take the plunge. Many retailers struggle to understand emerging technologies and keep pace. The retailers that don’t will be left behind in the wake of those who do. Staying on top of technology and eCommerce trends is critical to success in retail in 2021. 

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This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.