Streamline Your Shopify Bookkeeping with the Shopify Bank Method
Table of Contents
- Introduction
- Understanding Shopify and QuickBooks Online
- The Shopify Bookkeeping Challenge
- The Shopify Bank Method
- Setting Up Your Chart of Accounts
- Categorizing Shopify Deposits
- Managing PayPal Deposits
- Handling Afterpay and Stripe Fees
- Running Reports and Collecting Information
- Creating the Monthly Journal Entry
- Checking the Profit and Loss Statement
- Reviewing the Shopify Bank Account
- Troubleshooting and FAQs
- Conclusion
Article: How to Simplify Shopify Bookkeeping Using the Shopify Bank Method
In today's digital age, running an online business has become increasingly popular. Platforms like Shopify provide entrepreneurs with an easy and efficient way to set up an online store. However, when it comes to bookkeeping for Shopify sales and transactions, things can get a little tricky. With multiple payment methods and a complex deposit system, keeping track of your finances can become overwhelming. This is where the Shopify Bank method comes in handy. In this article, we will explore how to simplify your Shopify bookkeeping using this method, ensuring accurate and efficient financial management.
Introduction
As an online business owner, you may already be familiar with the challenges of managing your Shopify store's finances. Shopify provides a comprehensive platform for managing sales, orders, and customer data, but its unique payment system can complicate bookkeeping tasks. In this article, we will discuss a method called the Shopify Bank method, which simplifies Shopify bookkeeping and helps you accurately record and track your sales within QuickBooks Online.
Understanding Shopify and QuickBooks Online
Before diving into the details of the Shopify Bank method, let's take a brief look at what Shopify and QuickBooks Online are. Shopify is an e-commerce platform that allows entrepreneurs to set up and run their online stores. It offers various features, including inventory management, sales tracking, and payment processing. On the other hand, QuickBooks Online is an accounting software designed to help small businesses manage their finances effectively. It provides tools for bookkeeping, invoicing, and financial reporting.
The Shopify Bookkeeping Challenge
Shopify's unique payment system poses a challenge when it comes to bookkeeping. Customers can pay in multiple ways, including PayPal, Stripe, and Afterpay. This variety of payment methods complicates the process of tracking and recording sales. Bookkeeping on a per-deposit basis becomes difficult due to the numerous sources of income. Therefore, we need a method that simplifies the bookkeeping process and provides an accurate overview of our sales for each month.
The Shopify Bank Method
The Shopify Bank method is a simplified approach to Shopify bookkeeping within QuickBooks Online. It involves creating a separate "Shopify Bank" account in QuickBooks to represent the amount available to be deposited from Shopify. This account acts as a holding or receivable account for Shopify payments. By categorizing all Shopify deposits, including PayPal, Stripe, and Afterpay, to the Shopify Bank account, we can easily track our sales and reconcile them with the monthly Shopify reports.
Setting Up Your Chart of Accounts
To implement the Shopify Bank method, you need to set up your chart of accounts in QuickBooks to account for the different types of Shopify transactions. This ensures that each transaction is properly categorized and recorded. In a previous video, we explained how to create a custom chart of accounts specific to Shopify. If you haven't done so already, please refer to that video or follow the link provided in the description to set up your accounts accordingly.
Categorizing Shopify Deposits
Once you have your chart of accounts set up, it's time to categorize your Shopify deposits correctly. When a payment is received in your Shopify store, it needs to be categorized to the appropriate account in QuickBooks. For example, PayPal deposits from Shopify sales should be categorized to the "Shopify Bank" account, as they represent the amount awaiting deposit from Shopify. Similarly, deposits from Stripe, Afterpay, and other payment methods should also be categorized accordingly. By applying the right categorization, you can ensure accurate bookkeeping and track each source of income correctly.
Managing PayPal Deposits
PayPal is one of the most common payment methods used in conjunction with Shopify. When customers pay with PayPal on your Shopify store, it's important to ensure that these deposits go to the right place in your bookkeeping records. By editing the product and service settings in Shopify and mapping them to the "Shopify Bank" account, you can ensure that all PayPal sales are correctly recorded. Additionally, refunds processed through PayPal should be allocated to the "Shopify Refunds" account to maintain accurate financial records.
Handling Afterpay and Stripe Fees
Apart from sales deposits, you may also encounter fees associated with payment processors like Afterpay and Stripe. These fees need to be properly categorized to reflect the true cost of running your Shopify store. By creating separate accounts for Afterpay fees and Stripe fees in QuickBooks, you can accurately track and allocate these expenses. When recording your monthly journal entry, be sure to include these fees to complete the picture of your Shopify finances.
Running Reports and Collecting Information
To compile an accurate monthly journal entry, you'll need to run the necessary reports within Shopify and QuickBooks. The financial summary report in Shopify provides a breakdown of your sales components, including gross sales, discounts, returns, shipping income, and sales tax. Make sure to note down these figures as they will be used in your monthly journal entry. Additionally, collect information on transaction fees from Shopify, PayPal, and other sources to include in your bookkeeping records.
Creating the Monthly Journal Entry
With the collected information at hand, you can now create your monthly journal entry in QuickBooks to summarize your Shopify sales and expenses. This journal entry will help reconcile your sales with your bank account and provide a clear snapshot of your monthly financials. Using the appropriate accounts created in the chart of accounts, allocate your sales, discounts, refunds, shipping income, and sales tax to their respective accounts. Include the fees from Shopify, PayPal, Afterpay, and Stripe to balance your debits and credits.
Checking the Profit and Loss Statement
After posting your monthly journal entry, it's essential to review your profit and loss statement for the month. Ensure that the figures from the journal entry align with your sales and expenses in QuickBooks. The profit and loss statement serves as a summary of your financial performance and helps you monitor the profitability of your Shopify store. By regularly reviewing this report, you can make informed decisions regarding pricing, marketing strategies, and inventory management.
Reviewing the Shopify Bank Account
The Shopify Bank account in QuickBooks represents the amount available to be deposited from Shopify each month. By reconciling this account with your Shopify reports and bank statements, you can ensure accuracy and validate your bookkeeping records. Compare the ending balance of the Shopify Bank account with the deposits shown in your Shopify reports. While there might be some discrepancies due to the timing of deposits, a reasonable match will confirm the effectiveness of your bookkeeping methodology.
Troubleshooting and FAQs
Despite following the Shopify Bank method, you may still encounter challenges or have questions. Shopify bookkeeping can be complex, especially when dealing with various payment methods and multiple sources of sales. In the troubleshooting section, we will address common issues and provide solutions to help you simplify your bookkeeping process. Additionally, we have compiled a list of frequently asked questions to address any concerns you may have, ensuring you have all the information necessary to manage your Shopify finances successfully.
Conclusion
Effective bookkeeping is crucial for the success of your Shopify store. By implementing the Shopify Bank method and following the steps outlined in this article, you can simplify your bookkeeping process and gain a clear understanding of your Shopify finances. Remember to reconcile your financial records regularly, review your profit and loss statement, and take advantage of the various reports available in both Shopify and QuickBooks. With accurate and up-to-date bookkeeping, you can make informed decisions to grow your business and achieve long-term success.
