Why Proper Shopify Sales Recording Matters

Before diving into the specifics, it's important to understand why accurately recording your Shopify sales in QuickBooks is so critical:

• It allows you to track revenue and profitability
• It enables proper reconciliation with your bank accounts
• It provides the data needed for financial reporting and tax preparation
• It gives you visibility into sales trends and business performance

Failing to properly record Shopify sales can lead to inaccurate books, difficulties with reconciliation, and potential tax issues down the road. Taking the time to set up a good system from the start will save you major headaches later on.

Setting Up Your Chart of Accounts

The first step is to make sure you have the right accounts set up in your QuickBooks chart of accounts to properly categorize Shopify sales and related transactions. Here are the key accounts you'll need:

• Shopify Income: To record gross sales revenue
• Shopify Discounts: To record any discounts or promotions
• Shopify Returns: To record customer returns
• Shopify Shipping Income: To record shipping charges to customers
• Sales Tax Payable: To track collected sales tax
• Shopify Fees: To record Shopify transaction fees
• Shopify Clearing Account: To track funds held by Shopify before payout
• Bank Account: Where Shopify deposits will be recorded

To add these accounts in QuickBooks Online:

1. Go to Accounting > Chart of Accounts
2. Click "New"
3. Select the appropriate Account Type and Detail Type
4. Enter the Account Name
5. Click "Save and Close"

For QuickBooks Desktop, the process is similar:

1. Go to Lists > Chart of Accounts
2. Right-click and select "New Account"
3. Choose the account type and enter details
4. Click "Save & Close"

Having these accounts set up correctly from the start will make the recording process much smoother.

Gathering Shopify Sales Data

Before you can record sales in QuickBooks, you need to gather the relevant data from Shopify. There are two key reports you'll need:

Shopify Finances Summary Report

This report provides an overview of your sales, refunds, taxes, and fees. To access it:

1. In your Shopify admin, go to Analytics > Reports
2. Under Finances, click "Finances summary"
3. Set the date range for the period you're recording
4. Review the report data

Shopify Payouts Report

This shows the actual amounts deposited to your bank account. To find it:

1. In Shopify admin, go to Finances > Payouts
2. Click on a specific payout to see transaction details
3. Note the payout amount and date

Having both of these reports will allow you to reconcile the sales data with the actual bank deposits.

Recording Shopify Sales in QuickBooks Online

Now let's walk through the process of manually recording Shopify sales in QuickBooks Online using journal entries:

1. In QuickBooks Online, click the "+" icon and select "Journal Entry"
2. Set the journal entry date to the last day of the month you're recording
3. In the Account column, select the following accounts and enter the corresponding amounts from your Shopify Finances Summary:some text
   • Debit Shopify Clearing Account for the total payout amount
   • Credit Shopify Income for gross sales
   • Debit Shopify Discounts for any discounts given
   • Debit Shopify Returns for refunds issued
   • Credit Shopify Shipping Income for shipping charges
   • Credit Sales Tax Payable for collected tax
   • Debit Shopify Fees for transaction fees
4. Add a memo like "Shopify Sales - [Month Year]" for easy reference
5. Verify that the debits and credits balance out
6. Click "Save and close"

This journal entry records the summarized monthly Shopify activity. You'll then need to record the actual bank deposits:

1. Create a new journal entry for each Shopify deposit
2. Debit your Bank Account for the deposit amount
3. Credit the Shopify Clearing Account
4. Use the Shopify payout date as the journal entry date

By using the clearing account, you're able to match up the sales activity with the actual bank deposits, even if they occur in different months.

Recording Shopify Sales in QuickBooks Desktop

The process for QuickBooks Desktop is similar, with a few small differences:

1. Go to Company > Make General Journal Entries
2. Set the date to the last day of the month
3. In the Account column, select the same accounts as listed above for QBO
4. Enter the corresponding amounts from your Shopify reports
5. Add a memo for reference
6. Click "Save & Close"

For recording bank deposits:

1. Go to Banking > Make Deposits
2. Select the Shopify Clearing Account as the "From" account
3. Enter the deposit amount and date
4. Select your bank account as the deposit account
5. Save the transaction

The key difference is using the Make Deposits feature rather than a journal entry for recording the bank transaction in QuickBooks Desktop.

Tips for Accurate Shopify Sales Recording

To ensure your Shopify sales are recorded accurately in QuickBooks, keep these tips in mind:

• Be consistent with your recording schedule - monthly is recommended
• Always reconcile the Shopify reports to your bank deposits
• Use clearing accounts to handle timing differences between sales and deposits
• Consider using class tracking or location tracking for multi-channel sales
• Regularly reconcile your Shopify Clearing Account to catch any discrepancies
• Keep detailed notes on any manual adjustments or special transactions

Handling Refunds and Returns

Refunds and returns require special attention when recording Shopify sales:

1. In your Shopify Finances Summary, note the total refunds/returns amount
2. In your journal entry, include a debit to Shopify Returns for this amount
3. If the refund occurred in a different month than the original sale, you may need to make an additional entry to adjust Sales Tax Payable

Tracking Inventory

If you track inventory in QuickBooks, you'll need to make additional entries to record the cost of goods sold:

1. Set up inventory items in QuickBooks to match your Shopify products
2. When recording sales, include a debit to Cost of Goods Sold and a credit to Inventory Asset for the cost of items sold
3. Regularly reconcile your QuickBooks inventory quantities with Shopify

Considerations for Multiple Sales Channels

If you sell on platforms beyond Shopify, you may want to:

• Use separate income accounts for each sales channel
• Utilize class tracking or location tracking to segment sales data
• Consider using a more robust integration tool to handle multi-channel complexity

Automated Integration Options

While manual recording works for many businesses, as you grow you may want to explore automated integration options:

• QuickBooks Online has a direct Shopify integration available
• Third-party apps like A2X or Webgility can automate the sync process
• Some bookkeeping services specialize in e-commerce and can handle the integration for you

These solutions can save significant time and reduce errors, but they do come with additional costs to consider.

Common Pitfalls to Avoid

When recording Shopify sales in QuickBooks, watch out for these common mistakes:

• Recording gross sales without accounting for fees, refunds, and discounts
• Failing to properly track and remit sales tax
• Not reconciling Shopify reports with bank deposits
• Mixing up the timing of sales recognition vs. cash deposits
• Overlooking the impact of gift cards on revenue recognition

Conclusion

Accurately recording your Shopify sales in QuickBooks is a crucial part of managing your e-commerce business finances. While it requires some initial setup and ongoing attention to detail, having a solid system in place will provide you with the financial data you need to make informed business decisions.

Remember, the key steps are:

1. Set up the proper accounts in QuickBooks
2. Gather detailed sales data from Shopify
3. Record monthly summary entries in QuickBooks
4. Match bank deposits to your clearing account
5. Regularly reconcile and review for accuracy

By following this guide and staying consistent with your bookkeeping practices, you'll have a clear picture of your Shopify sales performance within QuickBooks. As your business grows, you can always explore more automated solutions to streamline the process further.

Sources: [1] https://quickbooks.intuit.com/learn-support/en-us/banking/shopify-sales-recording-in-qbo-using-daily-sales-receipt/00/1346715 [2] https://www.youtube.com/watch?v=QoLK7qxo_Wo [3] https://help.shopify.com/en/manual/sell-in-person/quickbooks/integration [4] https://www.youtube.com/watch?v=8klzPqyF_Ek [5] https://5minutebookkeeping.com/how-to-record-shopify-sales-in-quickbooks-online/ [6] https://www.reconcile.ly/blog/how-to-record-shopify-sales-in-quickbooks [7] https://www.webgility.com/blog/how-to-reconcile-shopify-sales-in-quickbooks [8] https://quickbooks.intuit.com/learn-support/en-ca/help-article/manage-integrations/shopify-quickbooks-online-integration-guide/L8bw6PiWJ_CA_en_CA