Accounting basics for Shopify dropshipping: Data entry, inventory, integrations and more
Kaci Carson
January 24, 2024
Bookkeeping and accounting are important to comprehend for Shopify stores using dropshipping. Dropshipping as an e-commerce business model has increased in popularity because it requires minimal inventory requirements. With this, it becomes easier to overlook best practices in your store’s accounting.
That’s why we’ve written this article to aid Shopify store owners in everything they need to know about accounting. This article serves as a perfect reminder for seasoned professionals but also as a comprehensive guide for Shopify dropshipping beginners.
Setting up Shopify for accounting
Before beginning your dropshipping operations on Shopify, it’s important to take the necessary steps at the start to enable seamless accounting. Activating Shopify Payments allows for the tracking of sales receipts and fees all in one place.
How to set up Shopify Payments
Setting up Shopify Payments is a simple process and can be done by following these steps:
- First find Payments in your Shopify admin.
- You will then see the option to activate Shopify Payments.
- Next, you’ll be prompted to input relevant store information along with your banking details.
- Then press Save and complete account setup.
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Understanding sales taxes for dropshipping
For Shopify store owners, properly registering for and understanding tax collection is crucial for avoiding issues as your business grows. TaxJar is an app available on the Shopify App Store that has the ability to automate the sales tax process for you.
It does this by applying the correct local and state sales tax at checkout for each customer order based on the customer’s location. This allows the process to be streamlined and ensures you remain compliant to the different local and international sales tax legislations that exist.
Consulting a tax professional for any gray areas you have is wise to ensure you remain compliant at every step of the way. As complex as sales tax can be, noncompliance poses a big threat to business and can lead to fines at tax time.
Leveraging accounting integrations
Accessing accurate data provides you with many benefits but most importantly it helps you make informed business decisions. It’s important that your business data remains as up to date as possible for this reason.
That’s why leveraging automation tools and software gives you the advantage of streamlined operations. It helps you to manage important accounting tasks while automating the tedious manual task of data entry.
Accounting software and integration
Shopify can integrate with cloud-based accounting software such as Xero, QuickBooks Online, Sage and MYOB through Amaka’s accounting integrations. Accounting software allows you to have access to data consolidated all in one place. Each software even has features that generate important reports to give you insights into data and performance.
Accounting software provides key financial statements like profit and loss, balance sheets, and statements of cash flows. Enabling these reports provides clear insights into metrics like profitability and helps you monitor overall cash flow. Careful financial tracking and analysis is still crucial for eliminating issues and making smart business decisions.
Amaka’s accounting integrations make it possible to enjoy the full benefits of accounting software through data syncing. The direct result of this is more accuracy in your numbers and reporting. It also eliminates the need to do data entry manually. Sales and payments from Shopify are automatically mapped to the right accounts in your accounting software. The integration also matches transactions to the bank feed for fast-tracked reconciliation.
Reconciling transactions
As a store owner, performing regular bank feed reconciliations also aids you in recording the most accurate data as possible. It involves ensuring the transactions in your books match up to the amounts Shopify deposits into your bank account.
Amaka’s integrations streamline this process significantly. It automatically matches transactions that have been synced from Shopify to the Shopify payouts from your bank feed. This means all you have to do is go through these matches and confirm that they are correct. You may also need to address any discrepancies found.
However, since this is a process that can still become tedious, Amaka has created the Managed Reconciliation Service. This service allows you to have your transactions synced by our integrations regularly reconciled by an expert member of the Amaka team. We’ll look into any discrepancies that may be found.
Let us reconcile your books!
Our Integration Specialists can also take care of reconciling your books.
We’ll handle your reconciliation needs and you’ll receive an email on a monthly basis with a report based on the team’s findings. This service is a great option for those wanting to relieve some of the pressure that can arrive when managing so many aspects of your business.
Do you need an accountant or bookkeeper for your dropshipping business?
A bookkeeper usually records financial transactions whereas an accountant analyses the information to provide insights. If you’ve applied the accounting tools mentioned throughout this article, you likely won’t need a bookkeeper for your dropshipping store, especially in the early stages of business. However, you may want to outsource this function entirely once your business is more established.
As for accountants, we generally recommend hiring a tax accountant regardless of what stage your company is in. A more general accountant that provides advisory services may not be essential when you’re starting out. However, finding one that specialises in e-commerce can be extremely useful if you’re looking for advice to grow and estabiish your dropshipping store.
Key takeaways on Shopify dropshipping accounting
Managing dropshipping for your Shopify e-commerce business becomes a seamless task when you’ve got the right tools and preparation in place. Leveraging accounting software and accounting integration increases your oversight of your store’s accounting. It also provides the benefits of accuracy and streamlined operations. With these tools in place, you’re able to successfully manage your Shopify store’s dropshipping.