How to sell gift cards on Shopify: Accounting, gift vouchers, and more

Kaci Carson November 20, 2023

Article E-Commerce

Offering Shopify gift cards is an excellent way for e-commerce stores to boost revenue and enhance customer experience, but managing gift card sales requires careful accounting and planning. As a merchant, you need to keep track of gift card liabilities, address challenges like fraud prevention proactively, charge correct taxes, and streamline bookkeeping processes whenever possible.

By grasping the details of establishing and maintaining a gift card program on Shopify, you can gain customer loyalty through the convenience and flexibility of gift cards. This article provides an overview of the key information to know to sell gift cards on your Shopify store successfully.

Benefits of selling Shopify gift cards

If you’re considering selling a gift card product on your Shopify storefront, there are countless benefits to keep in mind. Selling Shopify gift vouchers having the benefits of:

• Driving sales and revenue
• Building customer loyalty
• Providing flexibility and convenience
• Increasing brand visibility
• Boosting average order value
• Creating secured sales

Understanding gift cards and taxing

To successfully implement a Shopify gift certificate product, having a solid understanding of tax regulations are crucial. Rules and regulations around taxing gift cards differ based on location. For example, in many areas of North America, gift cards are only taxed upon redemption instead of upon purchase. However, this differs in the UK when tax is applied when the card is initially issued. With this in mind, ensure that your gift card transactions are priced correctly for tax reporting to avoid costly mistakes.

Although managing gift cards requires extra diligence to account for properly, the benefits to your company and customers make the effort worthwhile. With policies and strategy in place, providing gift cards as a versatile payment method can increase sales, build loyalty, and significantly contribute to your business’s success.

Setting up gift cards in Shopify

Before you set up a gift card product on your Shopify store, you will need to activate the gift card feature. You can do this by going to Products > Gift cards then click, Add gift card product. After that, you’re ready to create your first Shopify gift card.

To add or update gift card products on your Shopify store, follow these steps:

From your Shopify admin, navigate to the Products section, and select Gift cards

Click on the Gift card products option.

If you want to create a new gift card product, click on Add a gift card product. Alternatively, click on the name of an existing gift card product to update its information.

Fill in the necessary information for the gift card product, including the title, description, media, denominations, and search engine listing preview.

To publish the gift card and make it available through your sales channels, modify the availability settings in the Sales channels and apps section. You can also set a specific publishing date by clicking on the calendar icon next to Online store.

In the Organization section, you can provide additional details about the product type, vendor, collections, and tags.

Once you’ve completed all the necessary fields, click on the Save button to save your changes.

The liabilities of gift cards

When a shopper purchases a gift card, log it as a liability in your accounting software rather than revenue. It’s important to establish a gift card liability account to monitor unredeemed gift card balances. Once the customer uses the gift card to complete a purchase, decrease the gift card liability account and register the amount as income. Create a sub-account in your accounting software to track gift card purchases and to ensure they are categorized correctly.Set the account type as a Current Liability and set the name of this account as’ Gift Card Sales’ or ‘Shopify Gift Card’.

With an efficient accounting software in place, you can gain insight into the revenue and liabilities created through Shopify gift card purchases. Automate the accounting workflow as much as possible by integrating your accounting software with Shopify to save time and decrease mistakes. With an integration, you gift card liability and revenue accounts will automatically be created and updated daily to make certain all transactions are logged accurately.

How to automate accounting for Shopify gift cards

Automating much of the efforts involved in the implementation of gift card products and its transactions will streamline the process for you, helping you to maintain accuracy in what can otherwise become a tedious task. Through Amaka’s integration you’re able to connect Shopify to Xero, QuickBooks Online (QBO), and MYOB

Connecting Shopify to your accounting software syncs data in a matter of minutes, allowing you to have a comprehensive look at your business finances with up-to-date data all in one place. The integration will also automatically create a sub-account called ‘Shopify Gift Card’ so you can manage your gift card products and purchases with ease. There are also the benefits of payment reconciliation so you can stay on top of not only general transactions but also gift card transactions.

Here are the steps to connect Shopify to your accounting software:

1. Register or sign in the Amaka dashboard to get started.
2. Click the New integration button and select Shopify + Xero from the integrations list to commence the setup.
3. Sign in to your Shopify account by clicking the Connect new account button underneath Shopify logo. Follow the guided authentication process to grant all relevant permissions.
4. Authenticate your Xero account following the same procedure, then click Save + Continue.
5. Follow the wizard to choose your preferred setup method, invoice breakdown, invoice format, mapping and scheduler options to complete the setup of the integration.
6. Click Save + Continue to finish and activate the integration.

Understanding product returns

If a customer returns an item that they purchased using a gift card and you plan to reimburse them by increasing the value of their gift card, you are then increasing the amount you owe to them. In this case, you will need to allocate the refund value as a credit to your gift card liability account.

Beyond this step, process the refund the same as you typically would for any return. It is necessary that you carefully log the adjustment to the gift card liability balance to keep this account reconciled and prevent errors. Though handling gift card refunds may require extra care, this will ensure your store maintains compliance and operating smoothly.

Expired or invalid gift cards

As a Shopify merchant, it’s important to have clear policies to properly handle expired or invalid gift cards. You have two options for expired cards: renew if the physical card is valid and registered, or deny renewal. You can consider implementing a small fee for renewals or only renew registered cards. It’s important to communicate your policy to customers when they are buying gift cards to avoid disappointment and complaints.

For invalid or fraudulent cards, do not renew or allow redemptions. It is best to assume the customer does not actually own the card funds. You have the right to confiscate fraudulent cards to prevent misuse and to protect your business from further security risks. Take note of when a card cannot be redeemed due to expiration or fraud. Look for signs of fraud like common counterfeit markers.

Fraud and other risks

As a merchant selling gift cards on your Shopify store, you need to be aware of the potential risks and fraud involved with offering gift cards. Gift cards are essentially cash, so gift card numbers and PINs can easily be stolen and used illegally if not properly secured. It is important to enable security features like requiring customer info with gift card purchases, using secure servers to store data, and regular monitoring for any suspicious gift card activity.

Fraud is not the only risk to be mindful of. There is also the risk of errors in managing and auditing the gift card program that result in discrepancies over time. You will need to perform frequent audits and checks to ensure all transactions involving gift cards are recorded accurately according to accounting standards.

With consistent policies, communication and vigilance, you’re able to limit losses from invalid or fraudulent gift cards. With active management, offering gift cards on your Shopify store will not expose you excessively to fraud and security risks

Key takeaways on Shopify gift cards

In this article we covered many of the important things to note when selling gift cards on Shopify. Overall, there are many benefits to your business through offering gift cards as an option. This is especially true when you streamline your accounting through integration to assist in maintenance of the gift card product on your Shopify storefront. With these strategies in place, you’ll be able to sell gift cards in a manner that is productive and compliant.