Shopify Accountants Guide to Maximizing Your Ecommerce Profits

 

Shopify accountants handle the specifics of Shopify business financials. A Shopify store owner can hire any accountant, of course. However, we recommend getting help from someone who knows the ins and outs of Shopify filings.

 

Understanding Shopify Accountants

 

Shopify accountants are specialists in handling the financial aspects of businesses that run on the Shopify platform. They understand the intricacies of Shopify, so they can leverage that knowledge. This means they can provide a wider range of financial services than a general accountant might.

 

A Shopify accountant will typically take care of several tasks for you. That is, if you don’t have a bookkeeper to handle the simpler tasks. 

 

Tasks that Bookkeepers Usually Handle

 

• Meticulously record all your business’s financial transactions, including sales, refunds, inventory purchases, and any other relevant expenses.
• Reconcile bank statements regularly to ensure that they align with your Shopify account’s financial records.
• Prepare financial statements like profit and loss statements and balance sheets that provide a clear picture of your business’s financial health. 
• Manage accounts payable and receivable to ensure that incoming and outgoing payments are accurate and on time.
• Generate reports based on available data.
• Maintain accurate financial records according to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).

 

Tasks that Accountants Typically Handle

 

Accountants usually take over the more complex areas, like:

 

• Advising on tax implications specific to your business and ensure tax compliance and that you meet all filing deadlines.
• Analyze reports to check on your store’s performance and provide valuable insights into areas like sales trends, customer behavior, and profitability.
• Help with budgeting and forecasting: Financial planning is essential for any business. Shopify accountants can assist you in creating budgets and forecasts to help you make informed financial decisions
• Staying up-to-date on Shopify-specific accounting practices to ensure your finances are handled correctly. 
• Explaining your finances to you in a way that’s easy to understand.

 

 

Why Are Shopify Accountants Essential for Ecommerce Businesses?

 

We can name several reasons why a Shopify accountant is essential for your ecommerce business.

 

Expertise in Shopify

 

Ecommerce accounting is already complex. Shopify adds another layer to that. A Shopify accountant understands the intricacies of the platform, including its unique features and how they impact your finances. 

 

Handle Ecommerce Needs

 

Ecommerce businesses have specific accounting needs. These include managing inventory, handling sales tax on digital goods across different jurisdictions, and factoring in payment processing fees. A Shopify accountant will be familiar with these intricacies, so they can ensure that your finances are handled correctly.

 

Tax Compliance

 

Tax compliance can be a complex and ever-changing landscape for ecommerce businesses. A Shopify accountant will be more up-to-date on tax regulations specific to ecommerce and Shopify. Their job is to ensure that your business is compliant and avoids penalties and fines.

 

Financial Insights

 

A Shopify accountant can analyze reports to provide you with valuable insights into your business performance. They can also help you identify areas for improvement as the data helps you track your progress towards goals. Remember, data-driven decisions are usually better.

 

Save Time and Money

 

Managing your finances can be time-consuming, especially for a growing ecommerce business. A Shopify accountant can take care of several tasks to free up your time and help you stay organized. This way, you can focus on running and growing your business without worrying about the financial side of things.

 

The expertise of an experienced accountant can also help you avoid costly mistakes and identify additional areas to save money.

 

How to Find and Hire a Qualified Shopify Accountant

 

Here are the steps we would take to find and hire a qualified Shopify accountant.

 

 

1. Identify your needs

 

Think about the size and complexity of your business. If you have a small store with straightforward finances, you might not need more than basic bookkeeping and tax filing.

 

If you have a larger store, look into more advanced services like financial analysis and budgeting. Consider your budget, too, so you can hire the right person for the correct number of hours you need. 

 

2. Search online 

 

Several online platforms list Shopify accountants. Start at the Shopify Partners Directory. This page houses individuals who have been vetted by Shopify. Search for accountants based on location, experience, or budget.

 

The A2X Ecommerce Accountant Directory is also a good place to look for someone who specializes in Shopify. We also recommend asking other ecommerce business owners for recommendations. Contact us as well to see who we might be able to connect you with.

 

Other than these options, you can try popular freelance platforms like Upwork and Fiverr. Just know that you are basically hiring at your own risk on these marketplaces. In any case, carefully vet any potential hire to ensure they have the qualifications and experience you need. 

 

3. Interview potential candidates

 

Once you have a shortlist of potential candidates, interview them to confirm their experience. You want to be sure they can meet your needs for the rate you’re comfortable paying. Moreover, you want to make sure they understand and agree to all your expectations.

 

Ask each candidate about their experience with Shopify accounting, the range of services they offer, the software they use, and the like. 

 

Make sure that the accountant you pick has the right qualifications and experience. They should have a proven track record of working with Shopify businesses. Ideally, they will also have certifications to indicate that they have met rigorous education and experience requirements.

 

Before you finalize the hire, contact the references they provided to gather feedback on things like their work ethic, communication skills, and expertise.

 

Key Responsibilities of Shopify Accountants

 

A good Shopify accountant needs to be able to take care of the following key responsibilities.

 

Financial Reporting

 

1. Monthly Statements

 

Monthly statements are due soon after the end of each month for management and key stakeholders. These statements should provide a timely overview of the company’s recent financial performance. They typically include:

 

• Income statement (profit and loss)
• Balance sheet
• Cash flow statement
• Other specific reports (inventory, sales by department, etc.)

 

2. Year-End Reporting

 

Reports that cover the company’s fiscal year are due soon after the fiscal year ends. These are for both internal and external use, as regulations or investors might require. They serve as a formal record of the company’s financial performance for that year. Year-end reports usually include:

 

• Audited financial statements prepared according to a specific accounting framework (GAAP or IFRS), reviewed and verified by an independent auditor.
• Additional financial disclosures and analysis, such as management discussion and analysis (MD&A), explaining the company’s financial performance, risks, and future outlook.

 

 

Tax Compliance

 

1. Sales Tax

 

Sales tax is a consumption tax on certain goods and services within a specific jurisdiction. A Shopify business will typically collect this from customers at the point of sale, then remit it to the government. Some consumers directly pay use tax on purchases they make from out-of-state vendors.

 

Businesses that meet a sales tax nexus threshold must register to collect sales tax. They are responsible for collecting the tax accurately, filing sales tax returns, and remitting the collected tax to the appropriate tax authority.

 

2. Income Tax

 

This is a direct tax on income, paid by businesses on profits less deductions and credits. Businesses must file income tax returns annually, reporting income and calculating tax owed. They may need to make estimated tax payments throughout the year.

 

Both sales tax and income tax require good recordkeeping practices. There are specific deadlines for filing sales and income tax returns, too. Tax laws can be complex, and businesses can benefit from consulting a tax professional.

 

Financial Analysis

 

1. Profitability Assessment

 

A business needs to know its ability to generate profits, typically by analyzing revenue and expenses over time. Common profitability ratios include profit margin ratios and return ratios. 

 

2. Cost Management

 

A business also needs to work on minimizing expenses while ensuring efficient operations to maximize profitability. This means identifying costs, classifying them, implementing strategies without sacrificing quality or efficiency, and finding ways to reduce costs. 

 

Tools and Software for Shopify Accountants

 

 

Shopify Integrations

 

1. Accounting Software

 

Many ecommerce accounting software programs integrate with Shopify to streamline accounting tasks and bookkeeping processes. This streamlines data entry and reconciliation to eliminate manual work, reducing errors and saving time.

 

Accounting software can automate tasks like creating invoices, recording expenses, and categorizing transactions. This frees up more time. The integration provides a consolidated view of financial data, too. This means more accurate and insightful financial reports to track business performance.

 

Some accounting software integrates with inventory management features and can even categorize business transactions for tax purposes. With financial data all in one place, an accountant can focus on communicating real-time insights. This way, business owners can make data-driven decisions.

 

2. Tax Calculation Apps

 

Accounting software can offer some tax features, but a specific tax calculation app has more benefits. This app will focus solely on automating tax-related tasks like sales tax collection.

 

Tax calculation apps with Shopify integrations are valuable because they reduce manual errors and save significant time. They have all the data on rules for different locations and product taxability.

 

Some apps can generate sales tax reports and automate filing processes, too. They can help determine sales tax nexus in different jurisdictions, ensuring the business complies with relevant tax regulations.

 

Third-Party Tools

 

1. Reporting and Analytics

 

Many Shopify sellers rely on third-party reporting and analytics tools to gain deeper insights into their business performance. These tools help sellers analyze customer behavior, marketing campaign effectiveness, product performance, and other critical metrics.

 

Some apps allow custom dashboards for data and generate advanced reports that drill down into specifics. These apps help sellers identify trends more easily and provide easy-to-understand charts and graphs.

 

Many third-party tools integrate with other business applications, too, like email marketing and social media advertising platforms.

 

2. Inventory Management

 

Shopify’s own inventory management system, Stocky, is a good solution for basic inventory needs. However, many Shopify sellers want more advanced functionalities and features. 

 

These tools offer real-time inventory tracking across multiple sales channels, barcode scanning, and low-stock alerts. They can also streamline order fulfillment by automating processes like picking, packing, and shipping. 

 

For businesses with larger warehouses, these tools can help manage locations, bin assignments, and picking routes, improving efficiency. Many tools can also integrate with other sales channels like Amazon and eBay. This allows sellers to manage inventory levels across all platforms in one place.

 

Common Challenges Faced by Shopify Accountants

 

Data Management

 

1. Handling Large Volumes of Transactions

 

Large datasets make it difficult for an accountant to promptly identify fraudulent activity, discrepancies and errors. This can lead to delays in resolving issues. Accurately tracking COGS becomes more intricate, too, potentially impacting profitability calculations.

 

Extracting meaningful insights and effectively communicating complex financial information to clients can be especially challenging when dealing with large datasets.

 

2. Data Accuracy and Integrity

 

Manually entering and reconciling a high volume of transactions from Shopify into accounting software can be extremely time-consuming. This tends to divert focus from higher-level analysis and strategic tasks.

 

Manual data entry is also susceptible to errors, which can have cascading effects on financial statements and tax calculations. This can be even more complex and tedious when dealing with multiple sales channels and payment methods.

 

Integrating data from various apps and tools can be complex. Inventory management discrepancies can also become more common. Similarly, data inconsistencies between Shopify and payment processors can occur due to factors like refunds, chargebacks, and mismatched transaction details.

 

Compliance Issues

 

1. Changing Tax Regulations

 

It can be overwhelming for accountants to stay updated on all the modifications to tax laws and regulations. For Shopify businesses selling internationally, this includes navigating various international tax regulations, too. 

 

Sometimes, tax law changes are applied retroactively, creating additional work for accountants to adjust past filings. Clients may not be aware of the potential impact on their tax liabilities. Accountants must educate them and manage their expectations.

 

2. Financial Reporting Standards

 

The choice of whether to apply GAAP or IFRS depends on the company’s size, location, and target audience. Understanding the nuances and identifying the necessary disclosures for Shopify businesses, ensuring they are presented accurately, can be challenging.

 

Determining the appropriate timing for recognizing revenue from online sales can be complex under financial reporting standards. This is especially true for subscription models or digital products. Establishing and maintaining a robust system of internal controls can also be complex.

 

Frequently Asked Questions

 

How much does hiring a Shopify accountant cost?

 

The cost of hiring a Shopify accountant can vary depending on several factors, including:

 

• More experienced accountants or firms with better reputations will typically charge higher hourly rates. Hourly rates generally range from $100 – $500+ per hour.
• Businesses with higher sales volume, a large inventory, or complex tax situations will likely require more time and expertise from the accountant, leading to higher fees.
• Basic bookkeeping may be less expensive than full-service accounting, which may include tax preparation, financial analysis, and strategic planning.
• Accountants may also charge flat fees for specific services, retainer fees, or contingency fees. Flat fees generally range from $500 – $5,000+ per month. Retainer fees generally range from $1,000 – $10,000+ per month. All fees depend on the specific services included.

 

What are the benefits of hiring a Shopify accountant over a general accountant?

 

How often should I consult with my Shopify accountant?

 

The ideal frequency with which you should consult with your Shopify accountant will vary depending on the specifics of your business. Generally, we recommend:

 

• Quarterly consultations, at least, for regular updates.
• Monthly or more often for more complex businesses or businesses with complex tax considerations or when approaching tax deadlines.
• Bi-weekly consultations for guidance and strategic planning if you’re a new business owner or are experiencing significant growth or changes in your business model.

 

Many accounting firms offer email or online communication options for quick questions or updates between consultations, which may be sufficient for your needs. The key is to find a balance that meets your business needs and budget.

 

Can Shopify accountants help with financial forecasting?

 

Shopify accountants can definitely be helpful with financial forecasting. They have a strong understanding of financial analysis and can leverage historical data from your Shopify store to create accurate forecasts. They are also familiar with the specific trends and seasonality, which makes forecasts more realistic and relevant.

 

Shopify accountants can seamlessly integrate your store’s data with financial forecasting software, saving you time and ensuring your forecasts are based on the most current information.

 

Are there any specific qualifications or certifications I should look for when hiring a Shopify accountant?

 

Here are  few qualifications and certifications that signal expertise in relevant areas:

 

• Certified Public Accountant (CPA): The highest accounting designation in the US. CPAs can handle complex financial tasks and tax planning.
• Chartered Accountant (CA): Similar to a CPA, but internationally recognized.
• Shopify Partner Program members: These accountants have completed Shopify-specific training and have experience working with Shopify merchants.
• Experience with Shopify Apps: An accountant familiar with the apps you use or need can integrate them seamlessly with your accounting software.
• Ecommerce Accounting Certifications: Looks for certifications that focus on the ecommerce accounting principles that are relevant in your situatuion.

 

What Is EcomBalance? 

 

 

EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.

 

We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.

 

You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.

 

Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.

 

And here’s some free resources:

• Monthly Finance Meeting Agenda
• 9 Steps to Master Your Ecommerce Bookkeeping Checklist
• The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
• What Is a Profit and Loss Statement?
• How to Read & Interpret a Cash Flow Statement
• How to Read a Balance Sheet & Truly Understand It

 

Conclusion

We are sure you are capable of managing your finances yourself, especially if you are a small store. Still, having a Shopify accountant will become increasingly important as your business grows. 

 

When the financial complexities of your business increase, you will greatly benefit from a level of expert help. The expertise of a Shopify accountant, specifically ecommerce accounting and tax compliance, can save you so much time and money. Moreover, it can help you keep your peace of mind.