Shopify Bookkeeping in QuickBooks Online: Step-by-Step Guide

Okay, well I will get us started, so welcome everyone — thank you so much for joining us today. We have a great webinar in store for you, so I'll just start by doing some introductions.

I'm Amy from A2X — I'm the Product Marketing Manager at A2X — and we also have Brittany Brown here from LedgerGurus. I just want to start by saying you guys have picked a really good webinar to join. Brittany Brown is a fantastic speaker — she's spoken at many events; she spoke at the A2X Camp last year and she got rave reviews. Not only that, but she runs a really successful practice, helps a lot of Shopify businesses, and she has experience running an ecommerce business herself. So I'm going to go out there and say I don't think there's much about Shopify accounting that Brittany doesn't know — you've definitely picked an awesome webinar to join and we're really, really glad to have Brittany here with us today. Before we jump into the agenda and what we're going to cover today, I'll hand over to Brittany for a moment so she can tell us a little bit about her practice with LedgerGurus.

Thanks, Amy, for that very kind introduction. As Amy mentioned, we are an ecommerce-focused accounting firm. On top of doing the ecommerce accounting that we're going to talk about in depth today, I feel like if you're really going to get into ecommerce accounting you probably also need to be able to talk shop on inventory and sales tax as well. If this is where you're at the beginning of your journey, those are two other specializations I would highly recommend you get serious about gaining knowledge in, because those are all very intricately woven topics.

We always say our vision is to help other businesses succeed — accounting just happens to be how we do that. We want to be the best business decision our clients ever make and the best career decision our employees ever make. I would like to believe we're pretty successful at that most of the time — we're very passionate about the topic and the space and the partner, quite honestly. A2X is something I'm a raving, enthusiastic fan of — we love it. Definitely a very safe set of hands — we've got a lot of inquiries through our partner directory and they always lead to great reviews, so you're in safe hands.

Agenda

First of all, we're going to start by talking about why accurate Shopify bookkeeping is key to profitability. We'll talk about why Shopify bookkeeping is so complicated, then we'll go through a month-end bookkeeping process. We have an awesome checklist that we are going to share with attendees today so you can follow along — it’s not only about what you need to get started but also a step-by-step guide to walk you through the process. At the end we'll have questions and answers — if you've got questions as you go, pop them into the Zoom chat and we can answer those at the end. The webinar is recorded and we'll be sending that out afterwards too.

I’ll start by popping the checklist into the chat now so everyone has access. We're going to start by covering a little bit about why bookkeeping for Shopify is so complicated — that will give you access to the checklist to begin with. If you are watching this recording on YouTube after the webinar, you will be able to find a link to the checklist in the notes below.

Why is accurate Shopify bookkeeping important?

This might sound like a leading question — if your business is doing fine you might not give your financials a lot of attention. The problem is many businesses don't really need their financials until they really need them. I thought I'd start by asking you, Brittany — I'm sure this is something you see firsthand — why do you think accurate Shopify bookkeeping is so important?

I think one of the most compelling ways to answer is by telling some stories we've seen when it's not done correctly and the outcomes of that. Interestingly, one of the most important parts of Shopify bookkeeping — and one thing that makes it unique compared to Amazon, eBay, or Walmart — is that Shopify has multiple payment processors. A lot of the time we find clients will turn on payment processors because they're running their Shopify store and behind the scenes they may not even remember that they turned them on. It doesn't happen all the time, but in onboarding and cleanup we often find payment processors that clients forgot they had turned on and never finished syncing to the bank account. The payment processor was taking sales but not depositing the money into their bank account, and they didn't know — that was literally lost revenue until they realized it and finished connecting the payment processor so they could actually get the money they were being paid for their sales. That is an issue caught in the bookkeeping process.

Another situation we see is clients using Shopify to facilitate sales that would not normally come through Shopify. For example, a client was processing wholesale payments through Shopify because the customer wanted to pay with a credit card. They still invoiced in QuickBooks, then processed the payment through Shopify. In that case they were double-stating revenue — Shopify reports showed sales that weren't valid, and invoices showed valid sales, so the two didn't tie together. They greatly overinflated taxable income that year before cleaning it up. I could go on about many different scenarios and hairbrained solutions that create more problems. At the end of the day, accounting tells the story of the business — good accounting tells an accurate story. If you're doing bookkeeping well, you'll catch these issues because you're watching the story all the way through, so it's really important.

Yeah, it's crazy that you can be understating income by missing deposits and overstating it by doubling up. Shopify is so easy to add via the App Store and it makes for a nice customer experience, but payment gateways can create complications they don't always think about.

What makes Shopify bookkeeping complicated?

Payment gateways are a big one, but another is payout periods. When you're closing books, sales may happen in one month and payouts not until the following month. Payout period accuracy matters because gross profit margin is an important metric for ecommerce businesses. If you track cost of goods sold but mismatch when revenue and COGS are recognized, you get skewed margins that affect management decisions. A2X does a really good job at solving payout period issues.

One other thing — ecommerce accounting is different because much activity happens in the channel rather than the bank account. For regular businesses sending invoices and paying bills, capturing bank and credit card activity gives a fairly complete picture. But for ecommerce — including Shopify — activity passes through the channel, and you often only see lump-sum deposits hitting the bank. On the sales channel level you have thousands or hundreds of thousands of individual sales orders, but from an accounting perspective you can summarize without losing integrity. You summarize at the channel level — sales, discounts, sales tax, shipping income. That simplifies millions of sales orders into what happened on that channel during a period.

Shopify becomes more complex than Amazon or eBay because Shopify disperses payouts into whatever payment processor the customer chooses at checkout — PayPal, Shopify Pay, Amazon Pay, etc. Within those processors additional activity happens: returns, processor fees, and more. You must reconcile channel activity, payment processor activity, and actual bank deposits to tie everything together and have a high degree of confidence your picture is complete and accurate. That dispersal is what makes it complicated.

A lot of sellers sell across multiple channels, and they each have individual pieces — but Shopify payment gateways make it especially tricky. If you're not bookkeeping accurately you have limited visibility into profitability and business performance.

How A2X makes Shopify bookkeeping easy & accurate

Here's an example of what this looks like in real life. On the left you'd see your deposit in QuickBooks — sellers often see the deposit hit their bank account and code that whole amount to a sales account. That's problematic because that deposit is not the sales number. On the right you'd see that deposit broken down into what it actually was — the sales amount, minus fees, plus gift card liabilities, etc. You get insights when you split out the transactions that occurred.

Another common issue is ignoring bookkeeping after launching a Shopify store, then at the end of the year there's a mountain of data. Some people do a best-guess journal entry — again coding the entire deposit to sales — or they pull a report from Shopify and try to do it manually. It seems like you should be able to just get that information from Shopify, but it's really complicated because of payout periods and different transaction types. Shopify’s finance summary is a helpful validation but it won't catch all nuances you need for bookkeeping.

A2X provides automated and accurate ecommerce accounting. It connects to your Shopify account, pulls in uncategorized data, breaks out sales, fees, taxes, refunds, splits out payment gateway transactions, and organizes that data. Then A2X creates an entry to post through to QuickBooks to reconcile the payout — covering the correct payment period and all transactions that occurred. Instead of sending everything individually, A2X sends a summary entry: sales, tax collected, shipping income, and the other transaction types. That journal matches the deposit in your bank account so your Shopify payout and A2X journal entry match perfectly. A2X also attaches a summary so you can look up specific orders included in a payout. The idea of A2X is one-click reconciliation — it's a tool in the background to get accurate data into QuickBooks so you can run the statements and insights needed to run a successful business.

That overview covers why sellers choose A2X — it automates the process, gives visibility, and provides confidence because the entry matches the money you've received. That reduces manual adjustments and gives you accurate numbers — massive benefits for someone who might otherwise be flying blind. Even if you're not selling your Shopify store now, if you plan to sell or seek lending in the future you need accurate accrual accounts, so get on it now rather than leaving it to be a nightmare later.

What you need for Shopify bookkeeping

I popped the checklist into the webinar chat. If you're having issues getting access, let us know. We're going to talk about what you need from a monthly bookkeeping process — steps to get started and the steps to make sure you're accurately accounting.

If someone gave me a checklist and I saw something on it and had no idea how to use it, I'd get anxious — so I'm going to touch on each item and explain how it's used and where it fits so people feel more confident.

Monthly bank and credit card statements are essential — reconciliation relies on these to make sure everything's accurate and complete. The Shopify finance summary, while it doesn't necessarily include everything, can be a good confidence creator — you can see whether numbers are in the right range and whether large discrepancies indicate something to dig into. Loan transactions matter too — sometimes you're borrowing money through PayPal, Shopify Pay, or Amazon Pay and those affect deposits. Merchant account statements are important for settlement fees and other charges. Pending payments are important to understand — if a payment is in transit it affects reconciliation. Bills and receipts are part of the normal bank coding process and affect COGS. Additional apps touch this space — return apps like Returnly or Loop, product cost catalogs, unit sold by SKU — these are important. Manual orders are especially painful — they create discrepancies between what processed through payment processors and what Shopify reports say. Manual orders often cause a lot of pain — if you don't have visibility you'll end up with discrepancies you can't account for.

Step-by-step guide to Shopify bookkeeping

Some of you on this call are accountants serving clients and some are ecommerce brand owners new to accounting. We teach ecommerce business owners to be successful accountants for their businesses — this is approachable. A2X takes the complicated pieces and simplifies them.

The first thing to do is send your sales and income from A2X to QuickBooks Online (QBO). When you go into your bank register inside QuickBooks and open bank feeds, you'll see deposits coming over from Shopify — those are what A2X is designed to account for. If you code that deposit to income you're missing information and skewing financials — the deposit is not income; it's the net effect of many items.

In A2X, find the associated deposit — for example, $515 — anything that says Shopify Payments next to it will match what hits your bank account. Push it over to QuickBooks, refresh your screen, then in the bank feed match the deposit to the journal A2X pushed over. That's the main accounting for those deposits — find the transaction, push it over, refresh, match. That accomplishes the hardest part.

On the A2X screen there's a column that says Payment Gateway — that tells you which gateway processed sales. Shopify Payments will have a one-to-one match to the bank deposit. Others — PayPal, manual — need different handling.

Best practice — set up clearing accounts specific to each payment processor. For example, a PayPal clearing account. Push the A2X journal to affect that clearing account. When you see PayPal deposits hit the bank, code those deposits to the PayPal clearing account. A2X will show expected sales for PayPal sitting in the clearing account awaiting reconciliation. Then match deposits to the clearing account and reconcile with the PayPal statement to account for any fees. That is how clearing accounts work with multiple payment processors.

If you have questions about this, put them in the chat. The key distinction to leave with is: Shopify Payments match exactly to bank deposits — push and match. All other payment processors map to clearing accounts in A2X and you code deposits to those clearing accounts in QuickBooks — that centralizes detail for reconciliation at month end.

Record bills and expenses as they come in — code them normally. Bills and receipts factor into cost of goods sold (COGS), which we'll cover. Log additional apps that affect this process, like return apps. A product cost catalog is a summary of SKUs and their assigned costs — necessary to calculate COGS by SKU. Unit sold by SKU is something A2X helps with. Manual orders create discrepancies and need visibility.

Bank reconciliation is crucial. Source accounts — bank accounts and credit cards — make up most of the picture. Reconciliation ensures activity was captured, nothing duplicated or missed, and gives you confidence in your bookkeeping skills. If you’re not reconciling monthly, you’re missing a key control.

Understanding product costs

Inventory accounting is the most complicated part of ecommerce accounting. Don’t be a perfectionist — many people have discrepancies like expecting 100 units but finding 40. Engage in cost accounting, but don't make yourself crazy chasing perfection. You need to know product costs — whether via an inventory management system (IMS) or a spreadsheet using recent purchase orders. A2X has resources about costing and allows COGS calculation, but A2X’s costing is static — whatever product cost you load is the lookup until you update it. So update costs regularly if vendor prices or landed costs change.

How often to update costs depends on vendor volatility, landed costs, and purchase order size — shipping and landed costs can swing unit costs significantly. Be consistent about how you handle costs — for example, if you include shipping in product cost, code those shipping costs to inventory on the balance sheet; do not expense them on the P&L and also include them in product cost, or you'll double count. A2X will look up what you sold by SKU and what cost you assigned to each unit, multiply, and make the COGS journal entry if set up correctly.

Record COGS to QBO from A2X

Consider ending inventory balance — COGS sits on the P&L and inventory is an asset on the balance sheet — they are two sides of the same relationship. Periodically do counts to ensure inventory balances make sense. If inventory goes negative, you’re not watching the relationship between COGS and inventory carefully. Review and adjust for inventory shrinkage and losses — do counts regularly. We had a client who hadn’t done an inventory count in 10 years and had to make a massive adjustment before selling — it cost them significantly. Yearly counts are a bare minimum; monthly is great; quarterly is a reasonable middle ground.

If you're not using A2X to calculate COGS, you may use an IMS to push COGS or do manual spreadsheets. If you use an IMS, it should be dynamic and adjust costs each receipt — that’s superior to a static system. We still recommend using A2X to record revenue even if an IMS pushes revenue data, because A2X’s reconciliation automation is superior. If an IMS forces an “all or nothing” sync that pushes messy revenue data, it can create reconciliation problems. Best practice for us has been to use A2X to record the sales side even when an IMS is in use.

Review returned quantity and recording influencer products

Depending on your returns process, tracking returns can be challenging — an end count often sidesteps needing a dialed-in returns process operationally. Also consider reclassifying product sent out for marketing or influencers as marketing expense rather than COGS — that gives clearer margin visibility. This is often an add-on service for accounting firms, but it helps understand marketing spend.

Validate data

Review sales on your Shopify finance summary — if everything is pushed into QuickBooks from A2X, you mostly validate rather than re-create. Compare expected totals to payment totals; discrepancies can indicate issues. Verify unmatched A2X summaries — sometimes entries were sent that don’t have deposits, perhaps because expenses exceeded revenue in a period, or returns processed through a payment processor had no deposits. Some entries can be ignored if they're not valid Shopify sales — but understand why you're excluding them.

Be careful not to duplicate pushes — pushing an A2X settlement twice will duplicate the journal in QuickBooks. Duplicates are usually caught in bank reconciliation — A2X transactions without a bank match are often duplicates and should be deleted. Understand how clearing accounts and pending balances operate — if you see identical increases on the same date with the same A2X journal name, delete the duplicate.

Reconcile other payment gateways

Pull statements for PayPal, card processors, Affirm, etc., and reconcile money in and money out. Payment processor fees are usually evident on statements. PayPal is often the hardest to reconcile, especially with foreign currencies and vendor payments. Review pending payments, chargebacks, and currency conversions — foreign currency can complicate things significantly.

Review financials — don’t skip this step

After you finish accounting, review your financials. Pull up your profit and loss and balance sheet. The P&L shows how much money you made that month and whether you’re in the green or red. The balance sheet shows source accounts and balances at month end and where inventory sits. Click on line items in reports to see underlying transactions — this helps spot miscoded expenses. Look for reasonableness — if sales on the P&L don't match what you expect, dig deeper. Use report filters to view by month, class, etc., to see trends. Consult your financials for insights — track month-to-month trends and ensure you can explain balance sheet balances. Reconcile every bank account and credit card at month end.

Get in touch with LedgerGurus

If you want help, reach out to Brittany at LedgerGurus directly or find them on the A2X partner directory. Thank you so much, Brittany — that was awesome, detailed, and practical.

Q&A

First question: as a startup about to sell a single final product in a month, is it okay to skip steps 5–8 as long as we're coding COGS correctly in QBO, with the supplier maintaining inventory tracked by Excel — or should we get A2X COGS from the beginning? I'm concerned about extra maintenance of syncing.

Inventory is such a pain and can bury new sellers. It is okay in the first phases to skip detailed inventory accounting and expense purchases directly to COGS — know that your margins will appear less profitable than they are, and you may need to adjust at year end for remaining inventory. For new sellers, mastering inventory accounting is not the most important thing initially. However, build a product cost catalog immediately — even if you're not using it to track COGS now, it informs pricing and decisions later. Start that from day one.

Next question: recommended IMS systems?

My two favorites are Finale and Cin7 Core (formerly DEAR). We also implement Katana and are looking into Unleashed. Those are some good options.

Should I create a PayPal bank account in my chart of accounts or a PayPal clearing account?

If you're using PayPal to pay vendors as well, get two separate PayPal accounts — it doesn't cost anything extra and drastically simplifies PayPal accounting. For the account used to pay vendors, sync it to QuickBooks and track transactions normally. For the account accepting payments, use a clearing account (you can classify it as a bank account but don't sync it) — a clearing account is better for the sales side. My best tip is two separate PayPal accounts.

Is A2X viable for omnichannel ecommerce businesses in Europe — Amazon, Shopify, B2B, eBay, manual orders?

Yes — you'll have different A2X subscriptions for each channel. Shopify is the most complex within A2X; the rest are straightforward and easy. We use A2X for omnichannel clients, including our most complex ones doing tens of millions a year, and get great results. If this looks overwhelming, reach out to LedgerGurus — you’ll be in very good hands.

Wrap up

Thanks very much everyone — thanks Amy. Bye.