How to Set Up Shopify Automated Accounting

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Managing e-commerce accounting can be time-consuming and stressful. Still, it’s doable for small businesses. However, once your income grows, you may need to consider setting up automated accounting for your Shopify store.

Shopify automated accounting streamlines your financial record-keeping. It provides insights into your financial performance across departments, which becomes increasingly important as your store grows.

In this article, we’ll explore how you can automate your Shopify store’s accounting tasks and how it impacts your business.

Pros and Cons of Shopify Automated Accounting

While researching how to set up automated accounting on Shopify, we discovered its pros and cons.

The pros and cons that apply to you will depend on the business and accounting software you own. Overall, the Shopify accounting automation gives you better data visibility.

Automated accounting software validates your bank statements with accounting records and maintains consistent data across systems.

The integration also ensures your business complies with tax regulations so that you are stress-free at tax time.

Some accounting software easily connects with Shopify, while you may need a professional or third-party app to connect others, especially for advanced accounting features.

Also, not all accounting software is ideal for every company, so check out these best accounting software to find the one that fits you.

This way, you can minimize the cons and reap the benefits of automated accounting on Shopify.

Best Practices for Shopify Accounting Automation

Shopify accounting automation provides numerous benefits, including accurate financial records, enhanced tax compliance, and real-time visibility into your finances.

Here are some best practices to ensure your Shopify accounting automation goes smoothly.

Integrate Shopify with Accounting Software

Up to 75% of data loss is caused by human errors, such as data entry mistakes or accidental deletions. Automating data flow between multiple platforms removes the need for manual data entry, ensuring accurate and up-to-date records.

Moreover, this integration enables you to make more informed decisions quickly. For example, your accounting software tracks your customers’ purchase history, transactions, and order frequency, allowing you to make changes to improve customer retention and loyalty.

Keep Software Updated

Accounting software is ever-evolving, with software providers continuously introducing upgraded versions.

The latest releases often include feature enhancements and bug fixes. These improvements contribute to stable performance and reliable software functions, improving the tool’s overall efficiency.

If you aren’t using the latest version of software products, you cannot expect the best results and may fall behind competitors who leverage the latest features.

Here are some advantages of keeping your accounting software up to date:

Continuous Data Backup

Data loss can cause companies to shut down. Effective data backup strategies can help avoid such critical issues.

Data backup means saving your data in a separate location before making any changes or adding integrations to your current systems.

This way, you can recover your data from unexpected hardware failures, malware attacks, and breaches.

Shopify e-commerce stores deal with sensitive financial and customer data. Backing up this data means that no matter what happens while integrating your accounting software and e-commerce website, your sales and finance data will be safe and accessible.

Set Up Strong Security Measures

Use Reporting Capabilities

Accounting tools usually come with built-in reporting tools to understand your finances better. Similarly, Shopify analytics show your store’s recent activity, traffic, customer purchase patterns, returns, and more through reports.

Connecting both can give you extra insights that help you make the right decisions promptly. For example, integrating Shopify with automated accounting software means your financial and sales data are in one place.

Generating reports with such combined data can give you better insights.

You can generate reports on inventory levels, expenses vs profits, dollars spent on customer retention, shipping costs, and more. These reports will help you improve the performance of the respective departments.

Regular Tax Compliance

Filing tax forms and complying with tax regulations by yourself takes time. Integrating good accounting software streamlines this process.

Automated accounting software calculates sales tax according to a country’s rules and policies, allowing you to stay tax-compliant.

This lets you easily tap into international markets and explore broader market opportunities and audiences.

Moreover, this integration automates tax handling and reduces human errors while also settling taxes on time to avoid hefty penalties.

Accrual accounting

For growing e-commerce businesses, accrual accounting is better than cash-based accounting. Cash-based accounting calculates revenue and expenses only when the cash is settled in your bank account.

For example, with cash-based accounting, you only see the full accounting picture for January in February, after accounting for the returns, payments, and settled invoices.

In contrast, accrual-based accounting records revenue whenever the order is placed, regardless of when the funds reach your bank account. With this, you’ll know your financial position in the same month, as it records the revenue and expenses as they happen.

How to Set Up Accounting for a Fully Automated Shopify Store

With the right software, you can easily automate the accounting tasks of your Shopify business. We’ll use Zoho Books as an example to show you how you can set up integrated Shopify accounting.

Some accounting software doesn’t directly integrate with Shopify. In that case, you’ll need to use third-party extensions. Shopify partners with third-party services like Zapier or Web2Market(W2M) for many app integrations, including Zoho Books.

Step 1: Log in to your Shopify store.

Step 2: Type ‘Zoho Books’ in the top search bar and click ‘Search zoho books in Shopify App Store.’

Step 3: Select ‘Zoho Books by W2M.’

Step 4: Click ‘Install.’ Click ‘Install’ again on the new page.

You will now see the different pricing plans available for this integration. Select a suitable plan for your business. If you are unsure of the product’s capabilities, you can try the free trial option.

Step 5: The final step is setting up your payment method.

Common Pitfalls and Tips for Easy Integration

To ensure your integration goes as smoothly as possible, we’ve put together some common pitfalls and tips for easy integration.

Advanced Shopify Accounting Customization

Certain accounting software has several features specially designed for e-commerce businesses. You can customize many of those features to suit your business needs. From our research, below are a few features you can tailor to your e-commerce businesses.

Customize What Data Your Accounting Software Can Pull from Shopify

You can set access permissions for the data you pull from Shopify’s store. For example, during integration, Shopify might ask whether you want the accounting software to access invoices, payment methods, or discounts.

Based on your configurations, the tools access each other’s data. With granted permissions, the accounting software directly fetches the necessary data from Shopify.

Vendor Management

E-commerce businesses most likely work with external vendors to design, manufacture, and ship products. This means numerous financial transactions between vendors and your business.

With inventory, vendor agreements, and sales data in one place, you can easily validate invoices received and settle payments.

Accounting software also provides detailed insights into how much you’ve sold through your Shopify store. With those details, you can order optimal inventory through the vendor management portal, avoiding salvage.

Reporting Tools & Data Analytics

Reporting tools within the accounting software provide a complete overview of your financial health. These insights help you set realistic goals, create strategic business plans, and execute them.

Accounting software comes with basic reports on income, expenses, inventory, profits, and discounted sales. And certain accounting software also offers features to customize pre-built templates and generate reports specific to your needs.

So, the best accounting software allows you to generate customized reports on various metrics and helps you identify major spending, analyze effective discounts, evaluate price quotes of different vendors, and more.

Bank Reconciliation

Ideally, your bank account statements should match your accounting records. The bank reconciliation feature helps identify any discrepancies between the two, allowing you to investigate and correct those transactions.

You can apply filters to view specific transactions associated with a date, customer, or vendor. This helps you find the root cause of the issue, enabling you to resolve it and prevent future occurrences.

This way, you can audit and uncover any financial fraud at your company and ensure your records are consistent across the systems.

How To Choose Accounting Software for Shopify Automation in 2024

Different accounting software focus on different aspects of your business and differ in pricing, integration capabilities, usability, and features. Here are a few factors to consider when choosing the right accounting software for your business.

Many accounting software solutions have strengths and weaknesses. However, we’ve reviewed the top vendors and summarized the three options we thought were worth exploring.

We chose to use Zoho Books as an example because we found it offers easy integration with Shopify, built-in workflow triggers, affordability, tax calculations, and ease of use.

However, you might also want to check FreshBooks and NetSuite as they are also robust accounting tools with unique capabilities that might suit your business particulars well.

Shopify Automated Accounting Takeaways – Is It for You?

However, it’s important to choose the best accounting software for your business’s size and type. If you’re looking for a highly scalable solution with multi-lingual and multi-currency invoicing, then Zoho Books could be the solution you’re looking for.

However, other worthy options include FreshBooks and Netuite.

With automatic bank reconciliation, customizable reporting tools, seamless integration with other tools in the Zoho suite, and competitive pricing, Zoho Books is a worthwhile accounting software solution.

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