Leaving Payouts in Favor of Real Revenue Tracking
Among the most widespread errors made by new sellers on the Shopify platform is the fact that they accounted their net payouts as their total revenue. Trick When Shopify transfers funds into your bank account that amount has already been subtracted by transaction fees, refunds, and other mods. Reporting the deposit alone results in a gross understatement of what your actual business is all about and may result in problems with compliance with taxation.
These amounts need to be grossed up when doing professional bookkeeping for Shopify. This is whereby you will write down your total sales then write separately the fees and shipping costs as different items. Such an amount of detail is necessary due to a number of reasons. It will make sure that you have the right GST reporting and also make you see the actual profit margins. When you just consider the net deposit, you are not able to see the extent to which your potential profit is being used up by the silent costs of operation and platform charges.
The Threshold Requirements and the Management of GST
The Goods and services tax is a major consideration in your bookkeeping strategy in Australia. GST needs to be registered when your turnover in business is or is likely to be 75000 in a period of twelve months. Upon registration, you will be required to charge a 10 percent GST on the taxable Australian sales that you make and file this to the authorities through your Business Activity Statement.
Shopify helps in the easy collection of GST, which is at point of sale, but the difficulty is in reporting. Smart bookkeeping means that your accounting system is properly configured to work with your store to make the difference between GST-inclusive Australian sales and GST-free international exports. With correct records, you will be able to claim back on tax credits on the GST that you pay on any business expenses such as stock, software and marketing, and this will go a long way in enhancing your bottom line and overall cash position.
Inventory Control and Landed Costs
Shopify stores balance sheets usually have inventory as the biggest asset. Smart accounting is the abandonment of a simple cash-based perspective that you charge an expense when you purchase a stock to an accrual-based perspective. In this model the cost of goods sold is only tracked when an item is actually sold to a customer and this is a much more indicative of monthly profitability.
Your bookkeeping for Shopify should be able to do this effectively by taking into consideration landed costs. This consists of the factory price of the goods, the shipping, custom duties and insurance. With the knowledge of the landed cost of each and every single item, you can use your financial information in making informed decisions about pricing, discounts and products worth restocking. Without this understanding, you will be doing a lot of sales but not making the actual cash at the end of the month.
The Force of Integration and Automation
The sheer amount of transactions in a contemporary eCommerce store makes the process of data entry a disaster when done manually. In order to have hassle-free bookkeeping in the case of Shopify, it is not subject to negotiation to integrate your store with cloud accounting solutions. These systems enable smooth flow of information which records all the transactions, tax elements and fees automatically.
The process can also be further automated by using special integration tools that would fetch your payouts in Shopify and map them automatically to the right accounts. This will guarantee that your bank reconciliation is a case of brief checks instead of hours of manual investigations. Automation does not only save time, it removes human error, which gives you real-time financial data enabling you to make a quick decision in a competitive market. This is a digital-first strategy whereby your books are always available to review.
About Accountsly
Accountsly is a company that empowers Australian Shopify sellers with modern and technical bookkeeping and tax solutions. We are aware of the particular difficulties of eCommerce, including the GST compliance to sophisticated inventory tracking. Our team is an extension of your business whereby your finances are systematized and geared towards growth. We assist you to transform your data into a strategic asset.
Frequently Asked Questions
As a rule, any transport of goods between Australia and an international destination in a period of not more than 60 days of payment is treated as GST free exports and will not involve the 10% tax.
Refunds are to be reflected as an offset to revenue as opposed to a business expense so that your gross sales and tax obligations are not distorted to reflect inaccurate values when making submissions.
A clearing account is a provisional holding account in your accounting application whereby the sales are noted prior to being matched to the actual cash payment in your bank account.
Yes, as Shopify is a lawful business expenditure, you generally can assert the GST charged on your subscription and application expenses as an input tax credit on your activity statement.
In most expanding stores, it is advisable to do a weekly reconciliation in order to identify any discrepancies at an early stage and have a clear and up to date picture of your cash flow.
