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How to Record Your Shopify Deposits in QuickBooks Online

November 14, 2024

Bookkeeping Basics

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I'm here to help retail boutique owners like you feel more confident in the money-side of your business. Retail bookkeeping is more complex than most small businesses, but these blog posts & podcast episodes are designed to give you bite-sized bits of information you can learn & implement right away.

I'm Megan!

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One of the biggest, and most common, mistakes I see retailers making when doing their own bookkeeping, is marking all of their Shopify deposits as “Sales/Revenue” in their bookkeeping software or spreadsheets.

(If you want to learn about the other common mistakes I see, check out my free on-demand training here!)

Logically, that makes sense, since the deposits you receive from Shopify, or whatever other payment processor you use (Paypal, Sezzle, etc…) are a direct result of the sales you make – but there are SO many other pieces that make up that number.

Today’s post is going to take a deeper dive to help you understand how you SHOULD be recording those Shopify deposits in your bookkeeping.

Your Shopify Deposits are NOT all “Sales”

As previously mentioned, the deposits are not your “Sales”. Sure, your sales are a PART of that number, but there’s actually 6 different components that make up that deposit amount. Let’s look at each of these along with some hypothetical numbers…

Gross Sales: This is the full retail price of the item(s) you’ve sold. Let’s say you sold $1,000 worth of full retail sales in a day for our example

Discounts: Any reduction in sale price due to sales, discounts and coupons. For our example, let’s say that there was $100 redeemed as discounts on that $1,000 of sales, bringing the total collected amount down to $900.

Returns: If your store policy allows it, you may have returns or refunds processed on the same day. Let’s say a customer made a return of $50 on this day as well, bringing  the total collected amount down to $850.

Shipping Income: If you have an online component to your store, you likely collect shipping income from your customers to cover the costs of shipping your products into their hands. Generally, you want to break this type of income out separately from your product sales, so you can accurately track your product margins each month. In our example, let’s say you collected $100 in shipping income on TOP of the $1,000 gross sales for the day. The total collected is now back up to $950.

Sales Tax: If you are selling taxable products in your state, or any other state in which you have a nexus, then you are responsible for collecting sales tax on TOP of your product sales. These amounts that you collect are NOT your income…it’s the state’s income…and therefore should not be included in your sales revenue on your income statement. For our example, let’s say that you collected $60 in sales tax, bringing your total collected back up to $1,100.

Processing Fees: The final piece that’s calculated into your Shopify deposits amount is the processing fees that Shopify deducts before they actually deposit your money into your bank account. If all $1,100 of our collected payments are processed through Shopify Payments, let’s say that $33 was deducted as processing fees (about 3%). That would make the total payout/deposit amount $1,067.

If you are simply recording the deposit of $1,067 as “Sales”, you are missing out on ALL these other pieces of information to help you clearly see your boutique’s finances. Not to mention, you’re overstating your income by any sales tax collected (and thus, paying MORE in income tax when the time comes), along with missing out on the tax deduction of the processing fees (again, resulting in a higher taxable income). 

Side note…if you need to see exactly WHERE to see all these different numbers in Shopify, you can read my previous post on the 3 Reports in Shopify You Need For Your Bookkeeping & Taxes. (https://www.findingfreedomfinancial.com/reports-in-shopify/)

Think of your Shopify Deposits as “Transfers”

Now, if you were to attempt to break out each and every single Shopify deposit into these 6 different pieces of information, you’re gonna end up driving yourself crazy. There is a MUCH simpler method that I recommend you do either weekly or monthly. 

First, you’re going to start to think of your Shopify account as a “bank account”. The moment that a customer pays for their order, that money is legally yours. But, that doesn’t mean that it automatically shows up in your bank account at that exact moment. For all of these payments that are “in process”, I want you to think of those funds sitting in your Shopify Bank Account. 

Every week or month (whatever works best for you), you are going to enter all of these different numbers. You’ll record your gross sales, discounts, returns, shipping income, and sales tax, along with HOW the payments were actually collected (Shopify, Paypal, cash, etc..). If you use Quickbooks Online, you can use a template journal entry for this, where you literally just have to plug in the new numbers each time you do it – takes about 2 minutes!

Then, when the deposits actually show up in your bank account, you simply record them as a Transfer from your Shopify Bank Account that you’ve set up in your bookkeeping system. And that’s it!

Reconciling your Shopify Payouts

One thing I’ve heard boutique owners concerned about lately is that they’re worried that Shopify isn’t paying them out on all their funds. One way to help you double check and verify that you’re receiving everything owed to you is to reconcile your Shopify Payouts. (More on what a bookkeeping reconciliation is here)

Through this process, you’re going to compare the gross amounts that you’ve collected from your customers through the Shopify/Shoppay payments, record the processing fees that Shopify automatically deducts from your payouts, and confirm that the net amount you receive actually matches what you’re expected to be paid!

If you’re interested in implementing all of this in your own QuickBooks Online bookkeeping, but feel a little overwhelmed or confused on where to start, I want to invite you to check out my self-paced Bookkeeping Made Simple for Boutiques course where I have step-by-step videos to show you EXACTLY how to do all of this so you can have accurate financial information to help ensure that you have everything you need for a stress-free tax season.

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Bookkeeping Basics

New boutiques

Tools & Tech

how-tos

Taxes

explore the blog

search the post index

MORE ABOUT ME

I'm here to help retail boutique owners like you feel more confident in the money-side of your business. Retail bookkeeping is more complex than most small businesses, but these blog posts & podcast episodes are designed to give you bite-sized bits of information you can learn & implement right away.

I'm Megan!

ALL POSTS

With over 10 years of accounting experience, I've seen firsthand how retail boutique bookkeeping is more complex than other industries - you’ve got inventory, sales tax, and multiple payment processors. I've built my own bookkeeping systems I've used with my retail clients over the past 4 years, and I've broken it down and documented it all to help other small retailers implement it themselves.

Hey, I'm Megan!

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