If you're looking for a quick guide of which Shopify reports to use to account for your Shopify sales, refunds and fees without loads of waffle, then you're in the right place.
Let's dive straight in...
We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.
What figures do we need?
Firstly, taking a step back, let's have a think about what figures you actually need for accurate bookkeeping of your Shopify sales.
You will need the following:
- Sales (by destination country)
- Refunds (by destination country)
- Shopify Fees
The reason you need sales and refunds split by destination country is that they may need to be treated differently for VAT based on this. For example, a sale going to a UK customer would typically incur 20% VAT but a sale going to a customer outside the UK is classed as an export and as such is typically zero rated for UK VAT.
Depending on where your business is established you may also need to take into account sales where Shopify is responsible for collecting and remitting the VAT directly to HMRC too. We can discuss this more later.
Where to obtain these figures?
You can use the Shopify Sales by billing location report to get a snapshot of your sales for each month split by country.
The sales by billing location report contains the following columns which we will use:
- Total Sales
You will also need to grab your Shopify Fees figures which are available via the Payouts page on Shopify. Export all your payouts for a month and then total up the Fees column.
What to do with these figures?
Now that you have the figures from the payout report you can begin to enter them into your accounting software or spreadsheet.
You will need to sum up your sales into the following categories:
- Shipped to UK - Typically 20% VAT
- Shipped outside UK - Typically Zero Rated Income
Total up the fees for each month using the Payouts file you exported.
If you are based in the UK or the EU (excluding Ireland) and you have provided your VAT number to Shopify then Shopify is NOT charging VAT on their fees. More on that in this article Do You Pay VAT On Shopify Fees?
Alternatives to doing this manually?
As you may be seeing by now, doing this manually is going to take time and patience and even so it is going to be pretty susceptible to human error.
Most Shopify sellers decide that this task is something they don't want to spend much time on each month. So what are your options if you too decide this?
- Get your accountant/bookkeeper to do it
- Use software to automate it
Using an accountant or bookkeeper
If you use an accountant or bookkeeper then this will definitely save you some time. The downside is that they will charge you per hour for doing so. The likelihood is that it will take them just as much time as it would have taken you and this could easily end up costing you a few hundred pounds per month.
Using software would be most Shopify sellers preferred choice. This is quick, accurate and cost effective. One such tool is Link My Books.
Link My Books hooks up directly to your Shopify account and accounting software such as Xero or QuickBooks and posts summaries of each of your Shopify payouts following the same format as we discussed above. It also handles all other payment gateways if you're making sales via PayPal, Klarna, etc. or via Shopify POS for example.
It's trusted by thousands of sellers and is rated 4.98 out of 5 on average across hundreds of reviews.
You can try Link My Books for free here.
Knowing which reports to use and where to find them is just the beginning. Picking them apart and putting all your sales, refunds and fees figures together correctly is the hard part.
If you have the time and patience to learn the process then do so.
Most sellers value their time enough to want to either outsource this task or automate it.