You’ve taken the leap into entrepreneurship. Congratulations! By now, you’ve probably realized that this journey comes with its fair share of up highs and lows. And as your business has gained some traction, you’ve also probably realized that the administrative paperwork tends to pile up. In order to avoid the overwhelm, we’ve compiled a list of accounting tips for Shopify stores that will help you stay in control as your business grows.
Pay attention to your tax settings
When you create your Shopify store, the tax rates are automatically configured based on your address and the countries you ship to. Be sure to pay special attention to these rates as your business starts to grow to make sure they’re still accurate.
Shipping Internationally?
When you sell online, anyone in the world has access to your products which is good news for you. As you expand your reach, make sure that you set up a tax rate for each country you ship to.
Exempt?
Adding new products and collections is pretty much inevitable as your business grows. However, some products may have tax exemptions. To apply a tax exemption, you can implement a tax override.
Your local chamber of commerce or taxing authority should be able to help you if you’re unsure which tax rate to apply to your products.
Accounting Software Integration
Did you know that Shopify has built in apps to integrate various popular accounting softwares into your store? Having your sales automatically exported to your accounting software helps you stay on top of everything without the extra admin work. Setting up your accounting software to automatically integrate with your Shopify store ensures up-to-date sales reports without wasting time with repetitive work.
Track Cash Flow
Integrating your accounting software with your Shopify store will give you access to generating various reports. Some reports will help you specifically track money flowing in and out of your business.
Sales Tax Report
Staying aware of how much tax you’ve paid and how much tax you owe helps you maintain a clear vision of your business’s financial health. Always know if you have enough in the bank for tax season, and always be aware if your tax rates comply with local regulations.
Inventory Valuation Report
Instantly get a snapshot of your current inventory, including quantity and costs. Always know the total value of your current inventory. This report will help you grow as you learn which items in your inventory are slow-moving and how each inventory piece effects your cash flow.
Profit Tracking
Know how profitable your business is with various reports within the Shopify admin console. Using the profit and loss report will help you identify your largest costs and plan for how much cash is leftover.
Additional important Shopify profit tracking reports:
- Cost of Goods Sold
- Gross Margin
- Net Profit
Stay In Control of Tax Season
Knowing ahead of time what you need to hand in for your business will help take the stress out of tax season.
Corporate Tax Returns:
In Canada, corporations must file a T2.
In the US, there are two types of corporate filings. The first is an 1120, commonly called a C Corp, and the other is an 1120S or S Corp. The type of filing you need to do depends on how your company is incorporated. If you’re not sure, check your incorporation documents.
Individual & Partnership Tax Returns
If you’re Canadian, self-employment income is reported on lines 135 to 143 of your income tax and benefit return.
In the US, you need to look into forms 1040 and 1065. Sole proprietors will list all of their business income on a Schedule C of the 1040. Partnerships will complete the 1065 return, which is similar to the 1120 form that corporations file.
Additionally, if you paid more than $600 to an independent contractor, you’ll need to file a 1099 form.
Paying attention to the numbers in your Shopify Store will set your business up for successful growth without introducing new headaches. So implement these accounting tips for Shopify stores to make your entrepreneurial journey a little easier.