Accounting for Shopify Payment Gateways
The fact is that Shopify bookkeeping is quite challenging primarily due to all the payment gateways. A2X is definitely the industry standard when it comes to Shopify integration with QBO, but it's not perfect and requires a review of the balance sheet every month to ensure proper accounting. When setting up A2X, there is a lot of mapping of accounts from A2X to QBO that is required. By default, A2X sends other gateway payments (meaning anything but Shopify payments) to a clearing account call "Shopify Clearing Account". This is initially a catch all for non-Shopify payments. Using this default setup makes it very difficult to reconcile, so the best practice is to set up a clearing account for other gateway payments. Here are some examples:
PayPal payments - If Shopify Payments has not started processing PayPal payments for you, and you accept PayPal, you will likely see the most activity on this other payment gateway. You need to setup a specific clearing account. All express checkout payments and preauthorized bill pay user payments must go to this account from the connected PayPal bank feed in QBO. Then you must configure the A2X mappings to send all PayPal payments to the PayPal clearing account in QBO. The end result should be zero each month in the clearing account just by correct mapping. Where this gets tricky is when you are receiving payments into PayPal not associated with Shopify or sending payments, not associated with Shopify refunds. Even if Shopify payments is processing payments for PayPal, you may still receive payments there is you are accepting sales on Meta.
Meta - If you are accepting sales through Meta, you must set up a specific Meta clearing account which should also zero out each month just based on the correct mapping.
Shop Cash - If you are accepting Shop Cash, you must set up a specific Shop Cash clearing account which should also zero out each month just based on the correct mapping.
Shop Pay Installments - If you are accepting Shop Pay Installments, you must set up a specific Shop Pay Installments clearing account which should zero out give or take a few days at the end of the month if you have directed all payments received as "SHOPPAYINST AFRM" to this account and recorded the fees manually. The manual recording of these fees must be done each month by running a report in Shopify. If you don't do this, that account will not have fees on your P&L and the balance sheet account will grow.
Pending payments - What you do in Shopify flows through A2X to QBO. If you mark an order paid without receiving payment, a balance sheet account will show money due to you. Likewise if you owe a customer a refund, it will show a negative balance here. These balance sheet accounts should be reviewed monthly.
Manual orders - Manual orders can cause some issues too. Balance sheet accounts must be reviewed monthly to diagnose issues.
Shopify Clearing Account - Anything that doesn't go to the other clearing accounts, which show up here. If you have mapped all your clearing accounts and still see a balance here, that means you've accepted payment through a new gateway and you'll need to determine if you should set up a new clearing account.
Shopify Loan - Took a Shopify loan? Make sure to record the interest using the loan agreement, if not, you'll end up with a negative amount on the balance sheet liability account after applying all the payments.
Is there an easier way? Process wise, no. But you can outsource your monthly bookkeeping to an ecommerce accounting firm and save hours that can be used focusing on what you do best.
Learn more about our Shopify bookkeeping service.