Even successful Shopify sellers encounter accounting pitfalls that can affect profitability and compliance. Here are the 10 most common, with real-world examples:
1. Recording Net Payouts Instead of Gross Sales
Case Study: Sarah records her $4,500 payout as revenue, ignoring that her total gross sales were $5,000 with $500 in Shopify fees.
Impact: Revenue understated; taxes overpaid.
Lesson: Record gross sales first, deducting fees as expenses.
2. Treating Sales Tax as Income
Case Study: John mistakenly logs $1,200 collected in sales tax as revenue. During a state audit, he owed the tax.
Lesson: Treat sales tax as a liability, not income.
3. Not Reconciling Shopify Payouts
Case Study: Emma misses a $150 refund and a $50 chargeback by not reconciling payouts.
Impact: Profit reporting and taxes were inaccurate.
Lesson: Reconcile payouts regularly with Shopify reports.
4. Ignoring Refunds and Chargebacks
Case Study: Mike ignores 20 returned electronics items worth $800.
Impact: Revenue overstated; taxes overpaid.
Lesson: Record refunds and chargebacks immediately.
5. Mixing Personal and Business Finances
Case Study: Lisa uses a personal credit card for Shopify expenses, making tax preparation complicated.
Lesson: Use a dedicated business account for all transactions.
6. Incorrect Inventory and COGS Tracking
Case Study: Tom doesn’t track inventory, miscalculating COGS and overstating profit ($5,000 vs. actual $3,500).
Lesson: Track inventory and COGS accurately.
7. Forgetting Shopify and App Fees
Case Study: Jenny neglects $200/month in Shopify app fees.
Impact: Expenses understated; net income inflated.
Lesson: Record all platform and app fees as expenses.
8. Poor Expense Categorization
Case Study: Alex records advertising costs as “office supplies.” CPA struggles to identify deductible expenses.
Lesson: Use appropriate categories for financial reporting and tax deductions.
9. Not Tracking Sales by State for Tax Purposes
Case Study: Nina sells in 10 states without monitoring nexus rules. She received a $2,000 sales tax notice.
Lesson: Track sales by state and understand nexus thresholds.
10. Delaying Bookkeeping Until Tax Season
Case Study: Kevin reconciles books only in December, finding $1,000 in missed expenses and $500 in unrecorded refunds.
Impact: Tax filing stressful and costly.
Lesson: Maintain monthly bookkeeping.
Conclusion
By avoiding these common accounting pitfalls—tracking gross sales, reconciling payouts, categorizing expenses correctly, and keeping books updated—Shopify sellers can protect profits, simplify taxes, and scale efficiently.