A Guide to Bookkeeping for Shopify Store Owners

Running a Shopify store in the UK is an exciting opportunity, but along with sales and growth comes the responsibility of proper bookkeeping. Whether you’re just getting started or scaling your online business, understanding bookkeeping for Shopify is essential for staying compliant, profitable, and financially in control.

In this guide, we’ll cover everything Shopify sellers need to know about bookkeeping, including tools, tax obligations, and tips tailored to UK businesses.

What Is Bookkeeping and Why Does It Matter?

Bookkeeping is the process of recording and organising your business’s financial transactions. For Shopify store owners, this includes tracking:

• Sales and refunds
• Shopify fees
• Advertising costs
• Inventory purchases
• VAT and other taxes

Without accurate bookkeeping, it’s easy to overspend, underpay taxes, or miss out on valuable deductions. Good records are also crucial if HMRC ever audits your business.

Common Challenges for Shopify Store Owners

Running a successful Shopify store is no small feat—and keeping the books balanced is often one of the trickiest parts. Below are some of the most common bookkeeping challenges that eCommerce entrepreneurs face, and why it’s essential to have a streamlined system in place.

High Volume of Micro-Transactions

Shopify merchants often handle dozens, if not hundreds, of small transactions per day. These micro-sales, when not properly categorised or reconciled, can quickly lead to discrepancies in your records. Manual data entry becomes overwhelming and error-prone, especially as your order volume grows.

Tip: Automating your data capture through accounting integrations like A2X or Link My Books helps summarise daily sales, taxes, refunds, and fees—making reconciliation faster and more accurate.

Multiple Payment Gateways

Your store’s income might come through several providers—Shopify Payments, PayPal, Stripe, Klarna, or even manual bank transfers. Each has its own fee structures, settlement periods, and transaction formats.

Without proper allocation, it’s easy to overstate income or underreport fees. For accurate bookkeeping, revenue should be recorded net of fees, and each gateway should be tracked as a separate clearing account in your accounting software.

Related Reading: Consider our article on “The Difference Between Bookkeeping and Accounting” to understand how accurate transaction recording supports financial strategy.

Foreign Currency Sales

If your Shopify store sells internationally, you’re likely dealing with multiple currencies and tax jurisdictions. This introduces complexity in:

• Currency conversion (which must reflect actual exchange rates on the date of transaction),
• VAT or GST obligations depending on the buyer’s location, and
• Cross-border reporting for platforms like OSS (One Stop Shop) in the EU.

Failure to account for exchange rate fluctuations or international tax rules could distort profit margins or trigger compliance issues.

Helpful Resource: See Shopify’s own guide on selling in multiple currencies for setup and pricing tips.

Understanding and Accounting for Shopify’s Fees

Shopify charges a monthly subscription fee, plus transaction fees on each sale (which vary depending on your plan and whether you use external payment processors). These costs are often deducted before payouts hit your bank account, making them easy to overlook.

To maintain accurate financial statements, these fees should be recorded as cost of sales or merchant fees in your chart of accounts. Failing to track them can inflate your revenue and understate business expenses.

Pro Tip: Use reporting tools like Shopify’s Payout Reports to break down deposits, fees, and adjustments—then match them against your accounting software.

Key Bookkeeping Tasks for Shopify Sellers

Accurate bookkeeping is the foundation of any successful Shopify business. Staying on top of your records not only ensures HMRC compliance, but also helps you make data-driven decisions about marketing, inventory, and growth. Here are the essential bookkeeping tasks every Shopify seller should stay on top of:

Reconcile Shopify Payouts with Your Business Bank Account

Your bank deposits will often show net payouts after Shopify has deducted transaction fees. It’s essential to reconcile these deposits against Shopify’s internal reports to ensure all income and fees are correctly recorded.

Use tools like Shopify’s Payout Reports and platforms like Xero or QuickBooks Commerce to automate this process.

Best practice: Create a Shopify Clearing Account in your accounting software to record gross sales, refunds, and fees, before reconciling to your bank account.

Separate Sales, Returns, Fees, and VAT

Your bookkeeping should clearly break down:

• Gross sales
• Refunds/returns
• Merchant and platform fees
• VAT collected (standard, reduced, or zero-rated)

This allows for accurate tax filings and a true reflection of your store’s financial health. Failing to separate these components can lead to misreported turnover and VAT liability.

For more detail on this, see our blog post on What is VAT and When Do You Need to Register? (link example—replace with actual).

Track Advertising Spend (Google Ads, Meta Ads)

Marketing costs are a significant expense for most Shopify sellers. Whether you’re using Google Ads, Meta Ads (Facebook/Instagram), or influencer promotions, all costs should be recorded under a dedicated Advertising & Marketing expense category.

Where possible, integrate your ad platforms with your accounting system or manually input expenses, being sure to include:

• Campaign costs
• ROAS (Return on Ad Spend) tracking
• Date and purpose of spend

Tip: Include advertising costs in monthly reporting to measure profitability after ad spend.

Record Inventory Purchases and Cost of Goods Sold (COGS)

Inventory management can be complex, especially for dropshipping or blended models. You’ll need to:

• Track inventory purchases (with invoice dates and quantities)
• Record COGS when products are sold (not when bought)

This ensures your profit & loss statement accurately reflects true margins. Tools like Stocky (for Shopify POS) or DEAR Systems can help automate this.

Generate Monthly Financial Reports

At minimum, Shopify sellers should review these core financial statements monthly:

• Profit & Loss Statement (P&L) – shows sales, COGS, fees, and net profit.
• Balance Sheet – shows assets (like inventory) and liabilities (like VAT owed).
• Cash Flow Statement – tracks how cash enters and leaves your business.

Regular financial reporting helps you stay tax-ready, spot trends, and plan for growth.