Shopify Accounting For Your E-commerce Business — Jason Richelson | Why Accounting Is More Than Shopify Numbers, How Bad Accounting Kills Value, What Makes Multi-channel Tricky, How Reconciliation Saves Revenue, Why Automation

Shopify Accounting For Your E-commerce Business — Jason Richelson | Why Accounting Is More Than Shopify Numbers, How Bad Accounting Kills Value, What Makes Multi-channel Tricky, How Reconciliation Saves Revenue, Why Automation Speaker 2: Hey there, welcome to the Ecommerce Coffee Break Podcast, where we share actionable tips and strategies to help you grow your online store and sell smarter. I'm your host, Claus Lauter. In today's episode, we discuss how to handle accounting complexity as your eCommerce business grows. Joining me on the show is Jason Richelson. He is the CEO and co-founder of bookkeep.com. So, let's dive right into it. Hello and welcome to another episode of the Ecommerce Coffee Break podcast. Today, we want to find out how to handle accounting complexity in your eCommerce business, specifically as it grows. Now, accounting, bookkeeping, very, very important, underestimated by a lot of merchants out there, and we want to find out why it is so important. For that, joining me on the show today is Jason Richelson. He is the CEO and co-founder of Bookkeep.com, an innovative accounting automation platform empowering bookkeepers, accounting firms, and growing eCommerce and DTC businesses. With over two decades of expertise in payments, business automation, and accounting systems, Jason has a proven track record of building successful ventures, including ShopKeep, a cloud-based point-of-sale system that was acquired by Lightspeed. So let's welcome him to the show. Hi Jason, how are you today? Unknown Speaker: Great, great. Speaker 2: Jason, let's talk about challenges of eCommerce. Now, you have, and I think that's a big difference to other people out there dealing with accounting and bookkeeping. You have experience in eCommerce yourself. Tell me a little bit about it. How did your journey start? Speaker 1: I actually started my career at PricewaterhouseCoopers, believe it or not, working at Deutsche Bank, actually. So, I've actually been building or helping to build accounting software since my first job out of college. And I even did it in Wall Street, actually working on a trading desk where I did accounting, built accounting systems and did some trading for a small, which is now a large trading firm. So I have a lot of experience. I've always been around the space by accident. But more importantly, then I went into retail. I opened a wine store, I opened a grocery store. I expanded that business and got frustrated with my software available to me. And that's where I started Shopkeep, which was a POS system, which was one of the first cloud-based and the first iPad-based, although quickly followed by many others. And that company got sold a couple of years ago. And one of the spaces I'm always around is really getting the numbers right and knowing how your business is running because that's always been why I started businesses is to track the numbers. And so basically what Bookkeep does is to really help eCommerce sellers really track their numbers accurately, get proper financials so they really know how their business is doing versus just the numbers in the dashboard in Shopify. There's a lot more to it than that and we help automate that. Speaker 2: Tell me about merchants who are not really motivated to keep an eye on accounting and bookkeeping. What kind of risks are they taking? Speaker 1: There's a lot of risk. I mean, if you're a business owner, and I see it all the time, a lot of business owners feel like accounting is for the accountants or I'll have a bookkeeper deal with that. You really need to understand how all the numbers flow into your financials. You don't have to get always into the details, but you really, over time, and you don't have to do it all at once, but over time, you really need to understand how your P&L is calculated, how it rolls up, how, you know, what's my gross sales, what are the discounts, what's in those discounts, are there chargebacks in that discount or do we separate out chargebacks. There's a lot of different numbers, you know, how much fees am I paying in card processing, You really have to understand how those get in and you really, at the very least, you should be requiring your accountant to get you statements or your bookkeeper, whoever, every month. And you should be looking at your statements every month and you should be asking questions every month because when you think about KPIs, it's not always, you know, how many people visited the website versus how many came to shop versus checkout completion. You also got to look at what was my cost of payment processing this month and how many chargebacks did I get. And a lot of that stuff is not always highlighted by a lot of selling platforms because that's not helping you sell more, sell faster. But it's hard because people think it's confusing. They think it's some crazy, you know, thing that they just don't understand. You really need to get your head around it. Just start with getting your statements every month and looking at them and trying to understand what's going on with your statements. And that's kind of how we help to automate that for these eCommerce sellers because it is – even if you can find someone to do it, it's often really hard to find someone who understands how Shopify works. And why those deposits don't even come close to what your sales were. Like the numbers don't make any sense to a lot of accountants. And we see that all the time. And whether they're out-of-house accounting or in-house accounting, when we work with even large businesses and we talk to the team that's job is to get the numbers done, They are like, oh, I just can't figure out why the Shopify report never matches what I expected to. And that's where we're really experts in helping them explain and reconcile that back. And it is complicated, but we really know how to do that and we help a lot of big and small businesses do that. Speaker 2: Now, selling on Shopify is one thing. Most businesses out there are selling omnichannel, unified eCommerce, whatever it's called, and that's so much harder than brick-and-mortar store. Tell me a little bit about the kind of challenges you see when people try to pull data from different platforms. Speaker 1: That's where it gets even more complicated and that's really where we shine because we're connected to all the different platforms. The PayPal reports, a PayPal statement is extremely difficult to figure out. They show you every single transaction. I mean, we have clients that have 300-page PayPal statements because obviously every single transaction is on that piece of paper or PDF, whatever. So, we actually can pull PayPal in and properly summarize it and help make sure that it's matching what Shopify is showing you. Selling on BigCommerce, selling on Amazon Seller. We're extremely strong with Amazon Seller. One of the things about Amazon, you know, every one of these systems, they all have different ideas on what a report looks like. And most of them are not accountants. So, they're not accounting reports. Often, we see systems, depending on the platform, You know, Shopify is pretty good, but Shopify has a great summary report that generally balances payments plus your gift cards on the bottom equal – sorry, your revenue plus your gift card sales equal your payments, generally. However, that report doesn't always balance, and there's reasons for it in their reporting. A lot of systems don't do that. They'll show you your sales report or your orders report, but it has nothing to do with chargebacks. It has nothing to do with returns, and it doesn't match your payments, and maybe your sales tax are not in that report, so you've got to go find how much the sales tax were, and then you've got to go find a payments report. That is really tedious, and it goes back to why we started this company, and what I've seen in my own accounting, in my own businesses is that It's always an afterthought. Who cares about the reports? The customers are not signing up because we have great accounting reports. They're signing up because they can instantly turn on their store and start collecting sales on Instagram or whatever. That's why they're signing up. It's not because we have great accounting reports. Amazon Seller – The reporting in Amazon Seller is extremely hard to figure out and requires many clicks to go find the right report that actually should balance out to what's hitting your bank account. And then some of the complexities that come besides the reporting is Amazon pays out every two weeks. And they don't pay out all your money. They hold a little bit back and they don't tell you why. We make sure that's clear how much they're holding back. We don't always know why, but we at least can keep track of what they're holding back and why you didn't get the full deposit or the amount that you did get versus what they're holding back so that you can keep a balance in your books. Whereas Shopify will pay out every week or every day, every business day. eBay, I think, might be weekly. We work with eBay as well. A lot of times when you hire an accountant, if they're not used to eCommerce or they don't know anything about eCommerce, they just expect your credit card deposits hit every day and often – and this is completely wrong, but it's done a lot – they just say, whatever that deposit is, I'm booking that as income. And that is a main – that happens a lot even still, even in big businesses. That deposit is not income. That deposit is income minus returns plus sales tax minus any chargebacks minus any fees. It is not income. And so you have to break that out into the proper income, returns, sales tax, liabilities, etc., gift card liabilities. And that should balance against what you get paid for. And that's really what our system does because it's hard to find people who Even if people know how to do that, they don't want to do that every day. And so, they end up doing it at the end of the month. And so, to go back to your question, what could happen? We have seen where payments didn't get properly completed or closed out, so they didn't get paid for the order. Depending on how busy the business is, sometimes if you have a front office team, sometimes they're using draft orders. If they don't properly close those draft orders, you don't get paid for them. And if you're not checking every day and reconciling your payments against your revenue expected payments, you might not get paid. We have seen that happen in cases and it's after months later, it's too late to get that money back. So, there's definitely a lot of things, but really it comes down to having continuous accounting numbers so that you have daily numbers in your books so that you can keep, you know, do my books match what Shopify is saying? Is there something wrong? Why am I not seeing the deposits? You know, did I put the wrong bank account in? Did I not set up the bank account in Amazon Seller? You know, is Amazon holding all my money because they don't have a bank account set up? These things happen, especially when you're using multiple systems and it can be really overwhelming with all the different platforms people use. Speaker 2: Before I want to dive into your solution in bookkeep.co, I want to find out a little bit more about the problem I think you have in the U.S. with state tax. So, you can run into trouble with the IRS very, very quickly. Give me some examples. What can happen? Speaker 1: Sales tax. So we also do sales tax filing for our customers as well in the U.S. Sales tax is a big pain point for customers. If you are building a brand, you're looking to eventually sell your brand or, you know, eventually one way or another you're going to get in trouble. Often it happens when you're trying to sell. If you haven't been paying your sales tax properly, it's going to cost you money in the sale price. We've seen deals and I actually talked to an investment banker who said every deal has what she called nexus issues, which basically means they weren't paying their sales tax right. They had to hold back millions of dollars because they didn't know exactly what the fines would be from the sale price. So you want to get your sales tax set up right from the start. Make sure you're doing it right from the start. Which means collecting properly, filing properly, and the best way to do that is just get it automated. And a lot of businesses don't do that right because they don't understand it and it is complicated. Every state is different in the U.S. Sometimes in Colorado you have to pay separate filings for separate cities. Colorado is one of those states where you have different cities have different filings. So, it is really a pain in the butt in the U.S., definitely, but it's something you need to get on top of very early, ideally, when it's easy to get your head around it. So, definitely, you want to get on top of sales tax early. And one of the other things that we see is sometimes sales tax is set up wrong in Shopify where you're collecting, but you don't need to be collecting. So, if you don't set up sales tax right, people will be collecting sales tax, or Shopify will collect it. It's going into your bank account. You're not paying it to the state because you don't realize it's happening, because that's in your deposit, but you just don't understand. You're probably not going to get in trouble for it, but you may, you know, in the end, you're collecting more money from your customers, but also your cart total is going to be higher when it doesn't need to be. Right? For some of those customers. One thing that actually just before this call I just saw with one of our clients is that if you're on Shopify and you're selling on Facebook or Instagram, Facebook and Instagram pay the tax for you. So Meta is paying the tax to the states for you. So we just identified $500. This customer has taxes turned on for these states, but they don't have Nexus, so they shouldn't be collecting. Which means, but it's not going to their checking account, Shopify is taking it out of their money and sending it to the state. So in the end, the state got their money, but it didn't need to happen. They could have a lower cart total, checkout total. So there's a bunch of things that can go wrong there. One of the things that happens with a lot of these platforms is because they're so easy to set up, people just think it just should work. And for the most part, it is easy. But you do need to understand how sales text works in Shopify, how the payments are set up, you know, make sure you're banking out set up right to make sure you get paid and that you're not over collecting or under collecting. Speaker 2: Yeah, I think it's pretty clear that accounting is a very complex topic, specifically with a fast-moving business like eCommerce. There are so many moving parts in there and things can go downhill very, very quickly. Now, let's talk about BookKeep. Your solution helps merchants, obviously, to make it easier and tell me a little bit about the onboarding process and what the day-to-day life of an online seller looks like with your solution. Speaker 1: It's very easy to onboard with us. Basically, what you're going to do is you'll sign up on our website. It's bookkeep.com, and you can basically connect your accounting system. We work with Xero. We work with QuickBooks. We work with Zoho Books, Sage Intact, and NetSuite, and then you'll connect Shopify. You'll connect PayPal. You'll connect Stripe, whatever systems you're using. Then the next process is basically mapping that summary data into your accounting system. So your gross sales go to what income account? Your sales tax for All sales tax goes to this liability account. And that's pretty easy. It's a dropdown menu that you can select, you know, depending on how you want to do it. You'll run a few entries. You'll look at our numbers to understand how you want it segmented. Because the other thing that we can do, because in Shopify, you run your summary report. You can look at the different channels. If you want to actually post income in your books with either a class, you know, with a reporting class, which is just a different way to slice and dice your numbers, you could just take the Facebook, Instagram sales separately. So we'll summarize those separately from your direct eCommerce sales. So you have those options, and especially if you're using Shopify POS. That's where it becomes really important because you want to know what your brick-and-mortar sales are different from your eCommerce sales. And Shopify's reporting doesn't allow you to easily do that. You can only do one channel at a time, but you can't group channels. So we can help you set all that up so that it flows in. It literally takes less than an hour to get it set up. It's not a long onboarding. And then it just runs. It runs every night. We pull the data. We post it to your accounting system. We send a morning email that explains how You know, what we posted, what your totals were for those channels, a very simple email. And it basically runs. And the other important thing is that if something doesn't work or you don't understand, like, what does this line mean or why is there this adjustment from Shopify? Why are my adjustments so high? We actually do break out all the adjustments in the payout deposit. You can always chat with us. We know this. We actually learn from our customers. We have some pretty big Shopify sellers, up to $100 million in revenue. And they're like, you know, there's these new adjustments that are coming into our adjustment line and you're not, you know, you're not properly pulling them out. And we've had to do – and we'll go back and we'll check our code and we'll rerun and we'll adjust our code and rerun those. So we work closely with a lot of CFOs to – because Shopify changes a lot in the long run and they all do. Amazon does as well. So, it's kind of like having, you know, you need a team to stay on top of those changes in the accounting data and that's really what we do for you in your monthly fee. And so, we keep our software up to date so that you're getting the accurate data into your books. Speaker 2: I think it's a very important point that you just made. These platforms are changing very, very quickly and it's just impossible for somebody who tries to run a business to keep on top of that as well. Who's your perfect customer? Is there specific industries or niches that you work more with than others? Speaker 1: Definitely Shopify, Shopify Amazon Seller. So eCommerce business in the US, in Canada. We're also in the UK. We're on every Amazon, you know, if you're selling on any Amazon platform across the globe, we have all the platforms. The more complex, the better. Yeah, if you have, you know, we have customers that are on every Amazon platform globally plus Shopify, and we have customers on Shopify that have 20 POS locations or more. We actually just, we have one that now is up to 30 POS locations. They might be the biggest. And so that setup takes a little bit more time because they want to categorize each one separately. But the more complex the business, the harder it is for someone to do this manually, the harder it is to get those numbers segmented into your books the way you want to see it at the end of the month. But we probably go up to $100 million or so in revenue, but probably our sweet spot is 1 to 2 million to 10 million, you know, that's where we're getting a lot of small businesses getting on board. Sometimes when you go above 10 million to 100, they might be using NetSuite. We can still help with payment reconciliation, but often they're doing their order management in NetSuite, which gets a little more complicated. It's not totally necessary to do that. We also have really big customers that are not doing it that way. They're using Shopify as their order management system, which might be better. So, you know, a complex customer, a CFO, internal – really, we work closely with the CFOs or the in-house accounting teams of these businesses. But again, it doesn't have to be a big business. We have smart owners of eCommerce businesses and they just sign up and set it up themselves because they understand the accounting. They know they need it automated. They want their books to be accurate and we work with them as well. And again, we also work with accounting firms as well. We have a lot of accounting firms that specialize in eCommerce. But I think the way accounting is moving And what we're trying to do is it's going to be more in-house. Over time, as it gets very automated, you're going to be able to do it in-house. As an owner, you may be able to buy a bunch of software platforms like ours, turn those on, and your books are just correct throughout the whole month. So you don't necessarily need a bookkeeper over time. You still might want someone to look at it and study it with you, but we really work with the in-house finance teams. Speaker 2: Absolutely. I can only recommend to start early with that before things become too complicated and then you're on the safe side. Tell me a little bit about your pricing structure. Speaker 1: So, we basically work on where the business is in their life cycle. So, if you're a really small business, it starts at $49. You're just on Shopify and nothing else. And you're under a half a million dollars in revenue. Once you go up a little higher, it goes to $99, up to a million and a half in revenue. And we did start at that higher price, but we added the smaller price because there's a lot of smaller businesses. And by the way, we don't just do Shopify. Since we also work with Square, Toast, there's a lot of small coffee shops, they want to use BookKeep, and so we have that $49 price. And then it goes up to our most valuable plan is the pro plan. So it's $199 a month. That gets you five channels, so Amazon Seller, PayPal, Shopify, multiple Shopify channels within there. It also gets you into the base level of our sales tax filing feature. So at that level, we'll file your sales tax at that level in one state, so one filing per month is included at $199, and then each additional filing is $75 a month, or per filing, I should say. And that's really the most valuable plan because you're getting sales tax, filing, you're getting your revenue recognition. I mean, for $200 a month, you can't hire a bookkeeper to do it and the hours that it would take. So that's really our most valuable plan. And then it goes up a little bit more. Our max price, if you're enterprise or mid-market, is basically $1,000 a month, $999. And that's our unlimited plan. So you're over $10 million in revenue. Maybe you have 20 POS locations. Maybe you have 300 POS locations, whatever, it doesn't matter. That's our max pricing plan. That's the advanced and limited plan. Speaker 2: I think it's a complete bargain and an absolute no-brainer to go for this. It saves you a ton of time. You're on the safe side of things and you won't wake up with some kind of unpleasant surprises in your financials. So, I think having a solution like yours is an absolute must-have for every business out there. Before we come to the end of our coffee break today, is there anything that you want to share with our listeners that we haven't covered yet? Speaker 1: I just want to hit on the thing that I always hit on, which is really don't be afraid of accounting. Really, as an owner, learn the accounting, get QuickBooks or Xero. QuickBooks is a little easier to understand than Xero. And really understand how your numbers are flowing into your books and get your books done every month. Make sure you're getting your statements done and look at them every month. Over time, you're going to get it. That's what I did when I started my wine store. I didn't understand any of this stuff. I got QuickBooks. I figured out what a P&L was. I figured out how to get my point-of-sale data in, and I just kept looking at the statements and understanding how it all routed through, and it helped me understand how the business was doing. And that is something that owners and founders should not be afraid of. Speaker 2: Yeah, I think it's something that business owners and founders, as you said, need to do even if that's not what they want to do, but it's such a crucial part of their business and to make a business successful. Jason, thanks so much. Where can people go and find out more about you guys? Speaker 1: Yeah, you can just go to bookkeep.com and sign up right there or chat with us if you have questions and you can get going. It's fully self-service. You can sign up by yourself and you don't need to talk to anybody, but we are here if you need help. Speaker 2: Cool. I will put the links in the show notes as always and you just one click away and I hope a lot of business owners will reach out to you and get their accounting optimized. Thanks so much for your time today. Speaker 1: Thank you. Speaker 2: Hey, Claus here. Thank you for joining me on another episode of the Ecommerce Coffee Break podcast. Before you go, I'd like to ask two things from First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover the podcast. 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