How to Do Your Own Bookkeeping for Your Shopify Boutique

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Bookkeeping is an essential part of owning & running your own business, but unfortunately, knowing how to do your own bookkeeping isn’t a skill that comes naturally the moment you decide to open for business. 

So often, bookkeeping is a task that is ignored, until you can’t ignore it anymore (i.e. it’s time to file your taxes). But, by staying on top of your bookkeeping year-round, you can use the numbers to see where your money is disappearing to each and every month. 

So, here’s a little guidance to help make your bookkeeping as simple as possible, so it can become a task that you dread a little less. 

Separate all Business & Personal Finances

One of the first things you want to do when opening a new business is to open a separate bank account (and credit card, if you choose to use them). This will help ensure that all of the business related activity is easily identifiable, and nothing will be hidden amongst your personal finances. This is going to make your bookkeeping 100% times easier, when all the business activity is already sorted out separately. 

If you start your business as an LLC, this is especially important because this proves that you are actually OPERATING a business separate from yourself personally. The LLC will help protect you personally, but if you’re mixing business & personal finances, you could potentially be voiding the protection the LLC provides. 

Pick a System and Stick With It 

I’m not shy about the fact that my favorite system is Quickbooks Online, but I know the cost of that can be a hindrance for some (although I PROMISE you it is worth it!). 

The important thing is that you pick a system – whether that’s Quickbooks, Xero, Wave, or a spreadsheet such as my Shopify Bookkeeping Spreadsheet – and commit to it for the entire calendar year. Keeping everything in the same place is going to make tax time even easier for you. If you decide you don’t like your current system, I highly recommend sticking it out for the remainder of the year. If you do decide to switch mid-year, I HIGHLY encourage you to get “caught up” in your new system and use it to track everything beginning January 1st. 

Schedule Time Weekly (or at LEAST Monthly)

As I mentioned at the start, bookkeeping is a task that is often ignored until tax time. At that point, it becomes a “project” that stresses you out. To help avoid that, I want to encourage you to schedule some time EVERY Monday morning to track all the financial activity that occurred the prior week. So, what exactly does that look like??

It’s simple. It just means tracking your income and your expenses. If you use a software like Quickbooks, you can actually link those bank & credit cards you use for your business, so ALL of those transactions will automatically pull into Quickbooks for you. 

Every Monday, you’re simply going to tell Quickbooks what each of those transactions represents (i.e. inventory purchase, software subscription, deposit from Shopify, etc…). One of my favorite features of Quickbooks is that you can actually set “rules” up, so Quickbooks can learn to read the descriptions on the transactions, and automatically fill in these categories for you – saving you even more time on a task that you don’t like to do. 

I also recommend recording the prior week’s sales activity at this time as well. You’ll grab your gross sales, discounts, returns, sales tax collected, shipping income, and your cost of goods sold directly from your Shopify store (or whatever point of sale system you use), and plug them into Quickbooks. As part of this, you’ll also record HOW the payment was collected (cash, Shopify payments, PayPal, etc…). This will allow you to ensure you’re actually receiving all the money you’re owed from the various payment processors. 

Reconcile & Review Every Month 

Reconciling is just a fancy Accounting term that means you double check your work. This means comparing the amounts you have recorded in your bookkeeping to the statements provided by your bank, credit card companies and payment processors. 

Quickbooks makes this process super easy, and only takes a couple minutes each month, but it will require a little extra work if you choose to use spreadsheets for your bookkeeping. 

Once everything has been reconciled/reviewed, you should be looking at your financial reports! That includes your Profit & Loss Statement (P&L), Balance Sheet, and the Statement of Cash Flows. 

These are going to total up ALL those individual transactions into the categories you’ve selected (software, inventory, etc…) and it will show you where all your money is going. Together, these 3 reports will give you a holistic view of your business finances. 

Save for Taxes 

Yes, it’s no fun, but taxes are part of the deal. A good rule of thumb is to set aside 25-30% of your profits (bottom line on your P&L) for taxes.

Pro tip: Create a separate savings account just for tax money. That way, it’s out of sight and ready when you need it.