Record Shopify transactions

This article explains how to manage Shopify transactions in FreeAgent.

As the invoicing would already have been handled within your Shopify store, you likely wouldn’t need to create any sales invoices in FreeAgent. Therefore, you’d be able to record the income as it’s imported into your FreeAgent bank account by explaining it as ‘Sales’. Find out how to record income without creating invoices.

If you use PayPal to take payments from your customers, you can use the PayPal integration to automate the process of recording Shopify transactions in FreeAgent.

Alternatively, if you don’t use PayPal to take payments from your customers, you’ll likely have to account for the sales and fees manually by splitting the bank transactions.

You can create custom income and cost categories if you wish and accrue income by moving it backwards from one month to another, or defer income by moving it forward from one month to another, in FreeAgent.

Recording the income using the PayPal integration

If your customer used PayPal as the checkout method, you’ll first need to connect FreeAgent to PayPal to automate the process of populating this account with transactions coming into PayPal.

If your business has a personal PayPal account, you’ll need to upload bank statements instead.

Either way, we'd recommend that you tick the ‘Guess bank transactions’ checkbox when doing so as this will ensure that the PayPal fees are split out and explained automatically for you.

You'll then be able to record the sales income directly in the PayPal account without having to add sales invoices.

You can create custom income and cost categories if you wish.

Recording the income manually via the Shopify ‘payout’

If you don’t use PayPal to take payments from your customers the Shopify payout comes into your main bank account in your base currency (GBP if you’re in the UK), you would explain it directly to ‘Sales’.

If any fees have been deducted, you can split the transaction and explain the fee to ‘Bank / Finance Charges’.

If any refunds were applied, you would split the transaction and increase the amount paid into your business bank account. Then, explain the refunded amount as ‘Money Out’ > ‘Sales Refund’.

We’ll use an example of a Shopify payout of £530 for sales of £200 and sales of £430. In the example, the payout will also have had £30 deducted as fees and will include refunds of £100 for sales. Here’s how you would record that in FreeAgent.

1. Add the fees that were deducted

As the fees will have been deducted before the transaction appears in FreeAgent, the transaction in FreeAgent will have a value of £500. You’ll therefore need to select ‘Adjustments’ and then ‘Fees and commissions’ to allocate the fees.

Enter the amount of fees in the ‘Value’ field, £30 using our example, and select the relevant category. If you’ve added a custom category for Shopify fees, select ‘Other’ and choose the custom category from the drop-down menu.

Enter a description and select ‘Save and add another’ at the bottom of the screen.

FreeAgent will then allocate the fees to the transaction.

2. Split the transaction to record sales with different amounts

Next, select ‘Switch adjustment type’ in the top-right and select ‘Split transaction’ from the drop-down menu.

Select ‘Sales’ from the ‘Type’ drop-down menu and enter the value of the first amount of sales you want to record, £200 using our example.

Enter a description and select ‘Save and add another’ at the bottom of the screen.

You’ll then need to split this transaction between the final amount of sales and the refunded amount. To do this, select ‘Switch adjustment type’ in the top-right and select ‘More options’ from the drop-down menu.

If you don’t have any refunds, you can simply explain the remaining balance as ‘Sales’ without splitting it.

Increase the value of the transaction to the amount of the final proportion of sales and the amount of the refunds, £430 using our example (sales of £430 and refunds of £100). Select ‘Create New Explanation’ at the bottom of the screen.

3. Explain the refunded amount

FreeAgent will then create a new Money out transaction for the difference, £100 using our example.

Select ‘Sales Refund’ as the ‘Type’ and select 'Explain transaction' to complete the process.

If you have more than one Shopify store and receive payouts from Shopify in currencies that are different from your base currency, and these arrive into bank accounts in the same currency, you’ll need to explain these in the relevant bank accounts as they arrive.

If Shopify sends the payout in one currency but it arrives in a bank account with a different currency, for instance if they send you payment in Euros but this arrives in a GBP bank account, be aware that you may have to split the transaction and explain any difference to the category for Realised Gain / Loss on Foreign Exchange.