HOW TO BREAKOUT SHOPIFY FEES FOR ACCURATE FINANCIALS
As an e-commerce business owner, it's essential to understand your financials and where your money is going. One of the most significant expenses for any Shopify store is the fees charged by the platform. However, many Shopify store owners need to fully understand these fees and how they can affect their financial statements. In this blog post, we'll discuss how to break out Shopify fees for accurate financials and the benefits of outsourced e-commerce accounting.
Understanding Shopify Fees
Before we dive into breaking out Shopify fees in your financials, it's essential to understand what they are and how they're charged. Shopify charges fees for various services, including:
Monthly subscription fee
Transaction fees
Credit card processing fees
App fees
Theme fees
The monthly subscription fee is the fee charged by Shopify for the use of its platform. This fee is based on your chosen plan and can range from $9 to $299 monthly.
Transaction fees are charged on each sale you make through your store. The percentage charged depends on your plan, ranging from 0.5% to 2% per transaction.
Shopify charges credit card processing fees for processing payments made through your store. This fee is charged on top of the transaction fee and ranges from 2.4% to 2.9% + 30 cents per transaction.
Third-party apps charge app fees you install to add functionality to your store. The fees charged by these apps can vary, but they typically range from a few dollars to hundreds of dollars per month.
Shopify charges theme fees for the use of premium themes on your store. These fees can range from $140 to $180 per theme.
Are Shopify Fees COGS or Operating Expenses?
Breaking out Shopify fees can help you better understand your financials and make more informed decisions for your business. You may think of sales channel costs as costs of goods sold (COGS) but they are actually operating expenses.
Cost of goods sold represents the direct costs associated with producing and delivering a product. Credit card fees and other related selling costs are not directly related to the production or delivery of a product, but rather they are a cost incurred in the process of accepting payments from customers.
Although there is a direct relationship of these costs with your sales that does not make them costs of goods sold. We recommend grouping them in a section called “Selling Costs”. That ratio of Sales against COGS+Selling Costs is important and we often calculate that for our e-commerce customers.
Benefits of Outsourced E-commerce Accounting
Now that we've discussed how to break out Shopify fees let's talk about outsourced e-commerce accounting. Outsourced e-commerce accounting is when you hire a third-party accounting company to handle your financials. Here are some of the benefits of outsourcing your e-commerce accounting:
Cost Savings: Outsourcing your e-commerce accounting can be cost-effective. You won't have to worry about hiring an in-house accountant, and you can avoid the costs associated with training and benefits.
Time Savings: Outsourcing your e-commerce accounting can save you time. You won't have to worry about managing your financials and can focus on growing your business.
Expertise: Outsourcing your e-commerce accounting gives you access to a team of experienced professionals specializing in e-commerce accounting. This means you can be confident that your financials are being managed by experts who understand the unique challenges of e-commerce businesses.
Better Financial Visibility: Outsourcing your e-commerce accounting will give you better financial visibility into your business. Your accounting firm can provide regular financial reports, so you'll know exactly where your money is going and how your business performs.
Compliance: E-commerce accounting can be complex, especially regarding tax compliance. Outsourcing your e-commerce accounting can help you stay in compliance.
Scalability: Successful e-commerce businesses must be able to scale. As your business grows, your accounting needs will change. You’ll require more robust systems to automate the workflow. Outsourcing your e-commerce accounting can ensure that your accounting systems and processes are scalable and can keep up with the growth of your business.
Focus on Your Core Business: Outsourcing your e-commerce accounting allows you to focus on your core business. You won't have to worry about managing your financials; you can focus on growing your business and serving your customers.
Understanding your Shopify fees and breaking them out in your financial statements can help you better understand your financials and make more informed decisions for your business. Outsourced e-commerce accounting can provide the expertise and support you need to manage your financials while helping you save time and money. By partnering with a team of experienced e-commerce accounting professionals, you can focus on growing your business and serving your customers while leaving your financials in expert hands.
