Shopify Bookkeeping: Why A Shopify Quickbooks Setup May Not Be Right For You

Key Takeaways:

1. QuickBooks Requires Third-Party Tools for Ecommerce QuickBooks wasn't designed for the complexity of ecommerce transactions, creating a need for specialized integration tools to properly handle ecommerce accounting software.

2. Integration Tools Solve Specific Problems Integration tools aggregate ecommerce transactions into summary entries in QuickBooks, but require ongoing oversight and significant tailoring. In addition, it doesn't provide comprehensive inventory management.

3. All-in-One Solutions Eliminate Tool Complexity Platforms like Finaloop replace the entire QuickBooks + integration tool stack with a single ecommerce - native accounting system.

4. Real-Time vs. Traditional Accounting Approaches All-in-one solutions offer immediate financial visibility with financial statements that update with every sale, while traditional QuickBooks integrations typically have certain lag time and require month-end closes and reconciliation processes.

5. Choose Based on Your Business Complexity and Needs QuickBooks integration might work well for established businesses with complex accounting needs beyond ecommerce. All-in-one solutions are often better for rapidly growing businesses prioritizing simplicity and real-time insights.

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There are many different bookkeeping software options to deal with your Shopify bookkeeping, but some are just better than others.

Many direct-to-consumer store owners will jump straight to a Shopify Quickbooks integration. You know how it goes — you do a quick Google search for 'Shopify and Quickbooks online integration guide' or 'setting up Shopify Quickbooks', click on the first Shopify to Quickbooks app you see, set it and forget it .... or so you hope.

Here is the unfortunate reality that tends to smack most brand operators in the face a month or two in. Quickbooks and Shopify often don't play nicely. Quickbooks is a bookkeeping software better suited for service businesses, rather than inventory businesses.

You can keep trying to make Quickbooks work for Shopify — customize your chart of accounts, fix your Shopify Quickbooks integration, and manage your inventory in a separate inventory management system. We've seen lots of founders go down this path. The result is always the same.

After investing hours of their time and paying their bookkeepers a lot of money to try to fix their books, most founders come to the realization that they have two options:

(1) Accept mediocre books that are never up-to-date, but may be good enough for tax purposes, or

(2) Find a Shopify bookkeeping software that is actually built for ecommerce.

Fear not. We're here to help you find your Shopify bookkeeping happy place - the place where accuracy, speed, and ecommerce expertise meet to have a drink.

In this blog, we'll cover:

For a comprehensive understanding of effective Shopify accounting practices, refer to our complete guide.

The Real Issues with Using a Shopify Quickbooks Integration Set Up

There are many roadblocks and challenges Shopify founders face when using a Shopify Quickbooks setup for their bookkeeping.

Let's start with the good.

Why Have Many Brands Used Quickbooks for Shopify?

Quickbooks is a solid accounting software, often used by traditional bookkeepers, with many features and a large pool of integration options for ecommerce sellers (e.g., Shopify, Etsy, Paypal, etc.).

Quickbooks is the most well-known bookkeeping software with previous versions (e.g., Quickbooks Desktop instead of Quickbooks Online) likely used by your Dad's plumbing business or your Uncle's legal practice. On paper, Quickbooks for Shopify brands seems like the safe option.

If you ask traditional CPAs or bookkeepers, many will recommend Quickbooks for small businesses since this is the software they are most accustomed to using.

Why Today's Founders are Looking for Quickbooks Shopify Alternatives

There are four key problem areas that Shopify store owners have identified when using Quickbooks for Shopify bookkeeping.

1. Reconciling Shopify to Quickbooks
2. Getting real-time financial accuracy
3. Inventory management and COGS tracking
4. Finding the right bookkeeping service provider

Reconciling Shopify to Quickbooks

When you see the payouts in your bank feed from Shopify, Stripe, PayPal, etc., these payouts are net of your discounts, refunds, and processing fees. For every Shopify brand, it's very important to understand what these payouts consist of and to understand the actual composition of your income.

In Quickbooks, this process can only be done one of two ways. The first is to connect a Shopify Quickbooks integration to sync your Shopify sales and fees data directly to Quickbooks.

You can easily find a Shopify integration with Quickbooks as there are many third-party apps to use. The issue here to be most aware of is that there are often translation issues between the Shopify Quickbooks connection and how the items are actually mapped to the Chart of Accounts, and thus the financial reports. This can often result in missing transactions or double counted transactions and, therefore, inaccurate numbers. Be sure to review these and make sure they are set up correctly.

The second option is to pull a Shopify report at the end of the month and manually add a journal entry reconciling the Shopify payouts to the Shopify sales, discounts, refunds, and merchant fees. We often find this is the preferred method amongst traditional bookkeepers to prevent the inaccuracies that often arise from Quickbooks Shopify integrations.

This method works well for tax purposes but provides you with little visibility into your real numbers throughout the month since this information is only available one to two weeks after the month is over.

Getting Real-Time Financial Accuracy

When using Quickbooks as an accounting software, the actual bookkeeping service is generally performed manually, either by you or by a bookkeeping service. This means that your books are only updated as fast as a human can work to update it. And, even then, are often inundated with human errors.

The result is that your Shopify books in Quickbooks are often not fully updated until at least 15 days after the month is over and you don't have the numbers you need to understand your Shopify finances throughout the month.

Looking for financial visibility in the middle of the month? Sorry buddy, you'll have to take a shot in the dark and hope for the best.

Inventory Management & COGS Tracking

Quickbooks was not built for inventory-based businesses and often offers a lack of reporting needed to properly manage your inventory and cost of goods sold (COGS) in a scalable way.

Instead, most brands manage their inventory by tracking inventory units and landed costs per unit in a separate Google Sheet and providing the calculated monthly COGS once a month to their bookkeeper to add an adjusting journal entry at month end.

This again results in a lack of financial visibility throughout the month and in a clunky, manual inventory management process that often requires the ecommerce founder or operator to manage this in a separate sheet.

How to Find the Right Ecommerce Bookkeeping Service

Quickbooks is an accounting and bookkeeping software but not a bookkeeping service.

This means that the services need to be performed either by you, using Quickbooks as a DIY tool, or with a traditional bookkeeper.

If you have intermediate to advanced accounting knowledge, Quickbooks shouldn't be a very difficult tool to learn (this is why it's a preferred choice for many CPAs). If you have no prior accounting or bookkeeping knowledge, Quickbooks is not the recommended tool in terms of ease-of-use and intuitiveness.

At a minimum, you should be familiar with double-entry accounting (i.e., debit and credit), balance sheets, owner’s equity, bank reconciliations, and creating a relevant chart of accounts for your business. If not, any money you save by managing your financials yourself may be lost when you need to pay a CPA to correct the books come tax time.

Alternatively, the other option for maintaining a Shopify Quickbooks setup is to hire a traditional bookkeeper to work in Quickbooks and manage your books for you. In this case, the issue most identified by brands is that they often can't find bookkeepers that truly understand the complexities surrounding ecommerce. Even if they do find an ecommerce accountant, they are still dealing with time delays of at least two weeks in having any visibility of their financials.

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Shopify Quickbooks Bookkeeping Alternatives

What should your Shopify Bookkeeping Solution Include?

For ecommerce companies, your bookkeeping should essentially encompass three key components:

Shopify bookkeeping = Shopify accounting software + Shopify bookkeeper + app integrations

• Accounting software : Where is your bookkeeping managed?
• Bookkeeper: Who is managing your bookkeeping?
• Integrations: How are your transactions being recorded from your banks, credit cards, sales channels, payment gateways, etc.?

What Are the Best Alternatives for a Shopify Quickbooks Integration?

There are many Shopify software alternatives to Quickbooks, such as Xero, NetSuite, Sage, Zoho Books, Wave, and Freshbooks. But, with all of these alternatives, the same issues you had with Quickbooks will likely still exist.

All these accounting software alternatives are cut from the same generic software cloth and are not built for Shopify businesses.

After experiencing the same issues with multiple different softwares and multiple different bookkeepers, many Shopify brands transitioned to Finaloop, a real-time bookkeeping software and service tailor-made for Shopify and multi-channel brands.

How is Finaloop different than QBO?

Finaloop provides real-time financial reports without the need for month-end closes. Your P&L statement updates in real time, giving you immediate visibility into business performance.

This capability changes how you make decisions. You can see the impact of marketing campaigns, seasonal trends, or new product launches as they happen, not weeks later.

Finaloop tracks stock levels and costs automatically, simplifying inventory management. When you sell a product, the system knows exactly what you paid for it, including landed costs from international suppliers, seller fees, or other fulfillment expenses. Your gross margins are always accurate and current, which means you can make pricing decisions with confidence.

The platform eliminates the need for complex reconciliation processes because everything is integrated at the source. Bank deposits match your sales summaries because the same system is tracking both. Fee calculations are accurate because Finaloop understands each platform's fee structure.

Perhaps most importantly, you get all of this through a single login and interface. No more jumping between integration software, QuickBooks, inventory software, and spreadsheets to understand your business performance. Everything you need is in one place, updated in real-time, and designed specifically for how ecommerce businesses operate.

No more juggling tools. Just clean, up-to-date books that work at the speed of ecommerce.

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While Quickbooks for Shopify may be cheaper than Finaloop (by about $34 per month, depending on the tier and size of your business), the price difference often relates to the fact that QuickBooks is a software only that you use to do your own bookkeeping or in addition to hiring a bookkeeper, while Finaloop is a service that does your bookkeeping for you.

When you factor in the cost of services, most brands found Finaloop to be about 40% less than the cost of a Shopify Quickbooks set up.

Bottom line: Before Creating a Shopify Quickbooks Setup, Here's What You Need to Know

Many Shopify owners will choose to stay with a bookkeeping option that is mediocre rather than having to face the question "is there a better way to do this?" and deal with a transition.

Quickbooks is a great option to save some money for small business owners with significant accounting knowledge and sufficient resources to handle about 10 hours of monthly bookkeeping work. If not, optimizing this process through a combination of Shopify income integrations and a team of Shopify bookkeeping experts by trying out Finaloop can reduce your bookkeeping headaches, increase your accuracy, and give you more time to invest in growing your ecommerce business. 

Still not sure if Finaloop or Quickbooks is right for you? To find the best fit for your DTC business for accounting, take this quiz to help you figure it out.