Accounting for Shopify Managed Markets Orders on Bookkeep

As e-commerce continues to expand globally, platforms like Shopify have integrated with solutions like Global-E to help businesses sell internationally. This integration is part of the Shopify Managed Markets solution, which is discussed in more detail here.

Global-E simplifies cross-border transactions by handling local currencies, taxes, and compliance, but it also adds complexity to your accounting processes. This article will guide you through the correct accounting for Shopify Managed Markets orders, ensuring your financial records are accurate.

Bookkeep captures these orders and payments on the ecommerce journal entry and also records any payouts connected to these orders on the deposit journal entry to aid with reconciliation.

1. Understanding the Global-E Model

Global-E acts as an intermediary between your Shopify store and international customers. It manages pricing, taxes, shipping, and payment processing, providing customers with localized experiences. Funds are collected by Global-E and remitted to you, minus their fees and any applicable taxes. These orders often appear as "Flow Commerce," as shown below:

According to Shopify: “Your transactions for fulfilled and eligible Managed Markets orders are collected and combined into a payout on the 1st, 8th, 15th, and 22nd day of each month. A payout is sent to your bank account within 1-3 business days and might take an additional 3 days to become available in your bank account. If your payout fails, then the payout is attempted again within 72 hours, and you receive a notification upon failure. You receive payouts in USD, and only for fulfilled and eligible orders.”

2. Recording Sales Revenue

When an order is placed through a Global-E managed market, the sale should be recorded in your accounting system at the gross amount paid by the customer, including any taxes collected. This gross amount represents your total revenue from the sale before any deductions.

Bookkeep captures the sales on the ecommerce template similarly to any other order. Payments for these Managed Market orders will appear under the Shopify Payments line, as these orders are paid out to your bank account connected to Shopify. This is why "Flow Commerce" appears under the Shopify Payments line below:

3. Handling Fees and Deductions

Global-E deducts various fees, including transaction fees, service fees, and possibly tax remittances. These deductions must be recorded as expenses in your accounting system. Global-E typically collects and remits taxes on your behalf; however, it's essential to verify this process and ensure the correct tax liabilities are recorded.

Bookkeep records tax as being withheld when a Managed Market order indicates that the tax is channel liable. This is shown below by the sales tax withheld, captured on its own line and removed from the Shopify Payments balance since this tax will be remitted to Managed Markets and not to your bank account:

4. Reconciling Payments

In the Bookkeep payout journal entry for Shopify, payouts are broken down by sales day to help determine whether you received all payments for a particular day. See below for an example:

This shows the amount being paid out to your bank account per sales day to help with reconciliation. In the example, sales tax is withheld for Managed Market orders, so it is removed in the top line.

Accounting for Shopify Global-E Managed Markets orders requires careful attention to detail and a solid understanding of accounting principles. By accurately recording sales revenue, managing fees and taxes, and reconciling payments, you can ensure that your financial records are both accurate and compliant. This will not only help you maintain control over your business finances but also prepare you for any audits or financial reviews. If you have any questions, please contact [email protected].