Accounting and Reconciliation Overview

OVERVIEW

This article describes the basics behind the reconciliation process that merchants must follow to make their Shopify reporting accurate. Merchants will learn:

  • What reconciliation means for Shopify accounting.
  • Why merchants need to reconcile their accounts.
  • Which factors play into reconciliation.
  • How to complete the reconciliation process.

Important: Loop highly suggests reviewing the basic then the advanced exchange accounting articles before continuing; these articles give context for why reconciliation is necessary.

In this article:

What is reconciliation?

For Loop merchants, reconciliation refers to identifying and resolving discrepancies in the Returns, Discounts, and Net Sales columns within Shopify's sales reports. This process includes the use of Loop's reports to offset those discrepancies.

Why do merchants need to reconcile their reports?

Shopify's lack of native support for exchanges leads to accounting discrepancies that occur when:

  • Shopify makes order adjustments for returns without refunds (exchanges and store credit returns).
  • The Loop Discount is applied to exchange orders.

Therefore, financial reconciliation is necessary to arrive at accurate sales and accounting figures.

Note: Merchants that rely on a third-party finance tool for accounting (rather than Shopify) may not reconcile their accounts exactly like Loop recommends. However, Loop still encourages merchants to learn how Shopify and Loop interact regarding exchanges and store credit returns; this understanding can help merchants ensure that their third-party finance tools are accurate.

Loop's Sales Adjustment Report

To reconcile their accounts, merchants can use Loop's Sales Adjustment Report, which contains three values: returns, discounts, and net sales. By adding these adjustments to the corresponding values in Shopify's sales reports, merchants can resolve discrepancies and get accurate financial information.

Tip: Merchants can apply the adjustments from the Sales Adjustment Report in whichever system they use for end-of-month accounting reconciliation. However, the adjustments are most valuable when applied against Shopify reports, so Loop recommends that merchants use them with their existing accounting flow within Shopify.

Reconciliation instructions

The instructions below detail how to complete reconciliation for Shopify sales reports.

Export the Shopify sales report

  1. In Shopify, go to Analytics > Reports.

    The Shopify home menu, with Analytics and Reports highlighted for emphasis.

  2. Select the report being reconciled. Loop recommends the "Sales by channel" report, but merchants can use any report with (or add to a report) the following fields:
    • Adjustment
    • Discounts
    • Gross sales
    • Net sales
    • Returns
    • Sale kind
    • Tax
    • Total sales

Important:

  • Adjustments must be in the report to yield accurate numbers. If the chosen report does not include adjustments, add them by using the Columns button.
  • For order-specific reports, add the "Order name" column by using the Columns button.

This image shows the Columns button in the top right corner of a Shopify report. It is a rounded square with three vertical sections.

  1. Select the dates to the range needed for account reconciliation, then click Apply.

    The image shows date range options on Shopify reports. Options including set parameters such as the last 30 days, 90 days, etc., as well as the ability to choose a custom date range.

  2. If using the "Sales by channel" report and not including all channels, use the Filters button to include the desired channel(s).

    This image shows the Manage Filters button in Shopify reports, as well as the options contained in the Manage Filters pop-up. This example shows the chosen filter, Sales Channel Name; a search bar with the Sales Channel Name options, such as Loop Returns and Exchanges; a conditional dropdown to relate the filter and chosen channel name; and an Apply Filters button.

  3. After setting all columns, dates, and other parameters, click Export in the top right corner. Loop recommends exporting the full report.

    This image shows a view of Shopify's Sales by Channel report with the Export button in the upper right corner.

Important: It is not possible to add or subtract report columns within Shopify. Thus, merchants must export the report and complete reconciliation outside of Shopify.

Export the Loop Sales Adjustment Report

  1. In the Loop admin, go to Analytics > Reports > Sales Adjustment Report.

    This image shows the Loop admin menu with Analytics, selected, then Reports. The Sales Adjustment Report is at the bottom of the page.

  2. Set the data type.

    This image shows two Sales Adjustment Report filters: Data Type and Timeframe.

  3. Set the dates to the range needed for account reconciliation using the Timeframe filter (pictured above). These should match the date range set for the Shopify sales report.

  4. In the top right corner, download the report as a CSV file.

    This image shows the Dashboard Actions button within Loop's Sales Adjustment Report. The icon is three vertical dots in the upper right corner. When clicking this, the image shows that the Download and Reset Filters options appear.

Note: Merchants can review the impacts of individual orders (returned orders or Loop-generated exchange orders) with this report, but the most important part of the report for account reconciliation is the top line.

Reconcile the two reports

This section includes an example for merchants to reference and reconciliation instructions.

A guiding reconciliation example

The image below exemplifies a finished reconciliation of Loop's and Shopify's discounts, returns, and net sales numbers. Totals for these columns are bolded and shaded for clarity.

Refer to this image when needed while following the reconciliation instructions below.

This image shows a Google Sheets document. The imported Shopify sales report has several rows: the original order, shipping charges, the return, the return order adjustment, and the new exchange order. Each row shows the values for the columns selected in the Shopify sales report. Below these rows is a row totaling the Shopify values. Under the Shopify totals have been added the Loop Sales Adjustment Report values for discounts, returns, and net sales. These values are added to the Shopify totals for those columns, which produce the actual reconciled figures for the exchange.
Click this image to view it in its original spreadsheet.

The image above shows the Shopify report values in rows two through six:

  • Row two shows the values for the original order.

  • Row three shows shipping costs associated with the order.

    Note: This parameter was not mentioned in earlier instructions but is important for some merchants' reporting and was therefore included to visualize here.

  • Row four is the return row, representing the return itself.
  • Row five is Shopify's positive return order adjustment, created when the item was marked returned.

  • Row six contains values for the new exchange order. Its order name prefix shows it as an exchange.

    Note: In this example, the merchant has the Loop Discount turned on [link to new LD HCA]. This is indicated by the exchange order's $148 discount (shown as -148) that brought the sale amount for the exchange down to $0.

This image shows a consolidated version of the previous report example. It contains the same rows but only the columns for channel name, order name, gross sales, discounts, returns, and net sales.
A condensed version of the example above, focusing on the Discounts, Returns, and Net Sales totals.

Row seven shows the totals for the Discounts, Returns, and Net Sales columns from the first five rows. Rows eight and nine are where the example merchant added Loop's Sales Adjustment Report totals:

  • Row eight shows adjustments for the original order.
  • Row nine shows adjustments for the new exchange order.

Adding Shopify's totals (row seven) to Loop's figures produces the truly reconciled figures in row ten. The reconciled figures show the following:

Discounts The example merchant spent $68 in discounts for this order. The Loop Discount applied to the new exchange order (cell G6) is cancelled out by the positive discount adjustment from Loop's Sales Adjustment Report (cell G9), so the only discount left is the original one the merchant gave.
Returns The example merchant returned $148 to the customer. The negative return adjustment on Loop's report cancels out Shopify's positive return order adjustment (cell H5), leaving a negative value for the amount of the return by itself.
Net Sales The example merchant gained $272 in net sales. They did not lose sales on the return because that return money was redirected to the exchange order instead of a refund.

Reconciling the reports

To reconcile the two reports, do the following:

  1. Open a new sheet in Excel or a similar platform. This example uses Google Sheets.

  2. Import the Shopify sales report downloaded in the previous steps.

    This image shows a clicked File tab in the upper left corner of a Google Sheets document. There is a menu under the File button that includes the Import option, as well as some others.

    This image shows the pop-up that appears after clicking the Import option from the File menu. There are several import options, the preferred in this case being Upload. When clicking Upload, there is a Browse button merchants can click to search their computer for their downloaded Shopify report.

  3. Open the Loop Sales Adjustment Report outside of the spreadsheet and copy the totaled figures.

  4. In the spreadsheet, paste the totaled figures from Loop's Sales Adjustment Report under the corresponding columns from the Shopify report so that it reflects Loop's earlier example.

    This image shows the same reconciliation example from earlier in the Reconciliation section. However, there is added emphasis on the placement of Loop's report amounts beneath the Discounts, Returns, and Net Sales columns from Shopify's report.

    Note: The formatting on Loop's example was done for clarity. Merchants can format their reconciliation spreadsheets as needed.

  5. Total the Returns, Discounts, and Net Sales columns using both Loop's and Shopify's values. 
    1. The Discounts column will become more positive.
    2. The Returns column will become more negative.
    3. Net Sales will become more positive by the amount on the adjustment report but will net out to become more negative due to the changes in the Discounts and Returns columns.

Good job! Having reconciled the discrepancies caused by Loop's exchange process, the Shopify sales report should now be accurate.

FAQs

Can I change the numbers directly in Shopify? At this time, merchants cannot change figures directly in Shopify. They must export the reports and reconcile them externally in Excel or a similar platform. Loop cannot edit the Shopify reports directly.

Please reach out to support@loopreturns.com with additional questions.

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