When running an eCommerce store on Shopify, staying on top of your financial health is key to making informed decisions and driving growth. Shopify provides several financial reports that can help you monitor your sales, expenses, and profitability. Understanding and using these reports regularly can help you maintain accurate records, prepare for tax season, and spot trends in your business. Here are some of the key Shopify financial reports you should be using:

1. Sales Reports

Sales reports provide a detailed breakdown of your revenue, including total sales, returns, discounts, and taxes collected. These reports give you an overview of how much money your store is generating and help you understand the impact of different sales channels, product categories, or promotions.

What to Look For: You can customize sales reports to track sales by date, product, or location. By analyzing this data, you can identify best-selling products, peak sales periods, and underperforming items.

Why It’s Important: This report is essential for tracking revenue, understanding customer purchasing behavior, and measuring the success of marketing efforts and sales promotions.

2. Tax Reports

Tax reports are critical for managing your sales tax obligations. Shopify automatically calculates taxes based on your settings, but it's important to review this data to ensure everything is in order. The tax report will show you the amount of sales tax collected for each jurisdiction, whether local or international.

What to Look For: Pay attention to the sales tax collected by region, product, or customer. This helps ensure that you’re complying with tax laws in all locations where you do business.

Why It’s Important: This report is essential for filing accurate sales tax returns and for minimizing the risk of audit-related issues. It's particularly useful for businesses selling internationally or in multiple states or provinces with different tax rates.

3. Payments Reports

The payments report tracks all payment transactions that occur in your store, showing how much money you've received from customers, the payment method used, and any associated fees. This helps reconcile your accounts and ensure that the money in your bank account matches Shopify’s records.

What to Look For: Review the payment method breakdown (e.g., credit card, PayPal, Shopify Payments) and compare it with the corresponding deposits in your bank account.

Why It’s Important: This report helps identify discrepancies in payments, monitor transaction fees, and reconcile Shopify Payments with your bank account. It also helps in calculating net revenue after fees and refunds.

4. Profit and Loss (P&L) Report

The Profit and Loss report is one of the most comprehensive financial reports you can use. It summarizes your income, costs, and expenses over a specified period to show whether your business is profitable. It includes sales revenue, product costs, operating expenses, and taxes, offering a complete picture of your business’s financial health.

What to Look For: Look for trends in your income and expenses. Are you seeing increased costs in production or shipping? Is your gross margin improving? Understanding these factors allows you to make strategic decisions about pricing, inventory, and cost management.

Why It’s Important: This report helps you determine whether your business is turning a profit or operating at a loss. It's essential for assessing the financial viability of your business and planning for the future.

5. Inventory Reports

Inventory reports provide valuable insight into the stock levels of your products. Shopify automatically tracks inventory for products sold through the platform, helping you monitor low stock levels and avoid overselling.

What to Look For: Keep an eye on your stock turnover rate and identify which products are in high demand. Also, monitor slow-moving inventory to determine if adjustments to pricing or promotions are needed.

Why It’s Important: Effective inventory management is crucial for maintaining cash flow and reducing holding costs. Analyzing inventory reports can help you make smarter purchasing and marketing decisions.

6. Expense Reports

Expense reports help you track all the costs associated with running your business, including shipping, product costs, marketing expenses, and operating fees. Shopify accountants can integrate with various apps and tools to automatically pull in data related to your expenses.

What to Look For: Focus on recurring expenses that may impact profitability. Keep an eye on unexpected costs or areas where you may be overspending.

Why It’s Important: Understanding your expenses helps you control costs, improve profitability, and make data-driven decisions about where to allocate resources.

Conclusion

Shopify offers a wealth of financial reports that can help you keep track of your business’s performance, ensure tax compliance, and guide your decision-making process. By regularly reviewing sales, tax, payment, P&L, inventory, and expense reports, you can stay on top of your financials and make strategic decisions that support long-term growth. These reports, when used together, give you a comprehensive view of your business’s financial health and allow you to identify areas for improvement and growth.