How to match Shopify payouts and fees in FreeAgent with a clearing account

If you create a FreeAgent invoice for each Shopify order, the payouts in your bank feed stop making sense. One payout covers many orders, Shopify has already taken its fees, and refunds come off the total. No single invoice matches the deposit.

The usual fix is a clearing account: a bank account in FreeAgent that stands in for your Shopify Payments balance. Orders are paid into it, payouts and fees come out of it, and what is left is the money Shopify still owes you.

This guide assumes you take card payments with Shopify Payments and record sales in FreeAgent as invoices. If you do not create invoices and explain each payout as sales instead, follow the manual method and you do not need a clearing account.

Why a payout never matches your orders

Shopify sends each payout after a settlement time, which is at least 3 business days in the UK. Payments captured on Friday, Saturday and Sunday are combined into one payout. So a single deposit can hold orders from several days.

The amount is not your sales total either. Shopify lists the reasons a payout is lower than you expect: refunds, chargebacks, adjustments, currency conversion and processing fees. Refunds are taken from your next payout, not from your bank account.

To see what is inside a payout, go to Finance > Payouts in your Shopify admin and open the payout. You get a breakdown of charges, refunds, adjustments, fees and reserves and the orders it includes. You can export the payout's transactions to a CSV with Amount, Fee and Net columns.

Step 1: add a "Shopify" account in FreeAgent

In FreeAgent, go to Banking > Bank Accounts, choose Add new account and pick Bank Account (FreeAgent's guide). Name it "Shopify". Leave "This is a personal account" unticked.

For the opening balance, enter zero if you start using the account from today. If you are moving existing records over mid-year, ask your accountant what the balance should be.

This account has no bank feed. Everything in it comes from your own entries, or from an app that records payments for you.

Step 2: record each order as paid into the Shopify account

When an order is paid, mark its FreeAgent invoice as paid into the Shopify account for the full order total. Do not record it in your real bank account: the money has not arrived there yet.

If you refund an order, record the refund as money out of the same Shopify account. (How Shopify refunds become FreeAgent credit notes.)

Step 3: record each payout as a transfer

When the payout lands in your real business bank account, open that transaction in FreeAgent, choose the type Transfer from Another Account and pick the Shopify account. FreeAgent records a transfer as equal money out and money in entries in the two accounts. The Shopify account has no bank feed, so the money out side is added there as a manual entry and nothing gets duplicated.

Do not explain the payout as sales. The sales are already on your invoices, so explaining the payout as sales counts them twice.

Step 4: record the fees from the Shopify account

The fees never reach your bank, so you add them by hand. Open the Shopify account, choose More > Add new transaction and add a money out entry for the total fees in that payout. Use the category Bank / Finance Charges, the one FreeAgent uses for Shopify fees, or a custom "Shopify fees" category if you made one.

The fee total is in the payout details, or you can add up the Fee column of the payout CSV. One entry per payout is enough. Put the payout date and Shopify's payout ID in the description so you can find it later.

Chargebacks, dispute fees and other adjustments come out of the payout the same way. Record each one as its own money out entry in the Shopify account. If you are not sure which category a chargeback belongs in, ask your accountant.

How to check it balances

After each payout, the Shopify account in FreeAgent should hold only the money Shopify has not paid out yet: orders since the last payout, minus their fees and refunds.

To check a whole month, use Shopify's payout reconciliation report. It shows charges, refunds, disputes, adjustments, fees and payouts for a date range, with a starting and ending balance. Its ending balance should be close to the balance of your Shopify account in FreeAgent on the same date.

Small differences have common causes:

• Timing. An order at 11 pm on the last day of the month can fall into the next payout.
• Currency. If customers pay in other currencies, Shopify converts the money and takes a conversion fee. See Shopify orders in other currencies.
• Other payment methods. Orders paid with PayPal or another provider do not go through Shopify Payments. Record those payments in a separate account for that provider.

How Ledgerline fits in

We are building Ledgerline, a Shopify app that sends each paid order to FreeAgent as a sales invoice. In Ledgerline's settings you choose one FreeAgent bank account for Shopify payments, so you can choose your "Shopify" clearing account.

• Each paid order becomes an invoice marked as paid into that account, which is Step 2 above.
• Refunds become credit notes recorded as money out of the same account.
• Ledgerline does not record Shopify payouts or fees. Steps 3 and 4 are still yours, and with the clearing account they take a minute per payout.

Ledgerline is in review for the Shopify App Store and not available yet. Leave your email below and we will tell you once when it is live. For the other options available today, see FreeAgent Shopify integration discontinued: what to do now.

More Shopify and FreeAgent guides

• FreeAgent Shopify integration discontinued: what to do now
• How to record Shopify sales in FreeAgent (step by step, works today)
• Shopify and FreeAgent VAT a penny out? Why it happens and how to fix it
• How to record Shopify refunds in FreeAgent as credit notes
• How to record Shopify orders in another currency in FreeAgent

Ledgerline: Shopify to FreeAgent