This month, I’ve been exploring a fantastic new feature in A2X that directly connects the cost of goods sold (COGS) from Shopify. For e-commerce businesses, knowing the cost per item is essential for understanding profitability, and A2X’s integration with Shopify (currently in beta) has made this easier than ever.
Why is COGS A2X integration a good idea?
Previously, managing COGS was a time-intensive task for my client, who was manually updating COGS values - a process that took considerable time for their staff, even with bulk edit options. There was also the risk that values would be entered incorrectly... something they had already spotted had happened.
I wanted to streamline and safeguard this process, so I exported their product list from Shopify, then used Excel lookups to align COGS from their excel spreadsheet. Once complete I then imported the refreshed and accurate COGS data back into Shopify. With A2X refreshing its cache every night, the cost data now automatically syncs with Shopify and Xero.
There are ways to improve this flow further to reduce the need for manual interventions and duplicating data entry... that'll be another blog I reckon! One step at a time was needed here to support this client.
Preparing for the Shift
To fully leverage this integration, I first needed to refine the chart of accounts and clean up existing transactions. This involved manual journaling and recoding to ensure the data would be comparable from the start of the year. Rather than recording materials, products and packaging as expenses at purchase, we reclassified them as assets, only recognising these costs at the point of sale. This shift in accounting allows us to align expenses with sales directly, offering a clearer view of profitability. It also accurately reflects the value that the company holds in assets... over £95K in this instance!
Practical Tips for E-Commerce Businesses
A few things that a critical to note:
Product Data Management: Shopify prefers product data in a single list on one sheet of a CSV workbook. It’s tempting to categorise products or use merged cells for variations, but this can complicate data uploads. Keeping a master list as your "one-source" of truth for your product data is essential. You can then work magic with pivot tables and lookups to view the data in different aesthetically pleasing segments and for various reporting needs. This makes it easier to manage updates and cross-check data.
Recording Labour Costs: If labour costs for making or packaging products are included in the COGS, be careful not to double-count by also recording these through PAYE. Mapping your workflow from start to finish will ensure clear and consistent data in your accounts. Decide where labour costs will be included and be consistent.
Time Savings and Accuracy: A2X’s automated COGS posting saves both time and reduces errors, especially when catching up on missed entries or reconciling past payouts. A2X posts COGS adjustments alongside sales and payouts, updating stock and materials, reducing the asset, and recording the COGS expense. If you've been using A2X for payouts you can just send through the COGS lines without sending the payouts again. Just be careful when posting in bulk - those buttons are super close together and the last thing you want is to be picking through Xero to remove already posted payouts!
Final Thoughts
Using tools like A2X and taking advantage of its integrations can be game-changing for e-commerce businesses. Staying updated with these advances allows me to bring more value to my clients, enhance their insights, and maintain accuracy - all with a bit of Excel magic to ease the heavy lifting.
If you’re interested in setting up or optimising this integration for your business, feel free to reach out!
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