Shopify Accounting Explained: Minimize Tax Time with Automation — Kevin Reeth | How Traditional Tools Fail E-commerce, Why Automation Improves Finances, How To Catch Up On Bookkeeping, Why Inventory Tracking Is Key, How Schedule C Automation Works (#367)

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In this episode, we explore how automation and software can streamline tax management for online sellers. 

Kevin Reeth, founder and CEO of SellerLedger, joins host Claus Lauter to discuss modern solutions for e-commerce bookkeeping. With his extensive experience Kevin shares insights on simplifying accounting through automated data integration and tax compliance.

Topics discussed in this episode: 

• Why traditional accounting fails e-commerce. 
• What causes duplicate data issues.
• How Schedule C automation works. 
• Why inventory tracking is key. 
• Why separate personal and business finances. 
• How to catch up on 2024/2025 bookkeeping. 
• Why APIs transformed e-commerce bookkeeping. 
• Why automation future-proofs bookkeeping. 

Links & Resources 

Website: https://sellerledger.com/
Shopify App Store: https://apps.shopify.com/seller-ledger
Instagram: https://www.instagram.com/sellerledger/
Facebook: https://www.facebook.com/sellerledger
YouTube: https://www.youtube.com/@Sellerledger 

Get access to more free resources by visiting the show notes at
https://tinyurl.com/2bheypp8 

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Transcript

Hello, everybody, and welcome to the eCommerce Coffee Break Podcast. I'm Claus Lauter, and you're listening to the podcast that helps you become a smarter online seller. In today's episode, we discuss how automation and software can minimize your tax efforts. Joining me on the show is Kevin Reeth, founder and CEO at sellerledger.

com. So let's dive right into it. Hello, and welcome to another episode of the e commerce coffee break podcast. Today, we want to find out how automation and software can minimize your text time efforts this year in 2025 and ongoing. Now, Texas bookkeeping is obviously a part of every business, but the much most exciting, but you can make it easier.

And specifically with a lot of transactions e commerce business, it's a crucial factor for you to save time in your business. With me on the show today, I have Kevin Reeth. He's the founder and CEO of seller ledger. Sellerledger launched in 2023 and is designed to be the simplest, most automatic accounting platform for e commerce seller of all sizes.

Previously, Kevin was the founding CEO of outright. com acquired by GoDaddy in 2012 to become GoDaddy bookkeeping. Kevin was also the chief product officer of Textjar and also led the product management at Quicken or for Quicken at Intuit. So he has a massive background when it comes to accounting, bookkeeping, and everything that comes with it.

And I would like to welcome him to the show. Hi, Kevin. How are you today? Great. Hi, Claus. Thanks for having me. Let's dive right into it. Um, we all know that automation and bookkeeping is helpful for e commerce sellers, but how have changes in marketplaces and in payment methods, um, changed e commerce bookkeeping in the last couple of years?

Yeah, it's a great question. Um, I'd say, honestly, it's been a slow evolution over the years, uh, if you look at kind of the online banking world, uh, it's still a bit of a challenge, um, a lot of the big banks are getting better with authentication and making data available through their APIs, uh, and the same is true with the online marketplaces, so, for example, Shopify has been fantastic with their API, and I think it's one of the things that helped them grow, uh, in the early days, And other marketplaces have done, you know, a pretty good job doing it.

Uh, some of the newer marketplaces still don't make their data available easily. And that really makes it a challenge at the end of the year. Shopify, eBay, Amazon, Etsy, big platforms like that do a really good job of not just giving you kind of the summary level data, but through their API, they give you information that's really critical to running an e commerce business.

So a great example there is, um, you know, most people can get The deposits, the payouts from each platform through their bank, but it doesn't give you a breakdown of the actual item sales, uh, whether shipping was collected, if there's sales tax in there, if any fees have been deducted. And now with 10 99 Ks, at least in the U S um, the reporting threshold is coming down and it's important to be able to match.

Kind of the numbers that you get from these marketplaces to your own books. And if you don't have that level of kind of detail and fidelity, it's very challenging to do so. Obviously, it's not only a huge time factor, but also very annoying to go in these platforms and to dive in and to find the right part where you can pull the data if you can do it all.

So is that one of the main problems that sellers have when they use multiple platforms or are there others? Uh, that is probably the biggest is just find, finding access to the data, uh, because every platform puts it in different places and it's one of the reasons why, you know, various software vendors, ourselves included, try and aggregate that for you.

Um, but there are, there are other challenges, uh, as more and more established e commerce players, uh, or small business owners, um, expand, they tend to be multi channel and what you see is companies like Shopify with their Shopify, I think it's a, Marketplace connect app that they have where they will pull in information.

They're trying to help solve the problem of cross channel listings, inventory management, things like that. And so you can go into your Shopify store and see your Amazon and your Walmart and your eBay. Uh, transaction history there, which is great, except if you're looking for tax purposes to try and pull that data down, the data they're getting from the other platforms again, doesn't have that level of granularity.

And so then if you're pulling also from Shopify and then you happen to connect Amazon or eBay, you can end up with duplicate data, right? And that's just, that's a horrible thing to try and figure out. It's, it's kind of like trying to run a business by commingling personal and business finances. Strongly recommend against doing that, right?

So, um Yeah, it's it's as as more platforms come online as they add more access to data It's a lot easier to get the data jumbled and so staying on top of that's pretty critical for end of year Absolutely. Yeah, I think everyone who has started a business me included was at some point Working with spreadsheets and trying to things out and as I said, it's a complete nightmare now automation helps a lot.

There is a range of big, very well known bookkeeping software out there, Quicken, where you actually were a part of it. Why are they not a perfect fit for e commerce? Yeah. So it's actually QuickBooks is the, is probably the biggest, you know, solution for accounting software out there. Um, and I think the, the, it's a trade off in terms of what your established processes are.

If you've got accountants who are working with you on QuickBooks, it can work, uh, so long as they know a lot about e commerce and the data, because QuickBooks has a lot of third party developers who kind of, you know, bridge the gap between these marketplaces and QuickBooks, which is kind of your core general ledger.

But a lot of times, and we see, you know, there's great quotes out there. Um, don't want to get into it too much, but if you go on like the app stores on Amazon and Shopify and stuff, and just read the quotes, you will learn what some of the limitations are and they boil down to primarily. Not being focused enough on the e commerce data, the detail.

Um, I'll give you one example. Um, one of the most critical things, and especially as you start scaling any commerce businesses, really understanding your inventory and cost of goods sold, and to do that, you want to make sure that, you know, one, you're set up well with unique SKUs and you use those SKUs consistently across platforms, but you also want your tracking on the backend.

To be able to know when a skew, when an item sells on one platform, you want it to be able to reduce your inventory, calculate cost of goods sold, and make sure it's not available to be sold on other platforms. You know, a lot of the big established players don't do a good job of it. And you can go, you know, there's, there's quotes out there.

I won't read them to you. Um, but you can see that kind of. That lack of attention to that level of detail for an e commerce merchant, it's kind of critical, right? So, again, you know, we're, we're a newer company, we tend to be focused on smaller sellers. We're, you know, we're going to expand and go up market.

But, um, as I would say, as somebody who, if, if you're kind of, don't just assume that because a brand has, You know, a lot of recognition that they really know the e commerce space. Well, go in, try the software, play around, do your homework, research what other sellers who've been doing this for years have said, um, and come to your own conclusion.

Yeah, I think it's very important. Um, I did my first startup long time ago in 2001, and um, I had a massive trouble finding not only the right systems, but also the right account and bookkeeper to understand what e commerce actually is. Now we're 25 years ahead. People should have a better understanding, but I think it's still very difficult specifically as a small and medium enterprise where you have tons of other things on your plate than dealing with synchronizing data from different platforms.

On that point, what. Platforms. What systems do you connect with? So we have direct connections to APIs with, uh, let's see, Amazon, eBay, Etsy, Walmart, Shopify, uh, and most banks and credit cards. Um, we use a company called plaid, uh, for our banking platform. They're kind of industry standard. Now they have the best technology stack for integrating with banks.

Um, and then we also have, there are platforms out there like, uh, Oh, we also had it with Poshmark, um, and Mercari and whatnot are a couple of newer platforms that don't necessarily make their data available very easily. Uh, but for example, I've spoken with, uh, some of the product folks over at, uh, whatnot who understand kind of the issue and they're hoping to work on better reports and maybe they'll get an API, but, um, but we'll see.

So that's, that's what we have. And. Yeah, we'll see what this year brings too. But in terms of direct connections, I think we've got Probably the most out there. You touched on inventory management. You touched on profitability. Obviously that's the one side of the game. Very important. The other side is more on the unpleasant game of taxes.

Now, um, there is different things. And we're talking here about us sellers, um, that they need to take in consideration to stay compliant. How does your system help with that? Yes, actually, that's our number one focus as our software, and in fact, the most popular feature we have, and it started immediately when we launched, is, uh, we actually show you a preview of your Schedule C, which is the small business, you know, tax form to show profit and loss to file with your personal tax return in the U.

S., and it fills itself out. Uh, one of the great things about, Having access to the raw e commerce data is that we know where to put that on the tax forms in the U S. And when we expand internationally, we'll figure it out there too. Um, but it's, it's, you know, by far the most popular feature because we've had people who get to the end of the year and.

Really the only information that we don't know about is stuff that comes in from a bank or credit card, which you can categorize once we remember it. And so you don't have to do it again. So the system gets smarter. And then if you have any kind of manual cash based transactions, if you pay cash for an expense, or if you're tracking miles, things like that, um, but by and large, the vast majority of the data comes in, it gets put right in the correct place on tax form.

If you'd like to customize it, you can do that. But. We found that the vast majority of sellers don't want to spend a whole lot of time customizing how their tax reporting is done. They just want it done. Um, and the folks who get set up, if they, if you separate your business and personal, you have a business, You know, checking account and credit card and you put everything on through those.

You have all of your payouts go through there and you connect these, um, these marketplaces. We've had people say, yeah, came in, did my taxes, took me 10 minutes, sent it off. I'm good. Yeah. That's a perfect world scenario. No one wants to deal with tax forms. No, that's terrible. It's terrible. Yeah. So if you have something that automates that and you can be sure that everything is right, it's perfect.

Now you're relatively new business. Um, tell me about What kind of differences you saw from your customers moving from one system or no system to your system? The biggest challenge is the biggest thing we've seen is people coming over and wanting to pull historical data. So, uh, one of the other things about a lot of the big established players is they don't make it easy to pull the data out of the system.

Um, and in fact, that became such a common question that we just, we recently rolled out the ability to export all of your data in CSV format. Cause. We just believe your data is your data. Uh, but the biggest thing we see is, because it's so hard to move data over, people will come over, so they show up right now in January of 2025 and ask if we can help in, with all of 2024.

We even have people who haven't done their taxes in a couple of years. Um, and so we actually do have a program where we will go back and get all of your data if you if you repay, we charge on a monthly basis. But if you prepay for a year and we offer a discount for that, we'll go back and get all of your data from 2024 where possible.

Um, a lot of the banks don't offer data going back that far, but we have a ability to import via CSV. But that's probably the biggest thing we see is as much as every accountant and even software vendor would recommend you should stay on top of your books throughout the year and so on and so forth.

That's not how a lot of people actually behave, right? It's, it's like the least interesting thing to work on all year. You get to December, January, and it's like, Oh, I got to start getting organized. Is there anybody who can bail me out? And that's kind of how we've designed our software is, yeah, we'll do everything we can to go back and get your data.

And then you just tell us about things we don't know about. Yeah, I think that's a, it's a good notice that you have there. A good warning to our listeners, specifically the ones that have just started, who are either brick and mortar stores moving into e commerce or side hustlers, um, becoming full time merchants is like stay on top of your numbers on your bookkeeping and on your taxes, because otherwise it can be a complete nightmare.

But tell me about the onboarding process. How does a new customer get onboarded with your system? Certainly. So we We're big believers in try before you buy. So we give everybody 30 days to play around with the software. And the very first thing we ask you to do, you just create an account with an email and a password, you know, give us the name of your business, and then we give you a list of all of those marketplaces and data sources that you can connect to, um, including banks and credit cards.

And we say, connect your data and we'll show you a real time profit and loss right now. And we do it based on, we'll pull in 90 days of data to show you what we can do, what the software can do for you. And we will pre populate that tax form. And it's like, okay, here's a quarter of the year is already done for you.

This is what it looks like. See, play around with it for the next 30 days, go categorize some transactions. See if you want to customize, you can, but try and get as much of your kind of business financial life into the software as possible, and we'll show you how you're doing. And so. You have 30 days to play around with it.

And then we ask you if you want to keep continuing, subscribe to a paid tier. And again, you know, we, there's a mix right now of people who come in and they're like, I just want to get started fresh for the new year. And there are people who say, okay, you know, I like the software. Is there any way you can help me with last year?

And we do that too. So the onboarding is very much about, uh, just connect these data sources and we'll show you where, what value we provide, and then you make the decision. Who's the perfect customer for SellerLedger? The perfect customer, uh, is probably somebody who's multi channel, you know, a U. S. based customer who's still maybe on the smaller side, you know, under a million dollars in sales.

Although we have many people doing many millions of dollars on it because I guess they just love simplicity over anything else. Um, but basically if you're multi channel and you're really struggling to pull your data together, and if you really want to get a good insight into the profitability of your business.

Um, one of the other great things about being able to, when we talked earlier about the inventory and skew matching and, and pulling stuff down, um, if you're on top of it and you load your inventory cost information, when it sells, we'll show you the gross profit on every item that sells. Um, and it's one of the biggest drivers in the profitability of an e commerce business.

So you can see, you know, on which products are you making the most money? Um, what's your margin and what do you have left to spend? So. You have a very good explainer video on your website, which I watched earlier today. Um, for me, who is also not a big fan of bookkeeping, but obviously it's a part of my business as well.

I found the simplicity very, very cool. Um, I know QuickBooks, I know how complex that is. Um, so I think the explainer video for our listeners out there, go on the website, have a look there. It explains it very well. How much time do your customers spend on the system itself. That's a great question. I would say, when you first start up, the only real places that people are spending time are with the bank and credit card transactions, that initial, like, tell us what these trans, because our software can't know.

We can look at the vendor name, we can guess, but. A lot of times that would be incorrect. So we ask you to tell us, okay, for this vendor, what category do you want us to put it under? Then we remember. And so I would say when this, when the system starts, it's, you know, I don't know, a couple of hours, maybe going through a month's worth of data if you wanted to.

But some people can do it in a few, you know, 10 to 15 minutes. And then over time, that amount of time you spend in the software drops dramatically. So, it kind of gets back to, you know, there's a wide range. It gets back to one of the first things we talked about. Um, which is, it's basically how well set up you are when you do your bookkeeping.

Um, if you have good banks and credit cards, if you are on the marketplaces that have the APIs. We can, you know, we can provide an awful lot of value with almost no work. Right. Um, if you have more manual methods, because you haven't spent the time to kind of plan out, um, for example, uh, you know, tracking mileage and things like that.

If you use a mileage tracker and you have a log, you can just put in the total amount you're done. If you want to go in and manually type stuff in, you can, if you have a lot of off marketplace sales. So it's a function of. You know, the nature of your business and how, how automated your systems are to begin with.

And that's where we, we tend to recommend. And, um, it's actually funny yesterday. I had a conversation with, uh, or an email conversation with a seller who said, you know, she's going to be leaving one platform and is looking at a new one and was asking which one works best with our system because she doesn't want to break all the automation that she's created, which was flattering to us.

Um, so, you know, we kind of liked hearing that, but. We wouldn't necessarily recommend people make decision on, you know, selling platforms based on accounting stuff, right? Totally, totally. Yeah, that's the tail wagging the dog. Tell me a little bit of the pricing structures. You said the first 30 days are for free and how What kind of packages do you offer after that?

Uh, so we, we offer the cheapest, we start at 10 a month. So we're also much cheaper than all the other bigger established players, 10 a month for up to 250 transactions per month. Um, and then it goes up to 20 for, I think, a thousand and then 50 a month for up to, I think, 5, 000 transactions. And the transaction is basically.

So our pricing is driven almost entirely based on what it costs us to run the platform plus the ability to make a profit. Um, so it's just whatever transactions that we pull in, um, any transactions you type in, don't get counted. We also exclude things like, um, fees from eBay and Etsy because they just, they have so many.

Uh, so for those of you who sell on those platforms and are concerned about all those little, you know, kind of the nickel and dime fees. Don't worry about it. We don't, we don't count those. Um, so yeah, it's basically as your business gets bigger and more profitable and you're selling more. Um, one, it costs us a little more to, you know, service you to pull all that data and analyze it and do all that matching.

Um, but then it's also, you know, So you've got a bigger, more impressive business and, you know, hopefully have the money to invest in more automation so you can get back to, you know, sourcing and selling and fulfilling. Yeah. It makes perfect sense. And I think that's a very affordable price to get a solution that makes your life so much easier.

Kevin, before our coffee break comes to an end today, is there anything that you want to share with our listeners that we haven't covered yet? No, I think we've done a good job. Um, again, I would just reiterate, give us a try, right? Um, we have a phrase in the company that says, um, we only want happy customers paying for the software, right?

We, uh, we do, I guess the one other thing I'll share is we do, all of our support is through email. But the product team, myself included, does most of the customer support. Uh, and we do that because if there's an issue with a problem, with a product where it's not easy enough to understand, or if there's a bug or something like that, we want to know about it.

So we, we don't try and push people away and try and, you know, deflect customer support. We actually want to hear from people. And we do believe in making the product better. So, again, You know, there are, there are certain target customers that maybe we're not the best solution for today, but we would like to understand why so that we can become a better solution going forward.

Okay. Why can't people go and find out more about you guys? Uh, just go to our homepage, sellerledger. com. Um, and I think I gave you a, another URL. We have a great landing page for Shopify sellers that explains how it works for Shopify as well. Uh, they can also find us if you go in the Shopify app store under the, I think it's the finance and accounting category.

Uh, we're also on the Amazon, uh, app store as well, or just Google us. There's plenty out there. You'll, you'll find customer reviews and discussions on different communities. So, uh, yeah, sellerledger. com. Cool. I will put all the links in the show notes, then you just want to click away. And I hope a lot of people will check you out.

I think it's a great system. And also watch the video. I think the video explains very well what you can expect when you work with Saladecha. Kevin, thanks so much for your time today and hope to talk to you soon. Thank you very much. Appreciate it.