If you sell through dropshipping, your customers place orders in your store, but the products are stored, packed, and shipped by your vendor or third-party supplier, not by you.

Since these items never pass through your own warehouse, they need to be tracked differently in your books.

As part of setting up your InventoryIQ setup, we’ll ask whether you use dropshipping.

If you select Yes, you’ll go through a short guided setup to identify your dropshipping warehouses, vendors, and payment terms, so Finaloop can set up your accounting for these orders.

To get an overview of how we support dropshipping sales, check out this quick video:

During setup, we’ll ask a few quick questions to determine which solution best fits your business and how we should set up your dropshipping in Finaloop.

Based on your answers in the guided setup, we’ll automatically choose the best way to track your dropshipping orders and payments.

There are two ways we can manage your dropshipping COGS:

With this method, Finaloop tracks dropshipping costs based on vendor payments or bills. When we detect a dropshipping payment (via a bank transaction or bill), we record it directly as COGS on your P&L on the transaction date.

Because the cost is already recorded:

With this method, Finaloop calculates COGS using the landed cost of each dropshipping fulfillment.

When Finaloop detects a Shopify order was fulfilled from a dropshipping warehouse, you identified during setup (see below), we’ll automatically create a dropshipping purchase order (PO) for that order using the vendor and cost details available in our system.

If we don’t have vendor or cost information for the product fulfilled, we’ll create a draft PO instead. Once you add the missing details, the PO and related COGS will automatically update.

You can find these POs here:

Inventory>Purchases>Purchase Orders tab>Dropshipping POs tab.

Click into any draft PO to add or adjust the vendor and cost details. This method allows you to:

While this method requires a bit more input, it produces the most precise COGS results.

Sometimes, dropshipping bills or payments don’t exactly match the costs on the dropshipping POs. This can occur if the PO is based on an average cost rather than the exact cost for that PO shipment. In these cases, if there is a small gap you can add an adjustment to close the gap and align your vendor balance with the actual balance.

Note: If a larger gap exists between your dropshipping bills and payments and your dropshipping POs, we recommend editing the PO at the source rather than adding a dropshipping adjustment.

How to add a dropshipping adjustment:

Optional: You can also link relevant dropshipping bills and payments to the corresponding POs and adjustments.

No matter which method you use, you can always track dropshipping activity by product.

On the COGS tab you’ll see all sales channels, including dropshipping, where you can track:

Note: If you track dropshipping using Option 1 (based on dropshipping payments or bills), the cost and COGS for this product will show as $0.00, since costs are tracked at the payment level rather than per SKU.

If any automatically created dropshipping POs are missing required information, you’ll see a Missing data badge.

Click the badge to:

After saving, you can choose whether to:

Your COGS will update automatically.

We'll walk you through a guided setup, asking the following questions. Based on the answers, we'll automatically select the right option for your business.

If you ever want to switch between the two methods, contact Finaloop Support via chat or email. Our team can update your configuration to match the way you manage your dropshipping operations.