Exchange Accounting Options
There is no one-size-fits-all configuration for exchange management in Shopify due to different merchant data workflows, processes, and preferences. Hence, we offer two options to help with exchange accounting. Choose the method that aligns best with your accounting practices:
This article also covers:
Option 1: A 100% Discount for the exchange order (yayloh discount)
This option applies a discount equal to the return credit amount, ensuring that new exchange orders don’t artificially increase net sales. Any remaining balance owed by the customer, beyond the credit, will reflect in additional upsell orders.
Benefits of this method:
Suitable for merchants who track sales and tax from the original order in an external system.
Limitations:
Discounts may appear inflated, which could affect metrics like the Average Order Value (AOV) in Shopify reports.OV).
Option 2: Mark exchange order as paid.
In this method, the exchange order is marked as paid, showing that the full amount has been accounted for.
Benefits:
Suitable for merchants who use Shopify as their primary source of financial data.
Allows the full exchange order value to flow into third-party systems seamlessly.
Limitations:
Shopify still requires manual order adjustments to prevent inflated return and net sales figures. Without these adjustments, your financial data may not be reflected accurately.
Managing Tax in Exchange Orders
For new exchange orders, yayloh offers two tax handling options:
Tax added for all items on the order (default): Applies tax to the entire exchange order.
Tax added only to the outstanding balance: Taxes are calculated only on the portion of the order that exceeds the customer’s return credit (e.g., for upsell items).
Choosing the Best Tax Option for Your Exchange Orders
To determine the best tax option for your setup, consider the following:
How is tax handled on the original order? In your financial system (whether Shopify or a third-party solution), what happens to tax on the returned item?
How should tax be treated on the new exchange order? Should taxes be recalculated for the entire order or only for the new upsell items?
Guidelines for Tax Handling:
If tax is removed from the original order: Tax should be added to the exchange order (Option 1). This is common when Shopify is your financial source of truth.
If tax is preserved on the original order: Tax should only be applied to the amount that exceeds the return credit (Option 2). This approach is typical for merchants using ERP systems or third-party accounting tools.
Understanding Bookkeeping Adjustments
yayloh's exchange process in Shopify can lead to some unexpected adjustments:
When yayloh marks a product as "returned" without issuing a refund, Shopify creates a positive order adjustment. This adjustment is not offset by a negative transaction adjustment.
Additionally, the yayloh discount can cause inflated discount figures in Shopify.
How Sales Adjustment Reports Can Help:
Sales adjustment reports help merchants obtain accurate financial information within Shopify by delivering at-a-glance offsets to:
Removing order adjustments caused by exchanges or store credit returns.
Correcting inflated discounts to reflect accurate net sales.
Merchants can apply the offset totals to the appropriate bucket (discounts, returns, net sales) within Shopify or whichever system they use for end-of-month accounting reconciliation.
Merchants can use these offset totals to update their Shopify records (discounts, returns and net sales appropriately) or apply them in the system they use for end-of-month reconciliation. This ensures accurate financial reporting for both discounts and returns.
💡 To learn about Accounting for Gift Cards and Discount Codes, jump to the Accounting for Store Credit in Shopify article.