Are You Recognizing Shopify Revenue on the Wrong Date?

Are You Recognizing Shopify Revenue on the Wrong Date?

by | Apr 3, 2025 | Uncategorised

When should you recognize revenue?

If you’ve ever caught yourself wondering, “Wait… when do I actually count this Shopify sale as real income?” — first off, congrats! You’ve officially unlocked a new level in business-owner brain.

That question means you’re not just selling stuff anymore—you’re thinking like a CFO. In accounting-speak, this is called “recognizing revenue” and it means recording the money as earned income in your books. It’s the moment your business says, “Yep, we did our part.

That cash is ours, and we have no obligations left or anything to still send to the client.”

Now let’s untangle this accounting spaghetti in a way that actually makes sense.

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The Big Question: Which Date Is the Right One?

You’ve got three dates floating around for every sale:

  1. Order Date – when the customer places the order
  2. Payment Date – when the money hits your account
  3. Shipping Date – when the product leaves your hands

But according to our good friend GAAP (Generally Accepted Accounting Principles), the only date that matters for revenue recognition is:

When control of the product transfers to the customer,

So no—it’s not when they paid you, and not when they excitedly hit “Buy Now” at 1am. It’s when they actually take control of the goods. Usually, that’s when you ship it.

Let’s Nerd Out (Just a Little): GAAP’s 5-Step Rulebook

GAAP’s revenue recognition standard (ASC 606) gives us a 5-step checklist to figure out when revenue is “earned”:

  1. Is there a contract? (Yep—the customer placed an order.)
  2. What are you promising? (To send them a product.)
  3. How much will they pay? (Easy—check the cart total.)
  4. What are you delivering? (Usually just one thing—whatever they bought.)
  5. When did you deliver it? This is the moment you recognize the revenue.

That “delivery” moment usually means shipping date, assuming the customer can’t cancel or return it easily once it’s out the door.

So Which Date Should You Use?

Date Option Use It? Why / Why Not
Order Date ❌ Nope The sale isn’t earned yet. Things can still change (returns, cancellations, etc).
Payment Date ❌ Still no You got the money, sure—but you haven’t done your part yet.
Shipping Date ✅ YES! This is when you’ve fulfilled your promise and the customer gets control. GAAP loves this.

Real-Life Example:

Let’s say…

  • Customer orders on March 1
  • You get paid on March 1
  • You ship the order on March 4
  • Customer receives it on March 6

Under GAAP, you recognize revenue on March 4—that’s the magic moment where your obligation is fulfilled and the sale is officially “earned.”

Why is it important?

Recognizing revenue is how you tell the financial story of your business—accurately and honestly.

It’s not just bookkeeping. It affects how your business is viewed by investors, banks, buyers, and even tax authorities.

In short,

If you’re keeping your books clean (or just trying to impress your accountant), here’s the golden rule: Recognize Shopify revenue on the shipping date.
That’s when the customer gets control, and you get to count the sale as legit.

Okay, But How Do People Actually Do This?

Sure, the rule says use the shipping date, but let’s be real.

Most small online shops don’t have fancy systems tracking every item from shelf to door.

You’re probably using A2X, Link My Books, or something similar. These tools pull your data from Shopify or Amazon. And they use the order date.

Why?

Because it’s simple. Clean. Reliable. That’s the data your tools actually give you.

Trying to change every sale to match the shipping date? That takes hours. Maybe days. And it costs money — a lot of it.

For most sellers under $10 million? Not worth it.

So what should you do?

If you’re not raising money or prepping for an audit, the order date is probably good enough.

Just know there’s a difference. And if your business grows or investors come knocking, you can tighten things up later.

Need help with your accounting?

We provide Bookkeeping and Accounting services for Online Retailers, CPG Brands and eCommerce sellers that operate in the USA, Canada, UK and EU. Whether you sell on Amazon, Shopify or other channels, we can help with your bookkeeping, accounting and taxes.

TALK TO US