Returnly is a solution that can be integrated with Shopify to automate the returns process for shoppers. When Returnly is set up in Shopify, this will generate new data lines that will have to be mapped between A2X and your accounting system.
The Returnly merchant may choose to offer the customer up to three choices when returning their goods:
a) Exchange the goods for a different product
b) Return the item for a refund
c) Receive a Shopify gift voucher to use in the future
Returnly changes the original Shopify order through an order edit to remove the item that is being returned. When a new item is ordered, a new Shopify order is created by Returnly and a fictitious "payment" is processed by using the credit generated from the returned item.
This can create many new lines of Shopify data that will need to be mapped in A2X. We offer the following guidelines to assist you in this process.
Please note: We are using the new mapping view - if your screen does not match the screen prints below, please get in touch with our customer service team to update your mapping to the new view.
Step 1: The data that is generated by Returnly when the Customer requests a refund
In the Accounts and Taxes Screen, you can sort your accounts into logical groupings. Please click on the all button under categories and choose '352363' in your marketplace dropdown list. This six-digit code is used by Shopify to indicate the third-party application, in this case, those six digits represent Returnly.
The accounts that will be presented to you for mapping will change from store to store. The below screen print is an example only.
How you choose to map these accounts is a decision that needs to be made by your business. We recommend you consider the above Shopify data lines in two grouped categories:
Gateway Transactions (shaded in blue above) - this gateway represents payments refunded to customers where the customer chooses to be refunded. You will have to check to see what gateway is used to make Returnly refunds and then choose the appropriate payment gateway clearing account (usually a current asset/balance sheet account) from your accounting system. The tax rate column should be set as no tax.
Everything else (unshaded above) - these accounts represent the sale reversal associated with the return, broken down by various categories of the order. All of these lines should be mapped to a profit and loss account in your accounting system. It is up to your business whether you wish to break down each line into different profit and loss accounts or allocate the same account to the entire group. The tax treatment should follow regular guidelines - i.e. tax-free for those lines that indicate 'NotTaxed' and the appropriate tax rate for the remaining lines.
Step 2: The data that is generated by Returnly when goods are exchanged by the Customer
In the Accounts and Taxes Screen, you can sort your accounts into logical groupings. Please click on the all button under categories and choose 'Returnly Exchanges' in your marketplace dropdown list.
The accounts that will be presented to you for mapping will change from store to store. The below screen print is an example only.
How you choose to map these accounts is a decision that needs to be made by your business. We recommend you consider the above Shopify data lines in two grouped categories:
Gateway Transactions (shaded in blue above) - this is not a real gateway. It is a suggestion made by Returnly in relation to how to set up Shopify to process returns. This 'Refund Gateway bogus' is a fictitious gateway used by Returnly to use the exchange credit that was granted for the original return, which is used for the new order that Returnly automatically sets up in Shopify. We recommend that you map this gateway to a profit and loss chart of the account, with no tax code (as a result this amount will offset with the data in point 2 below).
Everything else (unshaded above) - these accounts represent the sale reversal associated with the return, broken down by various categories of the order. All of these lines should be mapped to a profit and loss account in your accounting system. It is up to your business whether you wish to break down each line into different profit and loss accounts or allocate the same account to the entire group. The tax treatment should follow regular guidelines - i.e. tax-free for those lines that indicate 'NotTaxed' and the appropriate tax rate for the remaining lines.
Step 3: Check the Shopify Gift Card report and ensure your balance sheet liability matches the Gift Card liability as shown in Shopify
A2X can read and summarize gift card transactions when they flow through an order. When gift cards are used to pay for an order, for example, A2X will decrease the gift card liability (if mapped correctly). And if set up properly, A2X will increase the gift card liability when gift cards are sold. More information on how A2X accounts for gift cards can be found here.
Returnly creates gift cards in Shopify automatically without the use of an order, and as a result A2X has no visibility as to the creation of these gift cards. In addition, A2X has no visibility over the expiration of gift cards. The only way to capture the financial impact of manual gift card changes in Shopify is to analyze the liability as at month end and record an accrual journal entry to align your balance sheet liability with the actual gift card liability.
When a customer is issued a gift card via Returnly from within Shopify to use at a future date, all of this data is captured and reported in a separate area of Shopify and can be found in Products | Gift Card. It is necessary to export this data and then filter on the issue and expiry dates to identify, as at month end the gift card liability owed to customers.
In summary, it is important that you cross-reference the total liability at month end between your accounting system and Shopify as it is not always possible for A2X to update these values automatically for your store by reading the order lines.
Work with your accountant and/or bookkeeper!
We highly recommend that you schedule a session with your bookkeeper or accountant to review this article and discuss this issue further. Each situation is unique, and it is necessary for you to fully understand what has happened in Shopify and the accounting implications of these transactions in your general ledger.
You will need to show your bookkeeper or accountant how the orders are generated in Shopify and the impact on the integrated payment gateway. A process will need to be implemented to reflect the financial impact of these transactions in your general ledger system. This process may or may not incorporate the mapping recommendations suggested in this article.
You can click here to access our expert panel of bookkeepers and accountants if you need to find a new service provider.
If you encounter further issues with the way the Returnly orders data is represented in Shopify, we recommend contacting both Returnly support and Shopify support and explaining the issues. This way they will both be aware of the challenges you are experiencing when accounting for these transaction lines in your accounting system.