We are about to switch to shopify markets from managing multiple stores and wondered how other companies handle returns and changing exchange rates. Our store is in the UK. Say someone pays in Hong Kong Dollars, returns their order and the exchange rate has changed - we could end up in profit or deficit on the return. How do you handle / report this for accounting purposes?
Hi @Lulu777
When using Shopify Markets, exchange rate fluctuations on returns can create small gains or losses. The best practice is to record these differences as foreign exchange (FX) gains/losses in your accounting system.
Most businesses handle this by setting up an FX gain/loss account in their bookkeeping software (like Xero or QuickBooks) to track these discrepancies. If you want to minimize risk, you can use a payment processor like PayPal or Stripe, which sometimes allows refunds in the original transaction currency, reducing FX exposure.
Consolidating all stores under Shopify Markets eases work except for exchange variations. That make return complicated. In a UK store, when a client pays in HKD, and then you will refund him his money in HKD.
The refunded amount in GBP that you will refund may change. And that depends on the foreign exchange rate. That is at the time of return creating an extra loss or gain.
For instance, when a sale done at £100 (1,000 HKD at 10. 0 GBP/HKD), it will be £98. 50 after deducting charges; but if refund made at 9. 5 GBP/HKD, then you have to pay off £105. 26 meaning a loss of £6. 76.
This is what you should do:
— Absorb It: Keep track of sales and refunds made in GBP. And keep record any difference to “Foreign Exchange Gain/Loss” account.
— Price Buffers: Introduce a premium (for instance 5% in HKD) that would help reduce losses. But can change in Shopify Markets.
— Track It: Use accounting software (Xero, QuickBooks) for recording differences. That will make different and easier analysis.
— Policy: State on your return policy. That customers will receive their refunds in the initial currency. Which uses so on control customer expectations.
Accounting-wise, remember to record GBP revenue upon sales, GBP refund during return. And treat any such variance as profit or loss. You should then compare this with how much Shopify has paid you in GBP. And which will lead to some insignificant discrepancies.