Key takeaways
What this article covers, in order:
- The chart of accounts for a retail business
- The 3 entries a retail business gets wrong
- What a retail business can claim
- The reports to run every month
- Frequently asked questions
- Where to go next
Your till total and your bank deposit disagree, and you cannot tell whether that is shrinkage, a card settlement net of fees, or a staff discount nobody recorded. Until stock and sales land in the ledger from the same source, gross margin is a guess.
This is the bookkeeping side of that problem: the accounts to set up, the entries that go wrong, and what you can claim. If you are still choosing software, the round-up linked at the end compares the options.
The chart of accounts for a retail business
Start from these rather than the default template. The codes are illustrative; the separations are what matter, because each one answers a question you will be asked later.
1200 Inventory — goods held for resale, at cost
1210 Stock in transit — paid for, not yet received
4000 Retail sales — split by rate if you sell at more than one tax rate
4100 Sales discounts and staff purchases
5000 Cost of goods sold
5100 Shrinkage and write-offs
6400 Card and payment processing feesThe 3 entries a retail business gets wrong
A card settlement deposited net of fees
Book the gross sale to revenue and the processor's fee to card fees. Posting the net figure understates both revenue and expenses, and it makes your fee rate invisible.
A stock count difference
Write it to shrinkage, not to cost of sales. Rolling it into COGS hides whether you have a theft problem or a pricing problem.
A supplier's volume rebate
Credit it against inventory cost, not to other income, while the stock is still on hand — otherwise margin looks worse than it is until the rebate month.
What a retail business can claim
Deductibility follows the rule in your own jurisdiction, so this is a checklist to take to your accountant rather than an answer. For a retail business the cost lines to review first, and the record each one needs, are:
| Cost line | The record to keep |
|---|---|
| Cost of goods sold | The invoice, and the business-use split where the cost is shared |
| Shrinkage and write-offs | The invoice, and the business-use split where the cost is shared |
| Card and payment processing fees | The invoice, and the business-use split where the cost is shared |
Whether each of those is deductible, and how much of it, is a rule your tax authority sets and changes. Keep the record either way; take the question to your accountant with the figures in front of you.
The reports to run every month
- Stock valuation that survives an audit — review it monthly, not at year end.
- A POS link that posts the day's sales as one journal with tax split out, not a lump cash receipt — review it monthly, not at year end.
- Card settlement handling: the deposit is net of fees, so the software has to book the gross sale and the fee separately — review it monthly, not at year end.
- Shrinkage and write-off as their own accounts, so stock loss is visible instead of buried in cost of sales — review it monthly, not at year end.
Frequently asked questions
What is the best accounting software for someone in the retail industry?
There is no single best one; there is a best one for a shape of business. For a retail business, work down the criteria in the section above and stop at the first option that clears all of them — that list is short, usually two or three.
The criteria that eliminate most options fastest are: Stock valuation that survives an audit; A POS link that posts the day's sales as one journal with tax split out, not a lump cash receipt; Card settlement handling: the deposit is net of fees, so the software has to book the gross sale and the fee separately.
What are the best accounting software platforms for a multi-location retail business?
There is no single best one; there is a best one for a shape of business. For a retail business, work down the criteria in the section above and stop at the first option that clears all of them — that list is short, usually two or three.
The criteria that eliminate most options fastest are: Stock valuation that survives an audit; A POS link that posts the day's sales as one journal with tax split out, not a lump cash receipt; Card settlement handling: the deposit is net of fees, so the software has to book the gross sale and the fee separately.
What is the best accounting software for retail?
There is no single best one; there is a best one for a shape of business. For a retail business, work down the criteria in the section above and stop at the first option that clears all of them — that list is short, usually two or three.
The criteria that eliminate most options fastest are: Stock valuation that survives an audit; A POS link that posts the day's sales as one journal with tax split out, not a lump cash receipt; Card settlement handling: the deposit is net of fees, so the software has to book the gross sale and the fee separately.
Give me a list of accounting software for retail that offer the best security?
Ask for evidence rather than adjectives. The things worth checking, in order: an independent audit you can see (SOC 2 Type II or ISO 27001, with the report date), encryption in transit and at rest, enforced multi-factor authentication, role-based permissions fine enough that a bookkeeper cannot export your whole ledger, an immutable audit trail of who changed what, where your data is hosted and under which country's law, and a stated backup and recovery position.
Then ask the question the brochure will not answer: can you see, after the fact, who changed a figure and what it was before? For a retail business that audit trail is worth more than any single feature on the security page. A vendor who will send the audit report under NDA is telling you something; one who answers with the words "bank-grade security" is telling you something too.
Is there free accounting software for retail?
There are free tiers, and they are real — but the limit is what matters, not the price. Find the cap before you move your books: how many documents or transactions a month, how many bank accounts, how many users, and whether the free tier includes the one thing you came for. HelloBooks has a free plan; /pricing lists what it covers today.
How much does accounting software for retail cost?
Published prices move, and the figure that matters is the one including the module you actually need — inventory, payroll or multi-currency are often a tier up, so the headline price is rarely the price you pay. Price each shortlisted option at the tier that carries what you actually need, on the vendor's own page, on the day you decide.
Where to go next
- HelloBooks for retail
- The retail accounting software round-up
- HelloBooks in the United States
- HelloBooks in the UK
- HelloBooks pricing and what each plan includes
This guide is written for businesses in the US, UK, Canada, Australia, New Zealand and Singapore. Tax treatment differs by country — check the rule for yours before you act on it.
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