How does accounting work for TryNow orders?

How Try Before You Buy works

1. Shoppers check out with the Try Before You Buy option on products.
2. When the order is placed, an authorization is placed on the shopper's card for the TryNow order.
3. The merchant ships inventory to the shopper, just like a typical order.
4. The shopper tries items at home and decides what they would like to keep or return.
5. After any returns are accepted, the shopper's card is charged only for the items kept. This charge occurs after the trial.

Please find some basic guidelines below, but note that you should consult your accounting team to make the final determination of how to implement all accounting policies and procedures.

How TryNow Orders Appear in Shopify Reporting

Shopify records TryNow orders in the same way as standard Buy Now orders, though this is contradictory to standard Accounting practices.

• When an authorization is placed, Shopify records the order amount as gross sales, even though no actual payment has been collected.
• When payment is captured after the trial period, Shopify treats any returns as a refund against the initially recorded gross sales. In reality, the first point of actual cash collection is the payment capture after the trial, which should be considered the true gross sale from an accounting perspective.

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Note:

If you prefer to exclude in-progress TryNow orders from Shopify reports, simply filter out orders with payment status Authorized (fully TryNow orders) or Partially Paid (mixed cart TryNow orders).

How to Properly Account for TryNow Orders

To ensure accurate financial reporting, TryNow orders should be accounted for using deferred revenue principles.

At the time of order placement (authorization hold)

1. Record as deferred revenue (liability), since no cash has been collected.
2. We recommend using the TryNow Order Export feature to pull this value, since it will be more detailed than Shopify reporting:
   1. Filter for trials with the status Unfulfilled, In Transit, or In Trial. The Current Authorized Amount column has the total value of authorizations.

When payment is captured after the trial

1. Reverse the deferred revenue and recognize only the actual collected amount as a gross sale.
2. Using the TryNow Order Export, filter for trials with the status Completed or Charged. The Captured Amount on Authorization column has the total value of payment captured post-trial.

Post-trial returns

1. It is rare, but if there are further returns post-trial, these should be recorded as refunds and should reduce net sales accordingly.
2. Using the TryNow Order Export, filter for trials with status Charged. The Ultimate Total Paid Amount column will take into account any post-trial returns. Take the Upfront Paid Amount + Captured Amount on Authorization — Ultimate Total Paid Amount to obtain the value of any post-trial refunds.

By following these accounting practices, merchants can ensure their financial records accurately reflect the cash flow of TryNow orders.