Key dropshipping expense categories
A profitable dropshipping business tracks these expense categories:
- Cost of Goods Sold (COGS): product costs from suppliers (AliExpress, Alibaba and so on)
- Advertising costs: Facebook Ads, Google Ads, TikTok Ads, influencer marketing
- Platform fees: Shopify subscription, payment processing fees (Stripe, PayPal)
- Software and tools: DSers, email marketing, analytics tools
- Shipping costs: any shipping fees not covered by customer charges
- Returns and refunds: product returns, customer refunds, chargebacks
- Other business expenses: virtual assistant, graphic design, domain registration
Step 1: set up your expense tracking sheet
Create a Google Sheet, or pick one you already use. When you connect it in step 2, SheetLink writes a Transactions tab whose 34 columns include the ones an expense tracker needs. Add your own columns to the right of them, starting at column AI:
| Column | Purpose | Example |
|---|---|---|
date (F) | Transaction date, written by SheetLink | 2026-03-01 |
merchant_name (K) | Merchant, written by SheetLink | |
amount (M) | Cost, written by SheetLink (money out is positive) | 250.00 |
| Category (AI, yours) | Expense type | Advertising |
| Order ID (AJ, yours) | Link to specific orders (optional) | #1001 |
| Notes (AK, yours) | Additional context | Testing new ad campaign |
SheetLink also fills in Plaid’s category_primary (column S) and category_detailed (T), a good starting point for your own categories.
Step 2: import transactions with SheetLink
Instead of entering every transaction by hand, sync your bank and credit card transactions to your sheet with one click:
Install SheetLink
Connect your bank accounts
Choose your expense tracking sheet
Press Sync now
Why sync instead of typing?
Manual expense entry takes hours each month and leads to missed transactions. A sync brings in every transaction from your connected accounts, with no data entry.
Step 3: categorize your expenses
Once your transactions are in, categorize them for tax purposes and profitability analysis:
- Use data validation. Create a dropdown in your Category column with your standard categories (COGS, Advertising, Platform Fees and so on).
- Categorize common vendors with a formula. In your Category column, tag money in (a negative amount in column M) as revenue first, then search the merchant name (column K):
=IF(M2<0, "Revenue", IF(ISNUMBER(SEARCH("Facebook", K2)), "Advertising", IF(ISNUMBER(SEARCH("Shopify", K2)), "Platform Fees", "Other"))) - Review monthly. Spot-check formula-categorized transactions to make sure they’re right.
Step 4: calculate profit margins
The real power comes from calculating your true profit margins. Create a summary section. SheetLink follows Plaid’s sign convention (expenses are positive amounts, deposits negative), so expense totals come out positive and the revenue formula flips the sign of your tagged Shopify payouts.
Monthly profit and loss
| Line | Formula | Example |
|---|---|---|
| Total revenue | =-SUMIF(AI:AI, "Revenue", M:M) | $10,000 |
| COGS | =SUMIF(AI:AI, "COGS", M:M) | $4,000 |
| Gross profit | Revenue minus COGS | $6,000 |
| Advertising | =SUMIF(AI:AI, "Advertising", M:M) | $3,000 |
| Operating expenses | The sum of your other categories | $800 |
| Net profit | Gross profit minus advertising and operating expenses | $2,200 |
| Net margin | Net profit / Revenue | 22% |
Step 5: track key metrics
Beyond basic expense tracking, monitor these critical dropshipping metrics:
- Customer acquisition cost (CAC): ad spend ÷ number of customers
- Return on ad spend (ROAS): revenue ÷ ad spend (target 2.5x or higher)
- Average order value (AOV): total revenue ÷ number of orders
- Profit per order: (Revenue - COGS - Ads - Fees) ÷ number of orders
- Operating expense ratio: operating expenses ÷ revenue (keep it under 20%)
Tax preparation tips
Proper expense tracking makes tax season painless:
- Separate business and personal. Use dedicated business bank accounts and credit cards.
- Keep receipts. Store digital copies in Google Drive, linked to transactions.
- Track quarterly. Review your P&L each quarter to estimate your tax liability.
- Work with an accountant. Share your expense sheet directly with your CPA.
- Understand deductions. Most dropshipping expenses are deductible (home office, software, ads and so on).
Common mistake: mixing personal and business
A common bookkeeping mistake dropshippers make is using personal accounts for business expenses. Open a dedicated business checking account and credit card to keep everything separate.
Questions
What expenses should I track for a dropshipping business?
The main dropshipping expense categories to track are Cost of Goods Sold (COGS) from suppliers, advertising spend (Facebook Ads, Google Ads, TikTok Ads), platform fees (Shopify subscription, payment processing), software and tools (DSers, email marketing), shipping costs not covered by customers, and returns and refunds. Tracking all of them is essential to calculate your true net profit margin.
How do I automatically import dropshipping expenses into Google Sheets?
Use SheetLink to sync your business bank account and credit card transactions to Google Sheets through Plaid. Install the Chrome extension, connect your business accounts, paste the link to your expense tracking sheet, and press Sync now. Transactions from Facebook Ads, Shopify, PayPal and your suppliers land at the end of your sheet, and rows already there are skipped. Each sync is one click rather than a schedule. Free for your last 7 days of transactions; Pro is $4.99 a month or $49 a year.
How do I calculate profit margin for a dropshipping business?
Dropshipping net profit margin = (Revenue - COGS - Advertising - Platform Fees - Other Expenses) / Revenue. A healthy net margin is 15-25%. Use SUMIF formulas in Google Sheets to total each expense category (SheetLink records expenses as positive amounts and deposits as negative ones, so flip the sign for revenue). Track ROAS (Revenue / Ad Spend) and keep it above 2.5x to make sure your advertising is profitable.
Should I use separate bank accounts for my dropshipping business?
Yes. A dedicated business checking account and business credit card are the foundation of dropshipping bookkeeping. Mixing personal and business transactions is a common bookkeeping mistake. Separate accounts make tax preparation much easier, help protect you from personal liability, and allow accurate profit calculations.