A gift card sale feels exactly like a sale: an order appears, money arrives, the dashboard number goes up. It is not revenue, and treating it as revenue is one of the easier ways to report a month that never happened. What you sold is a promise to supply goods later, which is a liability rather than income, and the revenue arrives when somebody redeems the card, at which point the card is simply how they paid. Count both events and the same money appears twice, in two different months, at whatever margin the second one implies.
- Selling a gift card creates an obligation, not income. Nothing has been supplied yet.
- Revenue happens on redemption, where the card is a payment method like any other.
- Counting the sale and the redemption double counts the money, usually across two different months.
- The cash arrives early, which is genuinely useful and completely separate from when the revenue is earned.
What actually happened on the day of sale
Money moved and a promise was created. Nothing left the warehouse, no goods were consumed, and the store now owes a customer whatever they choose to spend the balance on. That is why the sale is excluded from gross merchandise value on a correct statement: no merchandise was involved.
The payment fee is the exception that is genuinely charged on the day, because the gateway moved real money, and it does not come back when the card is later redeemed. So the fee belongs on the day of sale even though the revenue does not, which is the sort of asymmetry that only looks strange until you follow the actual cash.
What happens on redemption
The customer picks goods, the goods ship, and the revenue is recognised exactly as it would be for any other order. The card is the payment method, so the order carries no card fee for the portion paid with it, which is one small reason gift card orders look slightly better than average.
It also means the goods, the parcel and the fulfilment costs land on the redemption day. A store that took the revenue at sale and the costs at redemption has flattered one month and punished another, which is precisely what a recognition date exists to prevent.
| Event | Revenue | Costs | Cash |
|---|---|---|---|
| Card sold | none | payment fee only | €50 in |
| Card sits unused | none | none | held |
| Card redeemed | recognised | goods, parcel, fulfilment | none |
| Card never redeemed | eventually, per your rules | none | already banked |
The reporting mismatch this creates
A dashboard counting gift card sales as sales will disagree with a statement that does not, and the gap is exactly the value of cards sold and not yet redeemed. It is one of the ordinary reasons why your Shopify numbers never match, and knowing its size makes it a footnote rather than a mystery.
The same applies to your bank. Card sales bring cash forward, which is a genuine benefit around Christmas, and the revenue follows weeks or months later. A store reading cash as performance will therefore have an excellent December and a strange January, for reasons that have nothing to do with trading.
Breakage, and why to be careful with it
Some cards are never redeemed, and the balance eventually stops being an obligation. Recognising that as revenue is legitimate in principle and easy to do badly: taking it early flatters a month with money that may still be spent, and taking it by feel rather than by a stated rule means nobody can check the figure later.
The rules also vary by jurisdiction, and some markets restrict when a balance may expire at all, which makes this a question for your accountant rather than for a reporting habit. The safe operating position is to leave outstanding balances as a liability, watch how the total moves, and treat any release as a deliberate accounting decision rather than as trading income.
What this does to a promotion
Gift cards sold at a discount are the version that catches people out. Selling a €50 card for €45 does not cost five euros of margin at the moment of sale, because there is no margin yet; it creates a €50 obligation for €45 of cash, and the whole discount lands on whichever order eventually redeems it, at that order's own margin.
The practical version
- Exclude gift card product sales from revenue entirely; a net revenue calculator run on your own figures should never include them.
- Book the payment fee on the day the card was sold, because the gateway charged it then.
- Recognise the revenue and every cost on the redemption order, like any other order.
- Track the outstanding balance somewhere, because it is a real obligation and a real slice of your bank balance that is not yours yet.
- Expect a quiet January if you sell a lot of cards in December, and do not diagnose it as a demand problem.