Integrating Xero and Shopify for Easier Accounting
In today's fast-paced business world, the integration of accounting and bookkeeping software is crucial, especially for small businesses. It not only saves time and money but also minimises the risk of accounting errors. Among the accounting and bookkeeping software options available, a popular combination is Shopify and Xero integration. This common integration allows data syncing from your ecommerce Shopify store to your Xero account, making ecommerce bookkeeping easier.
There are a number of apps to integrate Shopify with Xero. This article is about the Shopify integration built by Xero, commonly used by small business owners. In case you are wondering, our favourite app for integrating these programs is A2X - you can read our review and benefits of a more specialised integration in our recent article.
Connecting the Dots: Shopify and Xero Integration
Shopify Xero integration can be a game-changer for ecommerce businesses of all sizes. This integration allows you to sync sales data from your Shopify store to your Xero accounting software. This process offers a clear view of your cash flow and also simplifies the reconciliation of payouts.
A few other benefits of integrating Shopify and Xero are:
1. Daily Summary of Shopify Sales:
A daily summary of all your Shopify sales is automatically synced to your Xero account as a Sales Invoice at the end of each day. It does not include every Shopify invoice, which is good because as your store grows syncing every invoice would be overwhelming and can cause Xero to slow down.
2. Sales Summary by Payment Gateway:
The above mentioned daily sales sync creates separate Sales Invoices for each payment gateway. For example, one invoice for Shopify Payments and a separate invoice for AfterPay.
3. Sales Details Recorded:
The daily sales invoices synced from Shopify to Xero include the Gross Sales, refunds, discounts, shipping, shopify fees and gift card purchases. This provides valuable information allowing you to track refund and discount percentages in Xero, as well as seeing if your shipping income from customers exceeds your shipping expenses.
4. Improved Sales Reporting:
Using the sales tax region settings in Shopify you can split your sales when synced to Xero into different sales accounts for Local sales with GST and Global sales without GST. This differentiation can provide valuable insights on your Profit and Loss report showing the dollar value of sales by region.
5. Cash Flow Visibility:
With the daily summary of sales imported into Xero, you get a real-time view of your cash flow. This is essential for understanding the financial health of your business and making informed decisions.
6. Multi-Channel Sales Management:
If you sell through multiple channels (e.g. in addition to Shopify, you sell through a physical store or other online platforms), the integration can help split your Shopify sales into a separate channel/account in Xero, providing a holistic view of your business's channel performance.
7. Time-Saving Benefits:
Automating the transfer of sales data from Shopify to Xero, saves time freeing you up to focus on your business.
Limitations with the Shopify to Xero integration
Although Xero’s Shopify integration can be very valuable, it does have limitations which some business owners only find out after they have implemented it. To avoid possible frustration consider the below before integrating Shopify with Xero.
1. Bank Reconciliations aren’t always easy
Although the Shopify integration syncs daily sales invoices into Xero by payment gateway and boasts that it makes bank reconciliations simple, those invoices do not always match the amount paid into your bank account. Although the synced invoices summarise daily sales, many payment gateways include multiple days on their payouts based on when card transactions settle. Therefore, you may need to look at your payment gateway account (eg. Shopify Payments) and identify how much of a bank deposit relates to which sales invoice. A challenging and frustrating experience for most business owners.
2. Multiple Shopify Stores
For ecommerce companies that have multiple Shopify stores, you can only connect one store to Xero. This significantly limits the value of the integration for some businesses. Having one store connected is great but how do you get the sales from the other store into Xero?
3. Multiple currencies
If you have a global ecommerce business that sells in foreign currencies, then this app will not work well. The Xero integration from Shopify does not support multiple currencies. It will sync your home currency but trying to get the remaining sales into Xero can be very challenging.
4. Inventory management
Many small business owners want to improve their ecommerce bookkeeping by automating inventory management and cost of goods sold. Unfortunately, the Xero integration with Shopify does not support either inventory or cost of goods sold management. It only includes the syncing Sales.
5. PayPal reconciliation with clearing accounts
PayPal is a very common payment method accepted by ecommerce companies using Shopify. The Xero to Shopify integration supports PayPal reconciliations with the use of a clearing account. Clearing accounts are well understood by bookkeepers but can cause business owners all kinds of problems, not to mention the clearing account will also need reconciling!
If you need help deciding if Xero’s Shopify integration is for you or if you are looking for assistance to set up or manage it, get in touch with our team of ecommerce bookkeeping experts.
Shopify integration with Xero offers a powerful solution for businesses looking to improve their ecommerce bookkeeping. This dynamic pairing streamlines the flow of data, providing benefits such as daily sales summaries, and real-time cash flow visibility. The time-saving advantages, along with increased accuracy and error reduction, make Xero integration with Shopify a valuable asset for businesses of all sizes. With the right setup and maintenance, the Shopify Xero integration can prove to be a scalable and reliable tool for ecommerce businesses looking to enhance their financial management processes. Embrace this integration and unlock a new level of efficiency in your business operations, but first also look at the A2X integration with Xero.
For further guidance on selecting the right accounting software or setting up the Shopify-Xero integration, don't hesitate to reach out to us. Our team is here to help you navigate the path to financial success.