Step-by-Step Guide: The Best Way to Perform a Shopify Xero Integration

Step-by-Step Guide: The Best Way to Perform a Shopify Xero Integration

Using Xero as the cloud accounting software for your Shopify store is a great choice. It allows you to keep your business’s finances well-organized so you can manage your books and tax obligations with ease. One thing that makes this process even simpler is having a Shopify Xero integration, so the pertinent data flows from Shopify right through to your general ledger.

Shopify merchants have three options when it comes to a Shopify Xero integration:

  • A Shopify Xero integration with an ecommerce accounting automation tool like A2X that will categorize and reconcile your payout data.
  • Integrate Shopify and Xero with a data-syncing app that puts individual orders into your accounting software for manual categorization.
  • Manually enter data from Shopify reports into Xero.

This article gives you comprehensive instructions for all three methods for a Shopify integration with Xero. Ultimately, this guide will equip you with the knowledge you need to make an informed decision that works best for your business now and what may be the best choice as you business grows. Overall you’ll gain confidence and skills to make the accounting processes for your Shopify store even more efficient and help your business gain financial visibility.

Integrate Shopify and Xero for accurate accounting

A2X auto-categorizes your Shopify sales, fees, taxes, and more into accurate summaries that make reconciliation in Xero a breeze.

Try A2X today
Shopify and Xero Integration – A (Statement)

Shopify Xero integration using a reconciliation tool like A2X

Use A2X to integrate your Shopify store with Xero

A2X is an ecommerce accounting app for businesses selling on Shopify and other popular ecommerce platforms. Unlike more general syncing apps used for Xero Shopify integrations, A2X is purpose built for accounting and bookkeeping, so it interprets your Shopify transaction data, compiles it into summaries, and passes that on to Xero as invoices. This process avoids surplus data overloading your Xero account and streamlines the reconciliation process—once A2X has sent the data, your books will match your deposits exactly, every time.

The way A2X interprets and summarizes your sales data is especially important because of Shopify’s payout system. Because Shopify payouts contain revenue from multiple sales, it can make it difficult to tie orders back to a single payout, leading to inaccurate books. A2X avoids all of this by condensing transaction data, ensuring the summaries match perfectly with your payouts.

Performing a Shopify integration with Xero involves linking your Shopify and Xero accounts to your A2X dashboard and takes minutes. You can manually configure your Chart of Accounts or automate this process by using A2X’s recommended settings.

A2X’s integration process is user-friendly, and resources are available for assistance if needed. These include a support center, online chat, and a dedicated support team. If you choose an A2X premium plan, you’ll also receive dedicated one-on-one support, including help with onboarding.

How to do a Shopify and Xero integration using A2X

  1. Sign up for a free A2X trial: Start the process by getting a free trial of A2X for Shopify to Xero
    1. Select Create an Account and enter your details.
    2. Give permission to Google to log in or sign in using your Xero account.
    3. You will land on the A2X dashboard.
  2. Connect to Xero: Click the Connect to Xero button on the A2X dashboard next to the Xero logo.
  3. You will be redirected to your Xero account to grant permission for access by A2X. After giving this, A2X will return you to your dashboard.
  4. Connect to Shopify: Click the Continue with Shopify button on the left-hand side of the A2X dashboard under the Shopify logo.
    1. Enter your store’s name and click Connect.
    2. You will be redirected to your Shopify store, asked to log in, and asked for permission to allow A2X access.
    3. After granting permission, A2X will return you to your A2X dashboard, and your first payouts will automatically begin populating. This could take as little as 10-20 minutes for smaller stores to a few days for very, very large stores that need to fetch a lot of historical data.
  5. Check the Connections screen in A2X to check both your accounts have been correctly linked to A2X.
  6. Map your accounts and taxes: This is the process of selecting which General Ledger account you want each transaction type to be posted to in Xero. For example, sales to a Shopify Sales account. A2X can automate this whole process for you or you can map it yourself.
    1. Go to the Accounts and Taxes tab on your A2X dashboard.
    2. The first time you visit the accounts and taxes page, A2X will prompt you with a few questions about your business. Once you’ve answered these questions, you will be presented with two options, Assisted Setup or Custom Setup
      1. Assisted setup: A2X will automatically apply best practice and create all of the accounts you need directly in your Xero and map each transaction type to the corresponding account. A2X can also apply a tax rate to be used in Xero if this is applicable to your location and tax settings. 
      2. Custom setup:If you prefer to map your own transactions, you can choose your own accounts and taxes for each transaction type rather than an A2X generic default accounts. To do this, click the down arrow next to a transaction type and find the account you want from your Chart of Accounts list.
    3. Once you’ve finished the process or made any other changes, click the Save Mapping button at the bottom of the page.
  7. Review and post: Before sending an entry to Xero, you should review the entry in A2X by going to Settlements and clicking review. Use the dropdown to review all information that will be posted to Xero.
    1. You can control when you send the entry to ensure you’re happy with what is being posted to Xero.
    2. When you’re confident in the entry, click Send to Xero to post it to Xero as a draft invoice or approved invoice. It can be found under the Invoices tab in Xero.
  8. Reconcile in Xero: With the post sent to Xero, you can now reconcile it.
    1. Go to your banking screen. There will be a green match, and you can reconcile in one click.
    2. If you can’t see your invoice in the banking screen, it will likely be in your draft invoices. 
  9. Accounting for payment gateways: A2X also accounts for payment gateways, such as PayPal, using a clear account. You need to manually add the payment gateway fees in Xero to account for these fees. Most sellers choose to do this once a month.

Note: If you create new accounts in your Xero account after connecting A2X, you will need to refresh your cache by going to SettingsConnections.

Shopify Inventory Sync with Xero

A2X has a Cost of Goods Sold (COGS) feature built in, so when you integrate A2X, you’ll also benefit from this inventory tracking system.

COGS will calculate the total cost of your products sold via Shopify as payouts come in, so that you can accurately track your stock levels and the costs associated with your sales. This will help you figure out your gross profitability and margins directly in your financial reports.

A2X pros

Understands Shopify’s transaction types (and how to account for them)  
A2X is a specialist accounting tool, so unlike data-syncing tools, it can identify and understand Shopify’s different transaction types, for example sales, refunds, shipping fees, etc. On top of this, it will correctly categorize these different transactions so that when it reaches Xero, your books are totally accurate and you’ll have no issue reconciling in one click.

Order details where you need them
Business owners may think their accounting software needs order-level detail to be able to do the books correctly but in reality, this much information will simply overload Xero. A2X follows accountant recommendations by bringing over only the data needed to accurately complete your books, including the number associated with an order. This gives you the information needed to look up an order in Shopify, should you need to, but it doesn’t swamp your accounting system with unnecessary data.

Reduces risk of error and ensures accuracy
Automation via A2X not only interprets and passes on data from Shopify to Xero accurately, but it also significantly reduces the potential for human error. After all, there’s no possibility of A2X losing focus, getting confused, or misreading data. This means you can have absolute confidence in the precision of your books, knowing they perfectly match your sales data to your payout statement every time. And, you’ll always find a flawless green match when you check your accounts.

It’s automated and a timesaver
Anyone who does the books for their business knows it sucks up a lot of time sitting down and putting effort into a very repetitive task—and one that needs to be done frequently. A2X takes that weight off your shoulders and gives you your time back. Not only does it automate the task but it takes the time to complete this process from hours to minutes, so you can spend it on other areas of the business.

It all ties back to your Shopify records
When A2X interprets and summarizes your Shopify data, you’ll also receive a finance report. You can then compare this report to Shopify’s finance report to check that all the data processed by A2X matches your Shopify transaction data exactly.

It captures payment gateway data
A2X is built and trusted by ecommerce accountants and bookkeepers who know Shopify stores often use multiple payment gateways. This means the gateways on the Shopify store will be accounted for as the data will flow through to A2X. For gateways that don’t extract their fees on Shopify and do it on their own site, like PayPal, A2X uses a clearing account method so everything is clearly accounted for.

Customizable to your needs
A2X can be changed and altered to fit what your specific business needs. This allows you to really get into the numbers and get the information you need to aid your business’s growth. For example, with A2X you can split your sales by SKU or product type if you need to.

Support when you need it 
A2X’s support team all have experience in the bookkeeping or accounting world, so when you need support, not only can they walk you through a solution, they understand exactly what you need and why it’s so important. A2X is particularly well-known for its helpful and knowledgeable support team who don’t follow pre-written scripts but tailor their support to whatever you need help with. In addition, A2X has a support center filled with articles on your Shopify and Xero integration, as well as a blog and ecommerce accounting hub where you can learn more about ecommerce accounting in general.

A2X challenges

Longer set up time
A2X is purpose-built to integrate Shopify with Xero. Its sole purpose is to transfer, interpret, and accurately match order data to deposits. Because A2X guarantees your books will be completely accurate, its setup can take a little longer compared to other integration solutions, particularly if you’re using custom mapping. However, A2X does offer assisted setup to help guide users through the process with the support team always available to help. Ultimately, the longer set up time is offset by the time it saves your business once it starts automating your books.

Start the integration process today by getting a free trial of A2X for Shopify now.

How to integrate Xero and Shopify with an order-syncing app

Integrate your Shopify store and Xero account with a data-syncing app

You can also funnel your data from Shopify to Xero using a data-syncing app. Ecommerce accountants sometimes refer to these as ‘detailed integrations’ because of the high volume of order-level data they transfer to accounting software. There are many different kinds of these tools, and they’re simply designed to move your transaction data from Shopify to Xero with no interpretation or summarizing of the data, which leaves you with that task before you can reconcile. You can see which data-syncing apps are available on the Xero or Shopify app stores.

These types of integrations may suit new or small businesses with few sales. However, if a business doesn’t review their tools and upgrade as they expand, problems could arise as the app continues to bring data into Xero, eventually overloading the software. Some apps may even post a daily sync, which seems convenient but is not necessary and often doesn’t tie back to what you’ve been paid. 

It’s also worth considering that these apps are generally less customizable and may not work for international businesses. They may pick up standard sales transactions but miss other types, such as refunds or fees. As your business grows, you will likely need much deeper financial analysis than these apps can provide. With this in mind, let’s learn more about how to integrate using these apps.

How to integrate Shopify with Xero using a data-syncing app

  1. Create an account with the data-syncing tool of your choice: There are many different apps available that will sync your data or orders directly to your Xero account. Find them on the Xero or Shopify app store (many will use the phrase ‘order syncing’) and choose one that fits your needs and budget.
  2. Connect Shopify: Select and connect Shopify as the platform that should send data to your data-syncing app.
  3. Connect Xero: Select and connect Xero as the place where the data should be received. At this stage, double-check that data won’t be automatically synced as soon as you connect Xero. You should have everything set up properly before you switch on the app so you don’t create entries in Xero that you need to delete later.
  4. Tell the app what data it should transfer: Configure the syncing actions to ensure your sales data is mapped to the correct place in Xero. Depending on the app they may post individual orders or they might do a daily summary.
  5. Test the action and turn it on: After everything is connected and you have chosen the action, test the action to ensure the data-syncing app is running as expected. These apps can have limited control of what data you sync, so keep this in mind.
  6. Review and compare data: Once you see data flowing through to Xero, be sure to compare the data you’re receiving with your Shopify finance summary. This will ensure that everything is being accounted for correctly.

Data-syncing app pros

Low cost (or free)
This can be a very affordable way to do a Shopify to Xero integration. Many of these tools offer a free or cheap plan suitable for smaller businesses that would suit an already-stretched budget. If you continued to use a data-syncing app as the business grew, it would undoubtedly be cheaper than hiring staff to do the books manually.

Can easily find order details in Xero
Data-syncing tools are what’s known as a “detailed integration” due to the fact they bring a lot of data into Xero. In reality, this is far more information than you actually need to do your books correctly. However, it does mean you can find order details within Xero, without having to open and search in Shopify. While this level of detail is not something ecommerce accountants recommend having in your Xero account, it could be convenient. 

A decent solution for smaller, less complicated businesses
Even with these integrations bringing so much order-level detail into your Xero, this likely won’t be an issue for smaller, straightforward businesses. It could be a good solution for those who have just started up and those who aren’t sure they want to invest in purpose-built accounting solutions for their Shopify Xero integration. The best way to use these apps would be with regular reviews to ensure they are still serving the business well or if they should be upgraded to something like A2X.

Data-syncing app challenges

It could swamp Xero
When using accounting software like Xero, you should be aware that if it’s inundated with information, it will become slow and hard to use. This can be a big problem when using data-syncing apps as they are designed to move data and they don’t necessarily know what data you need, which means they can end up transferring all of it. In worst case scenarios, your Xero account may become so unusable that you may need to start fresh.

It sends more data than needed and doesn’t interpret it
The other downside to transferring all that data is that these apps send far more than is needed for your books and it doesn’t interpret any of it. This means you need to have a clear understanding of what you do and don’t need in order to make sense of it all and enter the right information into your books. 

For example, you may think you need to have the order details for each individual sale, but in reality you don’t. What would be better is if the app transferred the sales information and the order number, so you could refer back to it in Shopify if needed, but didn’t have the bulky order details taking up space in Xero.

Functionality may be limited depend on your location
Some data-syncing tools are designed with North American sellers in mind. This could mean that certain marketplaces, countries, or currencies may not be supported. Additionally, these apps often have limited tax functionality, which can compromise the accuracy of your data during tax filing season. For instance, they may not accurately track the tax collected versus tax paid for Marketplace Facilitator Tax.

Varying degrees of support
Using a more generalist tool for your Shopify integration with Xero might be good for your wallet but if something goes wrong, you might pay for it with varying degrees of support you’ll receive. As these apps aren’t accounting-specific tools, it’s unlikely that a member of the support team will fully understand any issues you have and be unlikely to be able to guide you through it beyond simple fixes. If you’re on a free or low-level plan, you might find it hard to receive any individual support at all.

May miss transaction types
Sales aren’t the only transactions you need to account for in your books, Shopify has plenty of other transaction types including refunds, exchanges, taxes, and gift cards. Accounting for these can be difficult even when you do have all the information needed but it can get even harder when using these data-syncing apps because they may miss less frequent transaction types. In these cases, you’ll have to manually enter the data to ensure accurate records.

Doesn’t have the mapping that a purpose-built app does
These tools are not ecommerce-specific apps and therefore will not cover the level of mapping that a more sophisticated app does. This is particularly true when it comes to tax and could result in tax-related issues, including reporting the wrong amount of income and therefore paying an incorrect amount of tax for your Shopify store.

You may still need to do things manually
Even with the app transferring data there’s a high chance you’ll still need to do your books manually as these tools will not interpret your data and also may miss things. So, when it comes to reconciling your payouts, the entries may not match the payout amount exactly and you will need to dig in and account for the difference. This could result in leaving a residual balance in the clearing account. 

Manually enter data from Shopify reports into Xero

Manually doing your Shopify books with Xero

If you’re a new Shopify merchant or have fairly low sales volumes, you might be curious about how to manually transfer your Shopify data to Xero. Doing this process by hand replaces the need for any other sort of app. Although the manual process takes more time than using an app, it may suit the needs of your business, especially if you’re a smaller operation with a lean budget.

How to “integrate” Shopify with Xero manually

Doing a manual Shopify to Xero integration basically comes down to selecting and generating the right reports in Shopify and then mapping this correctly in Xero:

  1. Log into Shopify: Navigate to the Analytics section in the sidebar menu and then click Reports.
  2. Find the report you want: Select which information you want to download. For example, go to the Finances section and find the Finances Summary report. Another option is to download the Orders Report.
  3. Customize the report and download: In the top right corner, adjust the dates you want the report to span and click Apply.
  4. Download the report: Click the Export button in the top right of the page and select the file format needed, such as Excel, PDF, etc.
  5. Consolidate: Depending on the data in the export, you may need to do some consolidation, such as grouping sales and fees. Some people choose to use a pivot table to help with this.  
  6. Open Xero: Open your Xero account, click New in the top left corner, and then select Invoice.
  7. Open files and begin invoice: Mapping the data from the report to the corresponding accounts in your invoice in Xero. If you still need to create a Chart of Accounts, do this before making an invoice. 
  8. Attach files, if needed: You can attach a file or report to each entry so you have a record of how you accounted for each order. 
  9. Review and save: Check the data mapping and make any adjustments before importing the data to Xero. Remember that the total value of the journal entry should balance to the payout. Once everything is correct, click Save.
  10. Match your payout to your invoice: After saving the journal entry, go to your banking screen and find the payout. The last step is to match the payout to the journal entry you just created.
  11. Repeat for other payment gateways, if needed: This process should be followed for each payment gateway you use, e.g., PayPal. Download the reports from the relevant payment gateway and follow these steps.

Manual pros

No cost (except time)
The biggest pro for manually doing your books is that it doesn’t cost anything in addition to your Shopify and Xero plans. All you need is a little time and some know-how and you can do your books. For many new or smaller businesses, this option is definitely a good one. You just need to bear in mind that as your business grows, you might find that your time could be better spent on other tasks, especially if your volume of sales means needing more and more time to do your books properly and without error.

You control what data is entered
As discussed earlier, one of the main problems of using a data-syncing app is that they are what accountants call “detailed integrations.” This means they can bring over a ton of information to your Xero account—far more than you reasonably need to do your books. The benefit of doing your books yourself without a specific Xero and Shopify integration is that you have total control over what data you enter. Although this can make it harder to know if your numbers are correct, it does mean you avoid bringing over details like individual sales data, which isn’t needed and can clog up Xero.

Manual challenges

A lot of data
If you’ve ever downloaded Shopify reports, you’ll know they contain a lot of data. If you’re doing your books manually, you’ll need to dig into all that data to make sure you enter the right information. Once your store reaches a level where it’s doing sales in the hundreds or thousands, the amount of data will certainly become overwhelming to read through and input.

Many different transaction types 
Not only do you have to account for sales but you’ll also have to factor in other transaction types into your Shopify bookkeeping, for example, refunds, exchanges, and gift cards. This can be fiddly and hard to keep track of. However, failing to properly account for all of these transaction types will mean inaccurate financial records

More payment gateways = more work
As mentioned in the step-by-step guide above, if you use different payment gateways, you’ll need to download separate reports for each gateway and manually enter the transaction data for each. Having multiple payment gateways is great for your customers, as it gives them multiple ways to pay, for example using Shopify Payments or PayPal. But this can also mean extra work i

Month-end crossover can make it hard to balance books
Shopify merchants do not receive their payouts instantly, instead they get bulk deposits every few days. These deposits contain the revenue from multiple sales across multiple days, and sometimes those days may be across two months. For example, sales made on July 31 and August 1 might be paid out in the same bulk deposit. It’s very important to account for these sales in the month they were made, even if the money was paid in the same deposit. If not, you risk inaccurate books and you’ll find it incredibly hard to get your books to balance. 

Time-consuming and error-prone
Running a business is a generally time-consuming undertaking, and manually doing your books is a recurring task that will only take longer the more successful your business becomes. Doing this manually means setting aside dedicated time to input the data from your reports into Xero every month. You also need to maintain focus the entire time due to the whole process being prone to error, misreading a number of making a type can throw your books off and prolong your bookkeeping process as you compare your Shopify reports to the Xero to find the mistake.

Shopify Xero FAQs

Can Xero integrate with Shopify?

Yes. Xero can be integrated with Shopify to give you seamless, automated accounting. There are three methods to transfer data from Shopify to Xero:

  1. Use an accounting automation app, like A2X.
  2. Manually download relevant reports in Shopify and enter them into Xero. 
  3. Use a generic data-syncing tool.

How do I add Xero to Shopify?

Connect Shopify to Xero in seven steps:

  1. Create a free A2X account and log in
  2. Connect to your Shopify account
  3. Connect to your Xero account
  4. Check the connections screen to make sure both are linked
  5. Map your accounts and taxes
  6. Review and post entries to Xero
  7. Reconcile your entries in Xero

How do I reconcile Shopify in Xero?

Reconcile your revenue from Shopify in your Xero account in just three steps:

  1. Set up your bank fees in Xero so it can see your deposits from Shopify.
  2. Integrate Shopify and Xero using A2X so your Shopify sales data flows through to Xero.
  3. Reconcile your Shopify payments in Xero. With your sales data sent to Xero by A2X, it will perfectly match your deposits and you can reconcile in one click.

What accounting software works best with Shopify?

Xero and QuickBooks Online are excellent accounting software options for Shopify. It also supports FreshBooks, Wave, ZipBooks, Holded, Sage 50cloud, Kashoo, OneUp and more.

Can I do accounting with Shopify?

You need your Shopify data and reports for your accounting and bookkeeping but you cannot do your accounting using the Shopify platform. You will need a general ledger to enter all your sales data. Xero is a very popular general ledger accounting software.

What does Xero integrate with?

Xero’s app store offers a range of add-ons and Shopify/Xero integrations available to users. These include accountant tools, ecommerce, debtor tracking, inventory, payroll, HR, reporting, time tracking and other categories.

Is Xero better than QuickBooks Online?

Xero and QuickBooks Online are both good, solid, reliable choices for your cloud accounting software. To find out which is better for your business, do some research to find what will suit your particular business needs. You could ask owners of similar businesses, or search forums frequented by like-minded entrepreneurs. Speaking with a bookkeeper or accountant will certainly help you make an informed choice as they’ll be able to give you the pros and cons of each from an expert point of view.

Also on the Blog

Integrate Shopify and Xero for accurate accounting

A2X auto-categorizes your Shopify sales, fees, taxes, and more into accurate summaries that make reconciliation in Xero a breeze.

Try A2X today
Shopify and Xero Integration – A (Statement)

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