How to Integrate Shopify with Xero in 10 Minutes [2024] 📈

Are you plagued by the complexities of Shopify accounting? As an eCommerce seller, I'm sure you're all-too familiar with the challenges that come with tracking Shopify sales transactions, refunds, and fees. And of course, you have the headache of ensuring all this sales data is recorded accurately in your accounting software.

Without an effective Xero Shopify integration, these accounting tasks can prove both tricky and time-consuming. This often results in discrepancies within a Shopify store owner's financial records. And ultimately, a lot of wasted time that would be better spent on other areas of your business.

The solution?

A Shopify integration that automatically transfers data to your Xero account!

Today, I'm walking you through the simple but effective steps of integrating your Shopify account with Xero. This low-cost solution will automate and streamline your accounting process.

What Causes Discrepancies in a Shopify Seller's Books?

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There are a number of ways discrepancies can creep into your books, particularly if you're not using a Shopify integration that exports financial data to Xero automatically:

• COGS miscalculation: Miscalculating your COGS (cost of goods sold) will give you an inaccurate record of your profits, as well as a false value of your inventory. This can lead to you making bad business decisions, such as overspending on ads or pricing your products wrong. Many sellers make the mistake of recording COGS as they purchase their products too, rather than when they sell them.
• Tax miscalculations: You need to factor in sales tax rates for each country or state you sell in as these can vary greatly. Correct tax rates should be applied to revenue based on country or state to avoid tax miscalculations. 
• Recording deposits as revenue: Shopify deposits do not give a full view of your financial transactions. They miss out key data such as fees and shipping charges. More still, Shopify deposits take 1-3 days to hit your bank account. As such, by recording your deposits as revenue, you run the risk of recording transactions in the wrong month or year.
• Using spreadsheets: Spreadsheets have had their day when it comes to bookkeeping; the world has moved on. Using spreadsheets to record and manage your Shopify sales data is an easy road to discrepancies. It's so simple to make a typo or get lost in the endless sea of Shopify sales spreadsheets that you'll no doubt need to create over time.
• No bank account reconciliation: Bank reconciliation refers to the practice of ensuring your books align with your bank account transactions. Not taking this vital step can easily lead to discrepancies in your books. Bank reconciliation should be done once a month.

What You Need to Know About Xero's Native Shopify Integration App Before you Sign up

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If you've just started out on your Xero to Shopify integration journey, you might have come across Xero's native integration app; Shopify Integration by Xero. Since Xero is a reputable eCommerce accounting software, your first thoughts will understandably be that this is the most obvious and straightforward solution for a Xero Shopify integration.

But, if you dig a little deeper, you'll soon learn there are flaws with this application that can be detrimental to your accounting efforts. And, your eCommerce business overall.

For example, many users describe how the Shopify Integration by Xero app records inaccurate data. In some cases, the differences in the app records and the actual figures are huge.

Using an app that does not accurately record your transactions is almost on par with doing it all manually. Users will need to continuously check the accuracy on all the financial data it sends across to their Xero accounts. And, manually change any inaccurate recordings.

Therefore, until the Shopify integration by Xero app is improved, we recommend opting for a different, more accurate Shopify integration solution.

What are the Different Ways to Integrate Shopify With Xero?

So far we've focused on the 'don'ts' of Shopify bookkeeping and the Shopify Xero integration process. We're now going to get stuck into the all-important 'dos'.

The different ways to integrate Shopify with Xero accounting software include:

• Link My Books
• A2X
• Shopify Integration by Xero
• Bold Commerce
• Zapier

Pre-Integration Shopify to Xero checklist

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• Sign up for a Xero account.
• Determine what data you need to gather that will help optimise business performance.
• Note how many Shopify stores you wish to connect Xero to.
• List the different countries and states you sell in.
• Consider the different payment gateways your online store uses.
• Decide if there are additional apps you'll need to integrate Xero or Shopify with, such as inventory tracking.

How to connect Shopify to Xero

1. Navigate to linkmybooks.com
2. Create an account
3. Connect Xero and Shopify
4. Complete a guided setup wizard
5. Sync Shopify payouts to Xero in one click

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Step #1: Navigate to linkmybooks.com

This step is pretty self-explanatory. Make your way over to linkmybooks.com.

Step #2: Create an Account

Click on the 'Free Trial' button for a quick sign up. At the free trial stage, you don't need to provide any personal information at all to integrate Xero with Shopify, not even your name or email address! Because we're a Xero-approved partner, you simply sign up using your Xero account.

Once you've clicked on 'Sign Up With Xero', you’ll be prompted to let us know if you’re a business owner or an accountant connecting your client’s Shopify store.

Step #3: Connect Xero to Shopify

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Here's how to connect Xero to Shopify with Link My Books:

Select Your Sales Channel

You'll be greeted with a list of sales channels that you can integrate with Xero. Select the Shopify integration from the options.

Note: you can connect multiple sales channels to your Xero account but you need to set them up one at a time. These include:

• Shopify
• Amazon
• eBay
• Etsy
• Walmart
• TikTok Shop

This is an invaluable capability if you sell across multiple platforms because it will consolidate your cash flow and sales data from all your stores.

Add a Shop Name and Store Address

You can name your shop anything you want. However, for the sake of avoiding confusion, we recommend using the actual name of your Shopify store, particularly if you have multiple Shopify stores. After this, type in your Shopify store address. For example myshopifystore.com.

Connect With Shopify

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Click on the 'Connect to Shopify' button. You'll be taken to Shopify where you'll need to sign in to your Shopify account.

Next, click on 'Install app'. This will authenticate Shopify and mean you've accepted the connection. It will then link your Shopify account with Link My Books and Xero.

Step #4: Complete a Guided Setup Wizard

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Map Transactions to Your Account

You'll be taken to a page where you're presented with a list of Shopify transaction categories, such as sales, fees, and shipping. Get more information on these by hovering over the little 'i' icons. On this page, you'll also see transaction types, along with the Account Names.

The Account Names are set to default names, and most people keep them as they are. However, you can change them if you wish by selecting a different name from the drop-down menu.

Once you're happy with everything on this page, click on 'Next'.

VAT Registration Status (UK Shopify Businesses Only)

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Your next step towards automated eCommerce accounting is to select the locations that you're VAT- registered. If your Shopify store isn't registered for VAT at all, you can go ahead and check the box that reflects this.

After you click 'Next', you'll be taken to a page where you'll select whether you sell standard rated products, or zero or reduced rated products. Check the appropriate box for your eCommerce business. If you sell zero or reduced rated products, you'll have to confirm your tax rate for those groups.

Confirm Your Tax Rates

Finally, you must confirm your tax rates. This page will be pre-filled but you must check all the details to ensure they're correct for your circumstances. We also recommend that you take a screenshot and send it over to your accountant to give it a once over before continuing.

These tax rates will now be applied to your Shopify sales and calculated automatically.

Sync Shopify Payouts to Xero in One Click

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To send payouts from your Shopify accounts to your Xero account, go to your Settlements dashboard and select 'Action'. Click 'Send to Xero'. You can also choose to view your payouts before sending them through the 'Action' tab.

If you want posts to send automatically, go to your Settlement Settings page and turn on 'Auto Post Settlements'. This page is also where you can set up your COGS tracking.

Post Integration Best Practices

• Regularly check data accuracy: Whatever Shopify integration you use, you must check your data regularly to ensure it remains accurate. For example, through bank account reconciliation, or checking over your Shopify sales and Shopify seller fees.
• Update integration settings as your business evolves: As your business evolves, it will demand more from your integrations. Tweak and adjust your settings as you go so that they always accurately reflect your Shopify business. For example, you might branch out into a different country where tax regulations are different. Or, you might purchase goods in larger quantities for a lower cost per unit.
• Schedule regular backups: Backing up your data is a golden rule for all online activity. Xero does not provide automatic data backups. Therefore, you must choose a third party application, such as coupler.i.o, and export your data. You can export most data types from Xero, including VAT returns, balance sheets, and account transaction reports.

How to Integrate Xero and Shopify With an Order-Syncing App

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An order-syncing app is an application through which you can track and manage your Shopify orders. Data from your Shopify store is often automatically transferred to the application and you can also create automated workflows. A good example of an order-syncing app is Linnworks.

Connecting your order-syncing app with your Xero account makes for an even more streamlined process. It syncs data between Shopify and Xero, like orders and customer details.

Step #1: Sign up to Your Chosen Platform

You can find different order-syncing apps through the Xero App Store and the Shopify App store. For the purpose of this post, we're going to assume you've found your chosen platform through the Xero App Store.

Step #2: Connect Shopify

Select Shopify as the eCommerce store you want to connect to.

Step #3: Connect to Xero

If not already connected, select the option to connect the data-syncing app with Xero.

Step #4: Configure Your Settings

Your next step is to tell the app what data you want to be transferred. You might, for example, choose for data to be synced automatically as they happen. Or, you might prefer to receive a daily summary of transactions and activity.

Step #5: Test Your Setup

Once you've configured everything, perform an action in Shopify to ensure that it's set up correctly.

Step #6: Review Data

Finally, review the data in your order-syncing app and Xero account, and compare it to your Shopify data. This will make sure the financial data is being recorded accurately.

Order-Syncing App Benefits

Let's go through the main benefits of using an order-syncing app:

Efficient System

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An order-syncing app allows you to manage and process your orders efficiently. Different actions can be done automatically by assigning rules to actions. This makes for a better customer experience. Additionally, you'll save time on tedious manual data entry and other tasks so that you can concentrate on running your business.

Minimise Human Error

No matter how vigilant you are with your data, there's always the chance of human error. Equally, if you're not using an order-syncing app, you'll probably be dabbling with those spreadsheets. Which, as we've already established, leaves you wide open to data errors.

Manage Your Inventory

You get a clear understanding of your inventory levels, their value, and when you need to order more stock. With order-syncing apps, you can easily separate your top-selling products from the duds.

Thus, saving you both time and money. It's also worth noting that you might be able to perform advanced tasks like shipping products from specific batches, and also ensuring your Shopify store's stock levels are an accurate reflection of what's in your warehouse.

See the Big Picture

With an order-syncing app, you can access (and export) the data from all your eCommerce stores from one central dashboard. This gives you a complete view of your business. Additionally, understand where and when you make the most sales. This will help you to make better business decisions. For example, where to invest more money and when it's time to drop a certain venture.

Order-Syncing App Challenges

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Now we'll go through some challenges of order-syncing apps:

Syncs Individual Orders

If your order syncing app only syncs individual orders (as opposed to a daily summary invoice), this can make it really difficult to perform bank reconciliation, simply because there's so much data to sift through. This is why Link My Books. They are far easier to work with because they reconcile directly with deposits into your bank account.

Data Overload

Have you considered the potential confusion that having thousands of orders recorded in your Xero account might cause? So much data will make it difficult to locate specific transactions, and you'll also likely have more data types than you need. This will take up a lot of unnecessary space in Xero accounts.

Additionally, all that data can be overwhelming. You might be wondering what, if anything, you need to do with all the transaction types.

How to Integrate Shopify With Xero Using a Data-Syncing App?

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You can integrate Shopify with Xero using a data-syncing app like Link My Books or A2X. These apps automatically reconcile and categorise your Shopify sales data when it hits your Xero account.

This means you don't need to spend ages sifting through thousands of individual Shopify sales to find what you need. You simply need to head over to the Accounting menu in Xero, choose Reports, and search for the appropriate transaction report by date.

Here's a general overview of how to integrate Shopify with Xero using a data-syncing app:

• Step #1: Locate and sign up to your chosen platform in the Xero App Store.
• Step #2: Connect Shopify by choosing the Shopify platform from the eCommerce options.
• Step #3: Choose your settings, like what Shopify transactions to include.
• Step #4: Configure and confirm your tax rates.
• Step #5: Turn on automations and any other settings you want, such as COGS.

Data-Syncing App Benefits

Here are some benefits of opting for a data-syncing app:

Accurate and Relevant Data

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The main benefit of a data-syncing app is you get easy access to accurate and relevant data. Your Shopify sales transactions will appear in Xero as a daily summary invoice, which is straightforward to identify and doesn't swamp Xero with individual Shopify payments.

Useful for Creating Cash Flow Statements

With all that lovely, relevant (and accurate!) Shopify data in your Xero account, you or your accountant can generate accurate cash flow statements, financial forecasts, and balance sheets. You can use these to judge and boost business performance. Track revenue and Shopify payments over a specified period of time, and use that data to determine your business's future success.

Streamlined Accounting System

You can find reports through your Xero dashboard. Your streamlined accounting system help you and your account remain organised and on top of your eCommerce business finances. As financial data is sent across to your accounting software when you receive a payout from Shopify rather than a constant stream of information, it's more straightforward to manage your Shopify books.

Data-syncing apps will save you time by automating many of the accounting processes that come with running a Shopify store.

Custom Mapping and Sales Tax Calculations

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Data-syncing apps like Link My Books and A2X have tax settings. Once these are set up, they automatically apply the correct tax rates to every single sale and include this in your. This eliminates the need for manual sales tax calculations.

Data-Syncing App Challenges

Data-syncing apps come with a particular challenge:

Limited View of Product Data

Using a data-syncing app, as opposed to an order-syncing app or inventory-tracking app, gives you a limited view of product sales data. In other words, these apps by themselves don't show you what products have sold. Therefore, you can't use them to determine which ones are popular amongst your customers. You'll need to use other methods for this, which I'll go through further down.

How to Manually Connect Shopify and Xero

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Manually connecting Shopify with Xero involves generating reports in your Shopify account and then mapping them in Xero. If, for whatever reason, you're considering manually connecting Shopify and Xero, we've got the steps you need to take right here.

Note: this is a genuinely complex process. We would only recommend it for a very small Shopify store or other business. For example, one that does not meet the VAT threshold in the UK.

• Step #1: Locate your reports: Log in to Shopify and head over to the 'Analytics' section. You'll find this in the menu at the side of your screen. Click on 'Reports', then select the one you want.
• Step #2: Download your report: When you've chosen your report, select the dates to include data from your desired time-frame. Then, click 'Apply', followed by 'Export'. You'll be given a choice of download formats, including PDF and Excel. Choose your desired format.
• Step #3: Consolidation: Your next step is to consolidate information by grouping it together. For example, fees and sales. You’ll also need to think about where each sale is going to (country or state) to ensure you apply the correct taxes.
• Step #4: Mapping data in Xero: Open up your Xero account and create a new invoice. Do this by navigating to 'New', then selecting 'Invoice'. Now you can manually map the data from your downloaded report to your Xero invoice. Attach your report to the invoice so you can refer back to it when needed.
• Step #5: Review and save: Check if the data matches up with your report before you import it to Xero.
• Step #6: Match with your bank account: Once you've created your journal entry, check it matches up with the payout in your bank account.
• Step #7: Repeat this for all payment gateways: Go through the same process for all payment gateways, for example PayPal. Download the reports , consolidate them, and create new Xero invoices.

The Advantages of Manually Recording Shopify Sales in Xero

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Despite the lengthy process, there are some advantages to manually recording your Shopify sales transactions in Xero:

It's Cheap

Manually adding your Shopify store information to Xero is cheaper than paying for a Shopify Xero integration. You don't have to pay for an extra service because you're doing it all yourself. Of course, this means you should factor in the cost of your time when you're considering this Shopify and Xero integration method. This is why it's only recommended for very small businesses.

More Control Over Data

When you do this manually, you control what gets recorded and what doesn't. This means you only work with the data you need. Are you going to transfer shipping fees, cash flow, or Shopify orders? Or perhaps time-tracking will be beneficial if you have employees. Manual data entry gives you complete control over which transaction type to keep and which to leave out of Xero invoices.

The Problems With Manually Recording Shopify Sales in Xero

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Let's get stuck into the problems with this manual method:

Open to Human Error

Manually recording Shopify payments and other information associated with your online store leaves your accounts open to mistakes. This can be particularly problematic if you're manually recording sales. This can skew important business decisions that are based on your eCommerce business finances. Which, in turn, can impact business performance.

Incorrect Sales Tax and VAT

Even if you have a clear understanding of your tax rate, it's near impossible to be completely accurate when it comes to calculating tax. Unless, you check every single order's tax details. This inaccuracy can very easily lead you to either underpay or overpay in taxes.

Time-Consuming

This doesn't need much (if any) explaining. Manually recording your Shopify sales, taxes, fees, and shipping costs is a time-consuming endeavour. If your budget is very tight, you'd be better off looking for a Xero Shopify integration with a free plan rather than doing it manually.

How to Sync Inventory Between Shopify and Xero?

If you're looking to sync inventory between Shopify and Xero, Link My Books has a solution. Its COGS Tracking feature enables you to track the monetary value of the products you've sold. It automatically adjusts this in Xero accordingly so that you can keep track of your inventory value.

Alternatively, to track inventory on a per unit basis i.e. account for every single sale in your Shopify store as it happens, you could opt for a software like Unleashed. This syncs your inventory with Xero and reflects every inventory change in your Xero account in real time. However, it's worth nothing that this is an expensive solution, so probably not suitable for small businesses.

The most straightforward and cost-effective option for tracking inventory for your Shopify Store on a granular level, is to track it in the Shopify platform. In other words, keep it simple and don't worry too much about trying to track inventory in Xero on a per unit basis.

What is the Best Way to Integrate Shopify With Xero?

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Why Link My Books Makes Recording Shopify Sales in Xero Simple

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Link My Books is the simplest way to achieve a seamless Xero to Shopify integration. It automatically transfers all the necessary financial data from one to the other, in clear and concise summary invoices. Plus, it calculates your sales tax, and COGS, and integrates with multiple sales channels simultaneously. This results in a smooth (and hassle-free) automated Shopify bookkeeping experience.

In summary, Link My Books:

• Has a very straightforward Xero to Shopify integration process.
• Breaks down Shopify sales transactions into sales, refunds, fees.
• Sends summary invoices to your Xero account for each payout.
• Automatically calculates sales tax, VAT and COGS.
• Has an excellent support team (made up of accountants) on-hand to help you.
• Allows you to put your bookkeeping on autopilot!

Other Common Questions About Shopify and Xero Integrations

Can Xero Integrate With Shopify?

Yes! You can integrate Xero with Shopify using Link My Books to streamline your bookkeeping. 

How to Reconcile Shopify in Xero?

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You can reconcile Shopify in Xero using an integration app such as Link My Books. You can perform a bank account reconciliation directly in Xero by connecting your bank account. Then through the 'Reconcile' tab, you can ensure that bank transactions match up with your Xero data.

How to Categorise Shopify in Xero?

Categorising your Shopify transactions in your Xero account will help keep you organised. In Xero, you can categorise transactions by type, project, or department. You can also create custom categories should you wish to.

Assuming you want to categorise Shopify data by transaction, you:

• Go to the 'Accounts' tab then select 'Transactions'.
• Click on the 'Type' tab and select the one you want.

Xero also has a transaction tracking feature, where you can track different types of transactions, including invoices, bills, and expenses, to name a few.

Are There Any Security Concerns or Measures to Consider When Integrating Shopify With Xero?

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When you're working online, it's always good to be vigilant to cyber threats and security breaches. The main point to consider here is whether your chosen third party integration is a trusted and reliable app. Have a look at privacy, security, and data retention policies to gain an understanding of each company's approach to security.

It's also worth noting which of your favourite apps are featured in the Xero App Store because. These are ones that have been approved by Xero, giving them an extra layer of credibility.

Additionally, you can look for accreditations. Link My Books, for example, has earned a "Xero App Partner of the Month" badge. We've also got an average rating of 4.98/5 across 400+ reviews  on both the Xero App Store and the Shopify App Store. And, we're an approved Shopify software partner, which means we have to consistently adhere to high security standards.

How Frequently Should the Data be Synced Between Shopify and Xero for Optimal Performance?

Each time you receive a payout from Shopify Payments you should break down that payout into what it is made up of. For other payment gateways doing a weekly or monthly summary will allow you to focus on running your business. Link My Books does all of this for you on autopilot.

Which is Better for Shopify: Xero or QuickBooks?

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There isn't really a 'better' choice of Shopify accounting software here. Both QuickBooks and Xero have their plus points when it comes to Shopify bookkeeping and accounting. You need to look at the different features, the complexities of each, and of course whether the price aligns with your budget. And while neither Xero or QuickBooks have a free plan, they both have regular promotional deals to keep costs low.

Generally speaking, QuickBooks has gained a reputation for being a little bit more complex than Xero. It's designed for those who have some existing accounting knowledge. On the other hand, Xero has the option of including specific features as add-ons in their plans. This means you only pay for the features you need, often making it the cheaper option for small businesses.

Parting Advice for Connecting Shopify With Xero

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We've covered a lot of information in this article. There's lots to consider with a Shopify Xero integration for bookkeeping. Tracking your sales, fees, shipping rates, and taxes can prove an overwhelming task if you're not using the right Shopify Xero integration. But I'm sure by now you have a clear view of how to integrate your Shopify accounts with Xero.

The Link My Books integration automatically syncs Shopify payments and other financial data with Xero accounts. It sends across summary entries for each Shopify Payments payout which breaks down all your sales, refunds, fees and any taxes.

Plus, we support all payment gateways too, including PayPal, Klarna, and Clearpay. For these we create weekly or monthly summary entries breaking down the sales, refunds and taxes. 

Sign up for the Link My Books Xero to Shopify integration today and bag yourself a free trial. Our excellent support team will be happy to help get you up and running.