Get Your Shopify Online Store to Integrate To Your Xero Accounting System
E-commerce and online shopping have revolutionized the way that consumers shop...
and businesses sell. As a consumer, you click and shop at your convenience and a package arrives at your door. Pretty simple. But where a consumer's process ends, a business’ process only begins.
There are many steps involved to ensure that inventory is managed correctly, including the logistics of picking, packing and shipping. By no means are are we experts in this space, so we will let the Shopify’s of this world figure that out. A great resource to get started with Shopify can be found here.
We are more concerned about the accounting and numbers side of things. Sounds boring, doesn't it? It is….well was…..until a recent announcement from Shopify and Xero changed things :)
Business owners have always struggled to obtain relevant and timely accounting information from their online stores. They would have one system for e-commerce (Shopify for example) and another system that handles their accounting function. The two never talked to each other and reconciling one to the other for a nice financial picture was always cumbersome and never perfect. Oh, and it was definitely not timely - what good is financial information from six months ago?
A little bit about Xero...
Xero is an easy-to-use online accounting system that has changed the way business owners and bookkeepers handle their accounting function. Because it’s web-based, it's accessible from everywhere (as long as there's an internet connection, i.e. everywhere) and downloads your bank, credit card and PayPal transactions for you. This saves hours of time and almost eliminates data entry, leaving more time for analysis.
Xero possesses an open API, so there's tons of add-on apps and software that integrate seamlessly to your accounting system, providing even greater visibility into your business. One of those add-ons is Shopify.
A little bit about Shopify...
Shopify is an extremely popular online store platform, with a fantastic user interface. Shopify has made business owners out of everyone. With a little patience and a good idea, you can have an online store selling the goods of your choosing in no time, including payment collection.
How it works
Assuming you have a Shopify store and Xero account, you’ll need to first integrate them to one another, so that your Shopify orders sync to Xero. From your Shopify store, find the 1) “Apps” menu item, and install Xero from the 2) Shopify “App Store”:
Once you install Xero from the Shopify App Store and connect it to your Xero account, you’ll need to map some accounts so that Shopify knows how to send Xero the correct information. You may need to create some accounts in Xero first so that they are reflected in the accounts listing within Shopify. If you do make a change in Xero, like an adding an expense account to track “Shopify Fees”, you’ll need to “Refresh Settings” in the mapping page within Shopify, so that the newest data from Xero is reflected within Shopify. Here is an example of some accounts we have mapped:
After this is complete, you will need to let Shopify know after each order is generated, whether you want individual Customer information to be exported to Xero or whether you just want a generic “Shopify Customer” name to be exported to Xero.
For example, if John Smith purchased an item, Shopify can either export an invoice/order with the John Smith contact name to Xero OR it can just export the invoice/order with a “Shopify Customer” contact name to Xero. If you have lots of volume in your Shopify Store, the first option will drastically increase the number of contacts you will have in Xero, making your contact listing a little messy. This may be something you don’t want, since you can still track all of your orders in Shopify.
Please keep in mind that if you’re selling to businesses, usually the individual making the order will appear in Xero, rather than the company you are selling to. So even if Shopify exports individual customers to Xero, it may still not be relevant to you, since you may not be able to pick out the contact name associated with the business in question.
Lastly, you will need to select whether you want Shopify to export your orders daily to Xero or whether you would like to log into Shopify from time to time to export the orders manually. If you have only one Shopify store, I highly recommend letting Shopify export orders to Xero automatically for you.
If you have multiple Shopify stores, then you are out of luck. You will need to uncheck the automatic export option, and Shopify will require you to manually export orders to Xero from each store, since Shopify does not permit multiple store integrations to Xero at one time (yet).
Once you have mapped your accounts and selected your preferences, you will click on the “Complete Setup” button.
Exporting Orders from Shopify to Xero
If you are manually exporting orders, from Shopify>Apps>Xero, you will reach this screen:
You can select the date range you would like to export and complete the process.
Finding Orders/Invoices in Xero
Shopify exports orders from Shopify to Xero as Invoices. The invoices will detail the item(s) purchased, the contact information (if you selected this option), the order number in Shopify that the invoice relates to, the subtotal, sales tax and total amount.
If an order in Shopify has been generated and paid and then exported to Xero, you will find it in the “paid invoices” section in Xero, in the Sales account.
If an order in Shopify has been generated and payment is pending and then exported to Xero, you will find it in your “awaiting payment” section in Xero, in the Sales account.
The great part about this sync, is that Shopify will:
* Export your actual Shopify SKU’s or Item Codes to Xero
* Export the Sales Tax amounts to Xero, which will allow you to track exactly how much GST or HST you have collected on Shopify Orders
* Create a link from your Xero invoice to your Shopify order. With one click from Xero, you will be taken to the Shopify order within Shopify….amazing!
Things to Watch For
The purpose of this post was to provide a semi-detailed over overview of the Shopify and Xero integration, since the online documentation at the moment is a little slim (although Shopify has let us know that they are beefing this up). There’s lots more to this integration, so please keep the following in mind when syncing your Shopify store to Xero:
* If you are using Shopify as your payment gateway, Shopify will deposit the funds that are owed to you in bulk every 7 days. These funds will relate to multiple orders and will be net of Shopify Fees. You must reconcile each deposit to all of your orders created in Xero, otherwise your accounting will get messy. To get around this, we have created a system by which payments are received in Xero to a “Shopify Clearing” account, rather than a “bank account” (as shown above in the “mapping” screenshot). All Shopify deposits are then allocated to this same clearing account, with the net difference being Shopify fees. This takes some thought and testing, so ensure that you set aside some time or speak to someone experienced with this integration before proceeding.
* Although credit notes from Shopify are also exported to Xero, the timing of these credit notes can get confusing. In a nutshell, Shopify will export credit notes to Xero, even if they fall out of your exported date range, so long as the initial order that the credit note relates to, falls within your exported date range.
The experience and sync between the two platforms is always getting better so we will do our best to update this post as often as possible. We’d love to hear from you about your experience with the Shopify and Xero integration. Reach out to us or leave a comment below.