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How to Simplify Shopify Accounting with Xero

Updated: Jul 21, 2019


In a recent post, we discussed how QuickBooks and Xero are top accounting software programs for ecommerce businesses . Today we are going to take an even closer look at Xero and see how it can simplify Shopify accounting.


Xero provides excellent accounting tools


The financial transactions of fledgling businesses can usually be organized and recorded manually. However as the brand gains recognition and active customers, the paperwork quickly begins to monopolizes the time and energy of the owner.

Xero allows owners to refocus their attention on growing their business by simplifying every aspect of accounting, including:


InvoicesPaymentsPayrollOrdersExpensesCash FlowStock Management

Every Xero customer, independent of what plan they pay for, is able to have team members, create reports and budgets, synchronize  bank accounts, use Xero apps for Android and Iphones and integrate with hundreds of apps, including Shopify.


Xero simplifies Shopify accounting


The accounting for a Shopify business involves 6 vital steps:


  • Track expenses –  Tracking expenses is one of the most important aspects of business accounting, because it allows you to monitor the growth of your business and build realistic financial reports, as well as prepare for listing deductibles on your tax return.

  • Maintain proper bookkeeping – Bookkeeping is something that should be done every day. It involves recording financial transactions, categorizing them appropriately and then reconciling those transactions with your bank statements.

  • Create a payroll –  This step is only necessary if you hire a full or part-time employee or an independent contractor to help you with your Shopify business. Payrolls usually include the amount you are paying your help, as well as the taxes that are being withheld from their payment.

  • Track revenue – Revenue means income. As you make sales, you must record this income, so that you can calculate profit, develop income reports and determine tax obligations.

  • Calculate COGS – COGS is an acronym for Cost of Goods Sold. This cost includes direct expenses that you incurred in providing the goods that you sell.

  • Determine net profit margin – On a regular basis, you need to determine your business’ net profit margin to see exactly how profitable it is. Your business’ total expenses, revenue and cost of goods sold are used to calculate the net profit margin.

At one time, Xero users had to manually copy their product information, payment records, customer data and other necessary information from their Shopify account and then enter it into their Xero accounts in order to do these 6 vital steps.


Thankfully, Xero and Shopify partnered together to provide an app that eliminates all this hassle and reduces the risk of human error.  The Xero/Shopify app allows both Mac and PC users to easily share orders, invoices, summaries, tax rate calculations and much more between their Xero and Shopify accounts.  Besides all these benefits, the app also gives you the option to automatically synchronize order data between your accounts and receive daily notification emails.


The Xero/Shopify app makes our jobs as business accountants easier, but most importantly it  allows you to invest more time and effort in growing your business, instead of needing to focus on the financial ins and outs of daily business.


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