Hi everyone, as a specialist Online accountants firm, in this article, we’ll be looking at the Shopify system and how this can be set up and integrated into Xero. This will be useful in that it will save you time having to reconcile both systems manually and will allow Xero to do most of the work for you.
What is Shopify?
Shopify was launched in 2006 as the owners wanted to provide an e-commerce option better than the current providers at the time. Shopify is a complete commerce platform that lets you start, grow and manage a business. You can create and customize an online store, sell in multiple places such as the internet, by mobile, via social media, brick and mortar locations or even pop up shops. Using this system, you can manage your products, inventory, payments and shipping. As a cloud-based system, you can access this software from anywhere.
Shopify understands that it doesn’t know everything, however, and to this end, they have created their app store to find whatever you need to fill your niche concerns. With categories such as ‘Staff Picks’ and ‘Trending Apps’, you can keep on top of apps that work well and will benefit your business. They also launched an application programming interface, so if you can think of an app that would be good, you can also create/sell this on the App Store.
For more information on Shopify if this is your first time hearing of it or if you just need to refresh your existing knowledge of the software, please visit the Shopify website.
How do you integrate Shopify with Xero?
To integrate your Shopify account with Xero, you will need to complete the following steps:
Download and install the Xero app in Shopify.
Click ‘Add App’ and then click ‘Install app’
Next, choose the payment plan you wish to use.
Accept the terms and conditions.
Click Connect now.
A new popup screen will open asking you to log in to Xero and select the company you want to link to Shopify. Choose the company you wish to link and then click ‘Allow Access’. This will take you back to Shopify where you will need to select the Xero accounts you want Shopify to connect with. The following image shows the example we have picked for these accounts; however, these can be at the user’s discretion.
Next up comes the payment settings. The issue here though is that you will likely have to use the ‘create a new expense account’ link as Xero sets most expense accounts as overheads instead of expenses. Clicking this will take you to your Xero chart of accounts where you can create a new expense account.
Once created, refresh the Shopify page, and you will now have the newly created account as an option. Once selected, it will look like this.
Next comes the Tax Settings.
Now we have the final three. These are based on your preferences. Once completed, click the ‘Complete setup’ button to continue.
To the top right of the next page, there will be a ‘Launch Xero’ button. Click this to move over to Xero and check the app has integrated correctly. In the Xero Settings/Connected apps section, you should now see Shopify as an integrated app.
Congratulations, you have now connected Shopify to Xero. If you need to make any changes to how Shopify information affects accounts in Xero, you can use the app’s tab in Shopify to find the Xero app and then enter the settings for that app.
Shopify Xero Double Entries
First off, what is a double-entry? This is the method by which all the transactions and movements of money are recorded in your business.
Now, you may have heard of the term Debit and Credit before. Simply, these mean in and out.
For example, say you make a payment from your business bank account for a train ticket. This would credit (come out of) your business bank account and debit (go into) your travel account. This travel account is a theoretical account and doesn’t exist beyond allowing you to record what that money was spent on. The same goes if you receive money from a sale to one of your clients. It will debit your bank account and credit your sales account.
To help you understand how the Shopify integration process works in the background of Xero, the double entries for each stage have been included below to show this.
Shopify lists the changes it will make as the following adjustments in Xero:
1. Orders will be created as Invoices
- DR Trade Debtors
- CR Sales
2. Sale transactions will be created as payments against the Invoice
- DR Bank
- CR Trade Debtors
3. Refunds will be created as Credit Notes
- DR Sales
- CR Trade Debtors
4. Refund transactions will be created as payments against the Credit Note
- DR Trade Debtors
- CR Bank
5. Products will be created and/or updated
This is not a double-entry but will update the Products and Services section in Xero when your invoices are imported.
6. Customers will be created and/or updated
Like the Products and Services section, the customers will be imported along with your invoices.
7. Shopify Payment fees will be reflected in your Shopify expense account
- DR Shopify Expense Account
- CR Bank
Hopefully, you have found this article helpful, and you have all you need to continue. If you should have any further questions about the integration of this app, however, please do not hesitate to contact us.
We are specialist E-commerce Accountants helping businesses grow.