automate your accounting using shopify and xero
Never has it been easier to get your product into the hands of your customer. With an ever adapting world, it is more important than ever to embrace and harness technology and make it work for you.
More and more businesses are realising this, and, as a result, are opting to sell via an eCommerce store instead of a “bricks and mortar” shop down the street.

What is eCommerce?

First of all, let’s break down the jargon – an eCommerce store is your online shop. An online portal where you can view the products on offer and make your purchase before paying online and receiving your goods a few days later.

Is eCommerce just for local business?

No. Businesses aren’t limited to selling in their local area anymore. With an eCommerce solution, you can sell to people around the world in different currencies any time of the day. There are many different eCommerce platforms available but today I will be talking about Shopfiy.

What is Shopify?

Shopify is a very popular eCommerce platform. This is mainly because it’s ease of use and it’s clear pricing structure.

What does Shopify do?

Shopify will integrate into your website so your products are displayed clearly for your customers. It is fully managed through your login to Shopify where you can view your pending orders, any customer queries and also your stock levels.

How much is Shopify?

Shopify comes with varying price plan levels to suit different business needs and will adapt to your size, allowing you to upgrade your plan as you sell more of your products.

Can I set up Shopify myself?

Although Shopify is very straightforward to set up yourself, you are going to want to get some help if you’re planning on integrating this to your website, or even have a whole new website built alongside it if you haven’t quite started yet. This is where Bex Creative comes in with their web design solutions that are built with eCommerce platforms in mind.

So, what’s Shopify got to do with Xero?

So, I’m here from Cone Accounting to talk about the finance side. You’re selling your goods to your customers and yes, Shopify will track your revenue taken and your total sales tax, plus all your shipping costs and your margins – it’s really brilliant – but what about all your other overheads? This can vary depending on the size of your business but here some other overheads most eCommerce businesses will have;

  • Packaging
  • Wages
  • Software
  • Advertising & Marketing
  • Accountancy fees

So you’re probably tracking these costs in your spreadsheet or cloud software solution (like Xero or Quickbooks) and you’ve got your sales and cost of sales sitting in Shopify. It is crucial that small businesses can track their profitability every single month. Hands up if you can do this right now – go to your accounting/bookkeeping records and tell me what this month’s net profit is so far. To those who can, well done! To those who can’t, how do you know you’re on the right track? Are you prepared for your upcoming taxes that are due or are you on track to hit your sales targets?

What is Xero?

This is where Xero comes in; Xero is beautiful accounting software that is aimed for the small business owner. It’s super easy to use and you can track your revenue, expenditure, your bank account, cash flow, inventory and profitability. The advantage, over any spreadsheet or desktop software, is that you can log in and use this anywhere and it integrates with loads of different platforms and software solutions, including Shopify.

Now, if you are using spreadsheets then you’re probably going to be handing all your sales reports from Shopify, along with your spreadsheet, to your accountant or CPA. They’ll probably charge you a price to put this altogether as well and then, months after you’ve done this, you’ll receive a report telling you how much you made in the year. You’re always going to be reacting to this information but what if you can get in front?

So, how can Xero help me?

By using Xero, you can integrate your sales from Shopify as they happen, every single day. That means that at the end of each day, Shopify will tally up your total sales and how much you received (whether by Credit Card, Paypal, Stripe or another payment provider) and send all of this data into Xero. No copying out the sales report, no duplicating or wasting your time. It’s done every night. It will even put your items into different categories, if you sell necklaces and rings for example. Your shipping is split out and so are your card fees as well so you get an accurate revenue figure every day.

Meanwhile, in Xero, you’ve hooked your business bank account up so that is bring accurate statement data into Xero every night. All your overheads (rent, wages, packaging etc.) have been recorded here as you go.

Top Tip: Scan in your overhead receipts (by using your phone or an app like Receipt Bank) and this will help you keep your business paperless. Good for saving space and the environment!

What you get is a complete picture of how your business is going. All your sales, cost of sales and overheads are tracked in the same place and it’s actually up to date – you can see how you are doing on a weekly or monthly basis. That is so important for a small business as it helps you to plan ahead and grow.

So how does the integration work?

Well first of all, you will need a Shopify account and a Xero account (get in touch with us here if you need Xero). Once ready, you will need to navigate to your apps within Shopify and add Xero. It’ll ask you to login and take you to a form filled with some of the more technical details. This helps to put your Shopify sales into the right places so it’s crucial that this is done correctly.

In this form, you are going to select the accounts that match what you are doing, so your sales will go to your sales code, quite simple right? Some will require you to enter your Chart of Accounts in Xero and add some fresh categories, like Discounts or Gift Cards (as these are not usually found in cloud software by default.

You’ll need to add the following categories;

  • Current Liability: Gift Card Account
  • Revenue: Shipping (if you want this to be split out)
  • Current Asset: Payment Account (we usually call this “Shopify Clearing” or something like that)

Once done, you’re good to go. The integration will happen immediately and you can even import past sales prior to the integration (which is pretty handy) – so if you are already using Shopify then and want to move to Xero then this still works for you as well as those starting both from scratch!

Remember, having this integration makes your life easier but you still need to make sure that your website, and therefore your products, are found. This means you need a great, up to date website that has all the right SEO and digital marketing so that customers can actually find you and buy from you. This is where Bex Creative are awesome. You can get in touch with them here.

Stay in touch…

Please feel free to reach out to us at hello@coneaccounting.com if you get stuck at all and would like some help. Also, we have some great rates for Xero software as a Xero Certified Partner so if you are interested in checking it out or would like a free demo of Xero in action then just book your slot here, which will be done via Skype.

 
Ben Nacca is an accountant but is nothing like the stereotype you have visualised in your mind! He has worked in the accounting industry for almost a decade and is CEO of a firm called Cone Accounting. Everyone at Cone strives to make business owners lives easier. How do they do this? They invest in technology, people and dreams as they believe all three of these factors matter. Greatly. And whats more, they do this in a friendly, fun and informal way. Ben personally loves traveling the world, and having a business on the cloud allows him to work from anywhere. You can get in touch with him at http://www.coneaccounting.com

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