🧾 How to Set Up Xero for Shopify

Running an online store means juggling hundreds of small transactions, multiple currencies, and constant GST obligations.
At 42 Advisory, our e-commerce accountants in Melbourne help online retailers integrate Shopify and Xero, automate reconciliation, and stay compliant with ATO requirements.

This guide walks through how to connect Shopify and Xero, automate reconciliation across payment gateways, and manage GST, BAS, and profitability — with a real-world case study from our client, Watches of Mayfair, one of Australia’s leading luxury watch retailers.

🧠 Why Connect Shopify and Xero?

Connecting Shopify to Xero allows sales, refunds, fees, and taxes to flow automatically from your store into your accounting system — reducing manual entry and compliance errors.

According to Xero Australia’s official documentation, the native integration:

• Syncs daily Shopify sales and refunds to Xero invoices

• Automatically posts payment fees

• Simplifies GST coding for Australian merchants

For high-volume sellers, automation also improves cash-flow forecasting and speeds up BAS preparation by aligning merchant data with ATO tax codes.

⚙️ Step 1 — Prepare Your Xero and Shopify Accounts

Before integrating, make sure you have:

1. An active Shopify plan (Basic or higher)

2. A Xero organisation set to AUD

3. Clean Chart of Accounts (Sales, COGS, Merchant Fees, GST on Income, etc.)

4. Bank feeds connected (e.g. Stripe, Wise, eWay)

    

   🧩 Pro tip: Rename accounts clearly (e.g. “Shopify Sales – Domestic”) before connecting; it prevents duplicate mapping errors later.

🔗 Step 2 — Connect Xero to Shopify

Option A – Xero’s Native Integration

1. Log into Xero → App Store → Shopify Integration by Xero

2. Click Get this app and authorise Shopify access

3. Choose sync mode (daily summary or per order)

Option B – Automation via A2X or Amaka
For merchants processing high volume or multi-currency sales, tools like A2X or Amaka summarise transactions and map GST accurately — matching Shopify Payments, PayPal, or Wise deposits line-for-line in Xero.

🧾 Step 3 — Map GST and Chart of Accounts (ATO Compliant)

Correct GST mapping is essential for BAS accuracy. Per ATO guidelines:

*Shopify Fees are GST exempt if your store is based in Australia, you are registered for GST and have an ABN. 

Need help setting up your Chart of Accounts or managing GST-free exports and customs duties?

Our Shopify and Xero accounting specialists can implement your entire integration and automate GST/BAS reporting.

🔍 Reference: Navigating GST exemptions for Shopify

Enable “Include GST” for local transactions, and verify that A2X or your integration app applies the correct tax codes automatically.

💰 Step 4 — Reconcile Payments from Multiple Gateways

Most e-commerce stores use more than one payment channel. Our integrations typically cover:

• Shopify Payments / Stripe

• CommWeb (Commonwealth Bank)

• eWay

• PayPal

• Wise multi-currency wallets

Each gateway posts settlements at different intervals and deducts fees differently.
Reconciliation software such as A2X or Link My Books aggregates these payouts into daily or weekly summaries that reconcile automatically against bank feeds in Xero.

🔍 Reference: Xero Central – Connect to Shopify Integration

🌏 Step 5 — Handle Multi-Currency & Imports via Wise

When your business imports stock or accepts payments in EUR, USD, or GBP, each Wise wallet can be connected as a bank account in Xero.
Exchange differences are posted to “FX Gain/Loss,” while GST on imports and customs duties are allocated to “Cost of Goods Sold.”

🧩 Pro tip: Enable Xero’s multi-currency feature so foreign invoices are revalued automatically at the daily RBA rate.

📦 Real-World Case Study: Watches of Mayfair

Client Profile:
Luxury watch retailer with Australian headquarters and international customer base.
Sales channels: own website, eBay, Chrono24.
Payment processors: CommWeb, eWay, Stripe.
Currencies: AUD, USD, EUR (using Wise multi-currency wallets).

Challenges Identified

• Fragmented sales data across three platforms

• Multiple merchant settlements with varying fee structures

• GST on imports and DHL charges inconsistently recorded

• Difficulty tracking profitability by brand and SKU

42 Advisory Implementation

1. Integrated Shopify, Chrono24, and eBay sales into Xero.

2. Connected Wise accounts for EUR and USD to capture import payments and freight.

3. Mapped GST-free exports and GST on imports according to ATO rules.

4. Automated reconciliation for CommWeb, eWay, and Stripe settlements.

5. Produced three-way forecasts and profitability analysis by SKU — revealing that certain limited-edition models had 20 % higher margins once fees and freight were normalised.

Outcome:

• Manual bookkeeping reduced by 85 %

• Monthly BAS lodged 4 weeks earlier

• Clear visibility of profit by channel and currency

This case highlights why partnering with dedicated e-commerce accountants in Melbourne can transform complex, multi-platform operations into a single, accurate accounting system.

📊 Step 6 — Forecast and Report with Confidence

Once data flows cleanly, use Xero’s Business Snapshot, Modano or Fathom Reports to:

• Monitor cash position and gross margin

• Compare month-on-month performance

• Build three-way forecasts for growth planning

These reports feed directly into board packs and investment proposals — critical for scaling e-commerce operations.

❌ Common Mistakes to Avoid

• Ignoring GST-free export coding

• Reconciling Shopify deposits without factoring merchant fees

• Duplicating sales when both Shopify and A2X sync daily

• Forgetting to revalue foreign-currency accounts in Xero

🧩 Summary

Done properly, Shopify + Xero creates a single, compliant financial system for e-commerce.

You’ll spend less time fixing spreadsheets — and more time growing profitably.

At 42 Advisory, we specialise in designing and managing these integrations for Australian e-commerce retailers — from Shopify startups to luxury brands like Watches of Mayfair.