Xero for E-commerce: Automate Sales, Fees, and Inventory
E-commerce bookkeeping involves hundreds of daily transactions spread across platforms like Shopify, Amazon, or Etsy. Manually managing them is error-prone and time-consuming. Xero automates this entire process through smart integrations and accurate reconciliation. This article shows how to set up Xero for e-commerce bookkeeping that handles sales, fees, and inventory effortlessly.
Step 1: Connect Your E-commerce Platforms
Link your sales channels to Xero using official integrations or apps such as A2X, Synder, or Link My Books.
- Import daily sales summaries automatically.
- Separate gross revenue, taxes, and fees correctly.
- Match payouts directly to bank feeds.
These integrations save hours of manual entry and prevent overstated income.
Step 2: Track Platform Fees Properly
Each marketplace deducts transaction fees, advertising costs, or refunds before depositing funds.
- Post all fees to a dedicated Merchant Fees expense account.
- Reconcile deposits against actual payouts, not total sales.
Accurate fee recording ensures clean margins and true profitability reporting.
Step 3: Automate Sales Tax Collection
E-commerce sellers must comply with complex tax rules across states or countries.
- Use tools like TaxJar or Avalara to automate calculation and filing.
- Create separate tax liability accounts in Xero for each jurisdiction.
- Reconcile payments monthly to verify collections and remittances.
Automation keeps you compliant and audit-ready.
Step 4: Manage Inventory and Cost of Goods Sold (COGS)
For physical products, integrate inventory software such as DEAR, Cin7, or Unleashed.
- Record purchases and stock movements automatically.
- Update COGS monthly to reflect true product costs.
- Adjust for returns and damaged goods.
Consistent tracking keeps gross margins accurate.
Step 5: Generate Channel-Specific Reports
Set up tracking categories or custom fields in Xero to analyze each sales channel.
Run Profit & Loss by Tracking Category to see which platforms drive the highest profit after fees and taxes.
Step 6: Review Monthly and Close
At month-end:
- Reconcile all payment gateway and inventory accounts.
- Review AR/AP balances and tax liabilities.
- Lock the period to preserve historical accuracy.
A structured monthly close keeps data clean and ready for growth.
Benefits of Using Xero for E-commerce
- Automated multi-channel reconciliation
- Accurate sales tax tracking
- Better cash flow visibility
- Real-time profitability by channel
A well-configured Xero system saves time and supports scalable e-commerce growth.
FAQs
Can Xero integrate with Shopify or Amazon?
Yes. Apps like A2X or Synder sync sales, fees, and payouts automatically.
How does Xero handle sales tax?
Through connected apps that calculate and track tax liability for each jurisdiction.
What is the best inventory app for Xero?
DEAR or Unleashed for full inventory control and COGS management.
How often should I reconcile e-commerce accounts?
Weekly for high-volume sellers, monthly at minimum.
