What Is Xero? Key Features and Shopify Integration

Keeping up with financial records can be a demanding task that takes time away from growing your business. Instead of manual bookkeeping, Xero, a cloud-based platform designed to automate the difficult parts of your finances, may be a solution. It automates core accounting tasks, putting everything you need in one place, from online invoicing to account reconciliation.

Here’s a closer look at Xero, including its key features, Shopify integration, and pricing.

What is Xero?

Xero accounting software is an accounting solution designed to help small businesses, growing companies, and established businesses manage accounting tasks. It automates many routine accounting processes, reducing manual data entry (and, with it, opportunities for human error) and providing a real-time view of cash flow.

The cloud-based platform also makes it easier for an in-house finance team or accounting professionals to access company financial data and collaborate from anywhere with an internet connection.

Key features of Xero

• Bookkeeping and accounting
• Online invoicing
• Bank reconciliation
• Data security
• User-friendly interface
• Third-party app integration

Xero offers key features specifically designed to streamline business finances by making complex financial tasks simple and efficient. Automation is baked into multiple areas of the platform. Its modular design comes with a core toolkit and integrates with hundreds of third-party apps. This allows you to adapt it to your unique needs. Here are Xero’s key features:

Bookkeeping and accounting

Xero offers a comprehensive suite of bookkeeping and accounting features. Those available on all plans, including the lowest tier, are:

• Accounts payable. You can manage accounts, pay bills, and schedule payments.
• Sales tax tracking. The platform automates sales tax calculations and filings to ensure compliance and accuracy.
• Customizable reporting. You can generate reports on various aspects of business performance, from cash flow to profit and loss.

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At the higher-tier plans, you can typically access the following, depending on your region:

• Expense claims filing. Employees can submit expenses, and you can reimburse them from within the platform.
• Support for multiple currencies. If you have international clients, you can access currency conversion features. For example, if you invoice a client dealing in euros, Xero automatically converts the payment to your home currency.
• Project tracking. You and your team can track time so you bill clients accurately based on work completed.

Online invoicing

If you run a service business, Xero’s online invoicing feature lets you create and send professional invoices to clients with just a few clicks. You can customize the invoices with your logo and branding, adding a professional touch to reinforce your brand identity. You can also set up repeating invoices for regular clients and track the payment status of each invoice. The system sends automatic reminders for overdue invoices and provides online payment options, helping to improve cash flow. The lowest price tier caps the number of invoices you can send, but the middle tier allows unlimited invoices.

Xero also lets you create and apply credit notes, which reduce the amount a customer owes in the case of a billing error or return, to simplify the process of managing customer adjustments.

Bank reconciliation

At the middle price tier, Xero automates the tedious task of bank reconciliation—matching your internal financial records (like your accounting books) with your bank statement to identify any discrepancies. It connects to your bank account through a secure bank feed and imports daily bank transactions and bank statements. The software then suggests matches for your transactions, which you can approve with a single click.

Plus, Xero’s advanced machine learning learns from your past reconciliation decisions. It suggests increasingly accurate matches over time and significantly reducing manual data entry.

Data security

Xero employs a multilayered data security approach to safeguard data at all times. This includes:

• Multi-actor authentication (MFA). This is a mandatory security feature for all Xero users. In addition to a username and password, MFA requires a second verification step, such as a code from an authenticator app on your smartphone or tablet. This prevents unauthorized access to your account, even if your password is compromised.
• Data encryption. All data, whether it’s in transit between your browser and Xero’s servers or at rest in their data center, is encrypted using industry-standard protocols. This converts your financial information into an unreadable code, protecting it from unauthorized access.
• Secure data centers. Xero stores data in secure servers and data centers with robust physical security controls, including 24/7 monitoring and surveillance. This data is also replicated across multiple geographic locations to ensure it’s always available, even in the event of a physical failure.
• Role-based access controls. Xero gives you granular control over individual user access levels in your account. You can assign different user roles (such as “Advisor,” “Standard,” “Invoice only,” or “Read only”) to your team members, ensuring only authorized personnel have access to data.
• Activity monitoring and auditing. Xero provides an audit trail by logging actions like viewing reports and editing transactions. This creates a record of all activity within your account, which can be used to detect suspicious behavior and track changes to your financial data.

User-friendly interface

Xero’s design has a clean, intuitive user interface. Its dashboard provides a clear, at-a-glance overview of your company’s financial health, making it accessible even for new users who don’t have a deep background in accounting.

Third-party app integration

Instead of being a one-size-fits-all solution, you can customize Xero to cater to the needs of your industry via integrations.

• Ecommerce. Xero offers a native Shopify integration that supports basic, and high-demand use cases. For businesses with more complex needs, several third-party apps, such as A2X, also connect the two platforms
• Service-based businesses. Apps like Tradify or WorkflowMax connect project management and job tracking directly to Xero. Use an app to track your time and materials on a job, and the data is automatically synced to Xero, where you can create an invoice.
• Restaurants and hospitality businesses. Whether you run a café, a restaurant, or a brick-and-mortar retail store, integrating your point-of-sale (POS) system with your accounting software will save you time. If you use Shopify POS, integrations like Amaka and A2X for Shopify let you sync daily sales, refunds, and payouts.
• Manufacturing. If you manufacture or sell your own products, integrating inventory management apps like Cin7 Core or Unleashed Software with Xero to get a complete view of your business operations. These apps give you deep functionality like multiwarehouse management, real-time stock control, automated purchase orders, and cost-of-goods-sold (COGS) accounting. Connecting them through Xero helps ensure your financial records reflect your inventory.

How Xero works with Shopify stores

For ecommerce businesses, Xero connects your sales data to your accounting system. It’s part of the Shopify Partner program, meaning there are numerous ways to integrate the two platforms.

Xero has a native Shopify integration that automatically syncs sales data, refunds, and fees from your Shopify store directly into Xero. This eliminates the need for data entry and ensures your accounting data is always up-to-date and accurate, simplifying the reconciliation of your Shopify payouts.

However, the native integration has some limitations, so businesses with more complex needs may opt to use a third-party app like A2X or Link My Books to connect Xero to Shopify. These apps are specifically designed for ecommerce accounting and provide a robust and granular data sync.

How much does Xero cost?

Xero offers a subscription-based software-as-a-service (SaaS) pricing model with different plans tailored for freelancers, small business owners, and expanding businesses. There are three tiers: Early, Growing, and Established:

• Early. $20 per month. Offers basic features for new businesses, including a limited number of invoices and bills per month. It’s designed for professional accounting software beginners.

• Growing. $47 per month. The most popular choice for many small businesses, it offers unlimited invoices and bills, along with bank reconciliation.

• Established. $80 per month. It is designed for established businesses with a larger scale of operations or international dealings. It includes advanced features like support for multiple currencies, expense claims, and project tracking.

One of the most significant benefits of Xero’s pricing model is that all plans include support for unlimited users. This means your finance team and an outside accountant can access the same real-time data without any extra cost, creating seamless collaboration.