Straight out of the box, Xero cloud accounting software offers functionality that would have been the preserve of big multinational businesses just a decade or two ago. But when you add plugins and add-ons to the mix, it really starts to earn its keep.
At James Scott, we work with a lot of ecommerce businesses and especially online sellers. Whether they’re operating through their own websites, via Amazon, Shopify, eBay or some other ecommerce platform, these are businesses that, again, couldn’t have existed 30 years ago.
Remember, the first webpage didn’t appear until 1991 and Amazon didn’t appear on the scene until 1994 – as a bookshop initially, which is hard to believe given the sheer range of items it sells these days.
When your business exists solely or primarily online, internet payments are the default – what else are people going to do? Send you a postal order? In that context, there’s an obvious efficiency in directly connecting your sales platform to your accounting package – digital to digital, with reduced opportunity for human error.
You’d be amazed, though, at how many people are still muddling through exporting CSV files from their online retail platform and then manually importing them into their accounting packages.
In the 2020s, there’s really no need and our top tip is a brilliant bit of software called A2X which makes that integration fast and easy.
A2X launched in New Zealand in 2015 and is designed specifically to help online sellers use Xero to stay on top of marketplace sales, fees, cost of goods sold, inventory and so on.
From Amazon or Shopify into Xero
The Amazon sellers we work with often express frustration at the difficulty of working out when they’ll be getting paid, and what for.
Amazon has a habit of making deposits into your account in almost arbitrary bundles, potentially covering sales, orders, refunds or any number of other payments. They also take commission and fees in ways which can be hard to track.
As a result, some merchants resort to recording payments from Amazon as revenue. The problem is, when you fudge things like that, it means you’re not getting a true picture of the performance of your business.
A2X does a great job of turning the muddle that comes out of Amazon into a reconciliation that makes sense to sellers, and that keeps your books nice and tidy.
A2X is sometimes described as a bridge but it’s a bit more than that because it’s also a kind of translator, turning the language of one system (Amazon) into that of another (standard accounting).
Connect your Amazon seller account to A2X and it will start checking for new Amazon settlements every day. It will then import any new sales and fee data it finds as soon as it’s available. You’ll then see accurate, up-to-date summaries of transactions in your A2X dashboard, ready to be piped directly into Xero.
There’s some pretty sophisticated processing going on under the hood which, thankfully, none of us need to understand. Basically, though, it works by starting with the money arriving in the seller’s account and cross-referencing against individual transactions recorded by Amazon until it’s matched everything up perfectly.
It can even cope with Amazon settlements that cut across multiple months, splitting them into separate neatly-divided summaries ready for import into Xero.
That means you can be totally confident the money you’ve been paid has been properly accounted for and recorded – whether you need it to support conversations with HMRC, or to feed into your own decision making.
You could work all this out manually but… why would you? Time spent scratching your head and hunting down missing pounds and pennies could, frankly, be better spent selling more stuff and growing your business.
A2X also makes it easy to report on sales by country and product group in your profit and loss accounts. It can effortlessly handle multiple currencies, too, and also allows you to set tax rates for different types of transaction.
How A2X and Xero setup works
Now, although A2X and Xero are both easy to use and are all about streamlining and simplicity, it has to be said that setup remains a bit complicated.
For example, one of the first screens you’ll see when you attempt to connect A2X to Xero is ‘transaction mappings’ – a massive table full of dropdown menus and accounting jargon.
That’s often the way with software and it’s why we offer our clients support with the process. We know the quirks of each package and have done it often enough that there aren’t many stumbling blocks we haven’t encountered at least once.
It helps that we also know your accounts, too – we can see at a glance what looks right and what looks wrong.
We’ll set up Xero with Amazon or Shopify in mind, or both if you operate across both platforms. We’ll test it, confirm it’s all working as expected, then give you and your team a training session to get you up and running.
Equally, if you’re not an Amazon or Shopify seller but want to feed reports from some other preferred online marketplace into Xero, there’s almost certainly a suitable plugin out there. Flexibility and choice is part of what makes cloud accounting such an exciting field to work in.
Talk to us for cloud accounting support and training in your ecommerce business.