Setting up Xero for Ecommerce (Chart of Accounts)

A standard "Service Business" Xero setup fails for ecommerce because it doesn't handle high transaction volumes or multi-currency well. You need a custom Chart of Accounts designed for retail.

1. Clearing Accounts

As mentioned in our reconciliation guide, you must create a separate bank account in Xero for every way you get paid: "Stripe Clearing," "PayPal Clearing," "Afterpay Clearing," "Shopify Payments Clearing." This allows you to reconcile the net deposits easily.

2. COGS Separation

Don't just have one expense line called "Purchases." Separate your costs to understand your margins:
- Cost of Goods Sold: The product cost.
- Freight In: The cost to get goods from China to your warehouse.
- Merchant Fees: The cost of the transaction.

3. Multi-Currency

If you sell in USD (e.g., Shopify Markets), you must ensure you have a USD bank account set up in Xero (even if it's a virtual one like Airwallex or Wise). This allows Xero to handle the foreign exchange gains/losses automatically.