Xero is an online double-entry accounting software for businesses with 0–100 employees. Features of their service include invoice management, bank reconciliation, bookkeeping, and more.
When you connect your Gusto and Xero accounts, each time you run payroll, the details can be synced to Xero as a Bill (on eligible Xero editions) or as a Manual Journal (available on all Xero editions). You get additional levels of granularity within the entry based on earnings types, Gusto departments, and Xero tracking categories.
Click the dropdowns below to learn more about the integration.
Step 1: Connect to Xero from Gusto
You’ll need admin permissions in both Gusto and Xero to connect your accounts. Start here:
Step 2: Automate your mappings (Recommended)
Automating your mappings is optional but recommended to avoid sync errors. This lets you pre-select which Xero accounts should be used by default for new payroll categories. This means that when a new item is created in Gusto, you will not need to manually map it—Gusto will automatically apply your default mapping.
You’ll manage automated mappings in the Default tab. Click here for more details and next steps.
Step 3: Choose your Bill settings
In the Settings section of the integration, go to the Manage tab to view or change your Bill sync settings. By default, payroll data posts to Manual Journals, and bill approval is automatic.
To choose how Gusto should post payroll data:
To choose whether Gusto should automatically approve bills in Xero or require manual approval:
Step 4: Choose your sync settings
In the Settings section of the integration, stay on the Manage tab to set up any additional sync preferences—such as whether the sync runs automatically or manually, or whether certain taxes should be consolidated.
Head to the section below for a description of each setting and how to set them up.
Below is each setting you can customize and how to do so.
Here’s how to get to any of these settings:
Contractor payment sync
If you pay contractors through Gusto, decide how those payments should sync:
Employer tax consolidation
Choose how you want employer taxes to appear in Xero:
Journal entry consolidation
By default, Gusto consolidates entries of the same type into a single journal entry. You can also choose to group entries:
To learn more about group mappings, check out the “Consolidated mapping and Xero tracking categories” section of this article.
Entry date options
Select when the journal entry should appear in Xero:
Adding a Gusto button to your Xero dashboard lets you quickly navigate from Xero to the Dashboard, Run payroll, Time off, Reports, or Integration settings sections of your Gusto account.
Follow these steps to set this up:
The next time you sign in to Xero, you'll see a Payroll tab on your dashboard. All Standard users and Advisors will see this tab. The first time each Xero user clicks the Payroll tab, they'll be prompted to link their Gusto and Xero accounts. Linked users will only be able to navigate to pages they have admin permissions for.
If you want to use your Xero credentials to sign in to Gusto, here's how:
If you accidentally linked the wrong account, or you no longer want to sign in to Gusto with your Xero credentials, follow these steps to unlink your login. This does not disconnect the integration.
If the "Xero Payroll navigation" option is enabled in your Xero accounting integration settings, you will be prompted to re-link your account the next time you access any pages from the Payroll tab in Xero.
Here’s why mapping your chart of accounts matters:
Map your chart of accounts
Time-saving tips for the Mapping tab:
Since Gusto does not take any money for benefits or deductions, we include a mapping for benefit/deduction liabilities. This will create line items within the Bill and accrue an amount owed for the benefit/deduction. When the benefit/deduction is then paid to the correct party, in Xero you can offset your liability and zero out the amount owed.
This integration now includes an AI-powered feature that helps you choose the right accounts when setting up mappings for your chart of accounts. This is especially helpful if you’re not sure which account to pick for a payroll category.
Example: Say you’re setting up default accounts and don’t know what to choose. Gusto might suggest using Payroll Wages for Wages & Salaries, or Payroll Deductions Payable for Deductions.
How suggestions are generated
Gusto’s AI provides recommendations based on:
The AI model never stores or accesses your personal financial information. All suggestions are based on general patterns, not individual data.
Why default mappings matter
Over time, you may make changes to your Gusto account such as adding a custom deduction, creating a new earnings type, or setting up a new benefit. When this happens, new payroll line items are created in Gusto that need to be mapped to an account in Xero. If these items are not mapped, they can cause sync issues. Setting up default mappings can help you with this.
What default mappings do
Default mappings let you pre-select the Xero accounts that should be used for new payroll categories. This means that when you create a new line item, you will not have to manually map it to a Xero account—Gusto will automatically apply your default mapping to it.
Setting up default mappings is optional. If you prefer to manually map new Gusto categories, simply leave the default mapping blank.
Set up default mappings
Follow these steps to set up or change default mappings:
Edit default mappings
You can change default mappings at any time in the Default tab. Changes will only apply to new mappings going forward.
Edit detailed mappings
If a new category has been given a default mapping you’d like to change, you can change it in the Detailed tab. Here's how:
If past payrolls have already been synced to Xero with an incorrect mapping, you’ll need to manually re-sync those payrolls.
To provide more granularity, you have the option to map your chart of accounts by employee, job, department, or Gusto Projects (available to companies using Gusto Project Tracking). If you use Xero tracking categories, you can also assign a class to each of the selected grouping options.
This is optional.
Step 1: Choose your journal entry consolidation method
Step 2: Set up mapping overrides
Once you select a consolidation method, a new tab appears on the left. Ex: If you choose to consolidate by employee, the tab will be called Employee. If you choose to consolidate by department, the tab will be called Department.
You can override default mappings for individual employees, departments, jobs, or projects. Overriding a default mapping means assigning different accounts to payroll items at these levels.
This is optional—if no overrides are applied, journal entries will still be categorized accordingly.
Here's how to set up an override:
Contractor payments
Consolidating journal entries by employee and department is compatible with contractors.
Consolidating by job and project is not compatible with contractors. This is because job titles and Gusto Projects are not currently supported for contractor profiles. If your company pays contractors and uses job or project consolidation, contractor payments will be synced based on the default company mappings.
Follow these steps to send payroll data to Xero.
Note: Syncing payroll is only necessary when you’ve already run payroll in Gusto before setting up the integration, or if you have auto-sync disabled.
Note: If you do not see the Sync button, confirm your integration is still actively set up and is not disconnected.
If you have previously synced payrolls that aren’t mapped to Xero tracking categories, you can re-sync those payrolls if desired. Here’s how:
To view the newly synced bills in Xero, follow the steps above.
Here are some common syncing errors and their resolutions.
Error message | Detail | Resolution |
---|---|---|
You’ve already reconciled payments against this Bill in Xero. Please "Remove & Redo" any payments applied to this Bill in Xero, and then try again. | The entry has already been reconciled and cannot be re-synced. | Remove and redo any payments applied to this Bill. Next, sync the payroll or payment from Gusto |
You have reached the limit of invoices you can approve in Xero. Please update your Bill approval settings in the App Directory or upgrade your Xero plan. | You’ve reached the limit of invoices you can approve. | Change your bill approval settings in the Gusto App directory or upgrade your Xero plan. |
This Bill has already been synced and approved in Xero. You cannot change the status from Approved to Awaiting Approval. To resync this Bill, you must first void it in Xero. | We cannot change the status of an approved bill. | Void the bill in Xero. |
Because Gusto does not take any money for benefits or deductions, we include a mapping for a benefit or deduction expense and a benefit or deduction liability. This will create accounts within your accounting software that accrue an amount owed for the benefit or deduction over time.
When the benefit or deduction is then paid to the requesting party, you can offset your liability account and zero out the accrued amount owed.
Benefits always have two line items on the journal entry:
Garnishments always have one line item on the journal entry for the garnishment liability. It tracks the amount owed for the garnishment/deduction.
Important: When money is pulled for an FSA or commuter benefit, before it is deducted through payroll make sure you don't create an expense but rather establish a receivable. It will be expensed in payroll when the amount is deducted. At that point with the deduction, then reduce the receivable.
Offset benefit liabilities
Option 1: Create an entry from the bank debit (created by paying the benefit or deduction) and assigned that entry to the liability account to offset.
Option 2: Create a Bill or Invoice and associate that item with the liability account.
If you pay employees by check, we recommend you print the checks from Gusto.
If you prefer to print checks from within Xero, we recommend you use the Manual Journal sync option as an easy way to avoid double reporting. When you create the check in Xero, code the line item to the same Clearing Account that you have set up in your Xero account mappings to offset the account balance by the amount of the check.
If you're using Bill sync for your Xero integration, this is our recommended method for reconciling expenses if payments were all processed through direct deposit. You can use the Split function to reconcile the payroll invoice that Gusto sends to Xero with the two payroll bank transactions.
Step 1: Use the Split function to reconcile the first transaction
Step 2: Reconcile the second transaction
When the Gusto payroll bank debits (and paychecks, if paying your team by check) appear in your bank account in Xero, from the Create tab, create a new spend money transaction and allocate it to your clearing account.
The spend money transactions should offset the balance created from the Gusto Manual Journals in your clearing account, reducing the balance to zero.
To make the reconciliation process even easier, you could set up a bank rule to create the transactions for you.
You should regularly check the transactions in your clearing account using the Account Transactions report.
The Gusto payroll bank debits (and paychecks, if paying your team by check) should completely offset the balance of your clearing account after each payroll is reconciled. If the balance is not zero, it could be due to:
Disconnect your company's Xero Accounting integration
Choose a section below for frequently asked questions about this integration.
Q: Will transactions automatically reconcile?
A: No. Your Bill must be approved before you can reconcile the debits in your bank account with the Bill line entries. Do this by matching your bank transactions to the Bill Gusto created: Under Accounts, go to Bank Accounts. Click Match.
Q: How do I reconcile the two debits (net pay and taxes) with the subtotal in my Xero bill?
A: Refer to "Bill reconciliation" above.
Q: The chart of accounts in Gusto does not look correct. What should I do?
A: First, click Refresh chart of accounts in Gusto. If this does not resolve the issue, you may have linked the wrong Xero account. Disconnect the integration and reconnect to the correct Xero account.
Note: Accounts Receivable and Accounts Payable account types are not supported at this time because these require a Contact to be used with the Account. Asset and Liability accounts are supported without a Contact.
Q: How do I handle checks?
A: We recommend printing checks from your Gusto account or handwriting them. You can then reconcile the bill from Gusto when your employees cash the checks. We do incorporate the amount of each check in our entry.
Q: Why can’t I find the Xero account I’m looking for in the drop-down?
A: The initial list in the drop-down menu shows recommended accounts based on the selected category. If you want to choose a different account, simply type the name of the account into the search box.
If you still cannot find the account, it may need to be created in Xero first. Once you’ve created the account, click Refresh chart of accounts in Gusto and try searching for it again in the search box.
Q: Do I need to select a default for each section?
A: No, you are not required to select a default for every section. If you prefer to manually map specific sections, you can simply leave those sections blank.
Q: What happens if I do not set up default mappings?
A: Default mappings are designed to automate mapping of new payroll categories that are added to your integration. If you choose not to enable default mappings, you will need to manually select the appropriate account for each new payroll category.
Please note that the sync will be paused until all categories are mapped to an account in Xero, which may disrupt your integration process.
Q: When are new mapping categories created?
A: New categories may be created in your integration under the following circumstances:
Each of these actions can introduce new payroll categories that will require appropriate mapping to ensure your integration functions smoothly.
Q: If I set up or change default mappings, will that impact what I’ve already mapped on the Detailed tab?
A: No, this will only impact new categories that may be added to your integration going forward. If you would like to adjust your detailed mappings, you can do so manually in the Detailed tab.
Q: Can I change my default mapping selection later?
A: Yes, you can change your default mapping selections at any time. Note that any changes will only affect future mappings—your existing mappings will remain unchanged.
Q: If I update my mappings, can I re-sync a payroll to update the bill or journal entry?
A: Yes. To re-sync a payroll:
Q: How do I break out individual employee payroll items?
A: You can change the journal consolidation method to “by employee.” To do this,
Q: Why can’t I find the Xero account I’m looking for in the drop-down?
A: The initial list in the drop-down menu shows recommended accounts based on the selected category. To choose a different account, simply type the name of the account into the search box.
If you still cannot find the account, it may need to be created in Xero first. Once you’ve created the account, click Refresh Chart of Accounts in Gusto and try searching for it again in the search box.
Q: What if I will not be using one of the payroll items listed?
A: The item will still need to be mapped to an account. If the payroll item is not applicable, nothing will sync related to the account that is selected within your entry. Only payroll items that apply to a processed payroll will populate within the synced entry.
Q: Can I include employee benefit deductions on the Bill or Journal Entry?
A: Employee deductions are included in the gross wages amounts reported on the entry. They are not tracked separately because they are not an additional expense to the company on top of what's already reported for wages.
Employee deduction amounts are included in the Benefit Liability along with the Employer Contribution. Click here to learn more.
Q: Can unique reimbursements be broken out through separate mappings?
A: No, all reimbursements will be pushed over as a lump sum (e.g. Cell Phone Reimbursement + Gym Reimbursement + Office Supplies Reimbursement, etc.).
Q: Can I use more than one tracking category or journal consolidation method? For example, can I consolidate my bills or journal entries by employee and by job?
A: No, not at this time. You must choose to consolidate by one method (by employee, department, job, or project). Next, you may select one class for each employee, department, job, or project.
Q: Can I change the way I consolidate my mappings?
A: Yes, you can change your consolidation preferences at any time. Simply go to the Manage tab located under Settings. However, keep in mind that any changes will result in the deletion of previous consolidated account mapping overrides.
Q: Do I need to set up overrides for consolidated mappings?
A: Setting up overrides for consolidated mappings is optional. It's not required, but it does provide you with the opportunity to customize the mapping layout for each unique grouping you've established.
Q: Is it necessary to establish a Xero Class for each consolidated grouping?
A: No, it's not mandatory. This is optional based on your specific needs.
Q: Is it possible to assign multiple Xero Classes to a single consolidated grouping?
A: Currently, our system allows only one Xero class to be assigned per consolidated grouping.
Q: Do you offer integration with Xero Projects?
A: We do not currently offer direct integration with Xero Projects. If you opt to consolidate your mappings by project, we will segment each entry according to the projects you've configured in your Gusto Project Tracker. However, please note that this information will not be directly synced to Xero Projects.
Q: Why didn’t my sync work?
A: Typically, a sync can stop working if you are no longer connected to Xero or you have a missing mapping. See the “Troubleshooting sync errors” section above for more information.
Q: Why did Gusto disconnect from Xero?
A: Occasionally, an authorization issue might disconnect the integration. To resolve this, simply reconnect the integration:
After re-establishing the connection, all your previous mappings should be preserved.
Q: If I update my mappings, can I re-sync a payroll to update the entry?
A: Yes. To re-sync a payroll:
Q: How do employee taxes and employee benefit contributions sync to Xero?
A: They’re always included in Gross Wages & Salaries.
Q: Do you break out individual taxes?
A: Gusto handles all of your tax payments automatically. Because of this, you do not need to track tax liabilities. When we sync entries, we record employer taxes as expenses.
You can select for employer taxes to be broken by each individual tax or lump them together. You’ll find this option on the Manage tab under Settings.
At this time, we only support one account mapping which will be used across all employer taxes.
Employee taxes are not broken out individually for mapping or in journal entries, as these values are included in Gross Wages.
Q: How do contractor payments sync over?
A: You have two options for syncing contractor payments. Click here to learn more.
Q: Is there a way to retroactively sync all payrolls once I enable auto-sync?
A: Auto-sync will only work for the payrolls moving forward from the time it is set up. Any payrolls run before auto-sync was enabled will need to be manually synced.
Q: What does the timestamp indicate?
A: The exact time Gusto successfully synced a payroll into the accounting software.
Q: Can I re-sync an entry that has already been reconciled?
A: You can re-sync a payroll from Gusto at any time.
Keep in mind:
Q: Can I sync international contractor payments to Xero?
A: Yes, both US-based and non-US based contractor payments can be synced. To do so, go to the Pay section in Gusto and choose Pay history. Go to the Contractor payment history tab and select a payment to sync.
Q: Can I sync international employee payrolls to Xero?
A: Not at this time.
Q: Can I sync Gusto or NEXT insurance invoices to Xero?
A: Not at this time.