Integrate with Xero

Follow these steps to connect your company's Xero accounting and Gusto accounts. 

1. Sign in to your Gusto admin account. 
2. Go to the App directory.
3. Under Categories, click Accounting.
4. Click the Xero tile.
5. Click Connect.
6. Enter your Xero credentials to get connected.
7. Click Authorize to allow Xero and Gusto to sync.
8. Map your chart of accounts.
9. Navigate to the Settings tab to review your integration preferences.
10. Select if the payroll sync will run automatically or manually.
11. If you pay contractors through Gusto, choose how you would like the entries to sync to Xero.
    • Batch payments into a single entry: This will consolidate all payments into a single entry for each check date. The option to sync will be available at 5pm PT the day the payments are processed (if enabled, auto-sync will occur at the same time). This is recommended for companies that process more than 30 contractor payments at a time.
    • Sync each contractor payment as a separate entry: Each payment will sync as its own entry.
12. Select the desired employer tax consolidation.
    • Consolidate: Lump employer taxes together (Example: Payroll Taxes and one lump sum amount).
    • Don’t Consolidate: Split employer taxes into individual taxes on your journal (Example: Federal Unemployment, Social Security, Medicare, State Unemployment, and more are broken out along with the applicable sum for each tax).
13. Select the desired journal entry consolidation. By default, Gusto will consolidate entries of the same type into a single journal entry in Xero. Other options include:
    • By employee
    • By department
    • By project (available to companies using Gusto Project Tracking)
    • By job
14. Choose whether you want to sync Bills or Manual Journals to Xero.  
    • Gusto defaults to Manual Journals. Bill sync is not available on Xero Partner Editions. Xero Business Standard editions may sync either Bills or Manual Journals.
    • These will sync automatically if you're on Auto Sync. 
15. If you're using Bill sync, elect whether you would like to automatically or manually approve the Bill in Xero.
    • Note: Gusto defaults to approving the Bill automatically.
16. Choose the specific date you'd like to appear on the entries Gusto sends to Xero: Debit date, end of pay period, or check date.
    • Off-cycle payrolls and contractor payments without a defined pay period will default to the check date.

Total wages, taxes, benefit deductions/contributions, reimbursements and contractor payments will now sync to your Xero account each time you run payroll. 

Once you set up the Gusto and Xero integration, you can link your Gusto and Xero logins to each other for faster navigation between the two platforms. 

Add a Gusto button to your Xero dashboard

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:

1. Sign in to your Gusto admin account.
2. Go to the App directory and choose Xero.
3. Select the Settings tab.
4. Enable the Xero Payroll navigation option.
   • To remove Xero Payroll navigation, select Disable.

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. 

Link your Gusto and Xero logins

If you want to use your Xero credentials to sign in to Gusto, here's how:

1. Go to the Gusto login page.
2. Click Sign In with Xero.
3. Enter your Xero credentials and click Log in.
4. The first time you do this, you'll be prompted to link your Gusto and Xero accounts. 

Unlink your Gusto and Xero logins   

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. 

1. Sign in to Xero.
2. In the upper-right corner of the page, click your account profile.
3. Select My profile.
4. Go to the Xero Sign On section.
5. Click Unlink Account.

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.

When setting up your mappings you will be prompted to add:

• Earnings Types (Regular, Bonus, Commission, custom earnings, etc.)
• Employer Taxes
• Reimbursements
• Benefit Expenses
• Benefit Liabilities
• Deduction/Garnishment Liabilities
• Owner's Draw
• Clearing Account (only when syncing journals)

Once all payroll items are matched with the corresponding accounts, the building blocks are in place for the Bill or Manual Journal that Gusto will sync over into Xero.

The more accounts you choose when setting up your integration, the more detail there will be in the line entries on your Bills or Manual Journals, which enables you to run more detailed reports in Xero (expense reports, outstanding liability reports, etc.).

For example, if you'd like all wages from all employees to go to the same expense account, regardless of what type of earnings they are, you would select the exact same expense account for all earnings items. For reporting purposes you would have one expense account item measuring all earnings.

If you'd like to break out different types of earnings into different expense accounts you can make different account selections for each earnings type. For example, you could have one expense account for vacation pay and a different expense account for overtime.

If you do not see an account you’d like to use, sign into Xero and create the account. Then, click the Refresh chart of accounts button in Gusto. 

To get started:

1. In your Gusto admin account, head to the App directory and choose the Xero integration.
2. Select the Mapping tab. For each Gusto payroll category, you'll select the Xero account that it corresponds to. 
3. For each expense category you want to map, click Select. Choose the Xero account that the Gusto category corresponds with.
   • By default, we will only display common account types for each category. If you do not see the desired account, start typing the account name to map to the account.
   • In order to be included in the dropdown menu, an account must be marked as "Included in chart" in Xero. If an account is missing from the options, update the account's "Included in chart" setting in Xero. 
4. Repeat until you've selected an account for each Gusto category. Your progress is automatically saved as you go. A few tools you can use to map accounts more quickly:
   • Map multiple items to the same account at once: Check the box next to each item you want to map. Click Actions and choose Edit account type. Type the account name to select it. Click Submit.
   • Show only unmapped categories: Next to "Actions," click the filter icon. Choose Display unmapped accounts only, then click Apply.
   • Clear your selections: Uncheck the box next to an item or click Clear all.

Click here to learn more about mapping your accounts.

To provide more granularity, you have the option to map your chart of accounts by employee, job, departments, or Gusto Projects (available to companies using Gusto Project Tracking). If you use Xero tracking categories, you can also map employees, jobs, departments, or Gusto Projects to tracking categories (optional).

Follow these steps to send payroll data to Xero.

1. Sign in to your Gusto admin account.
2. Click the Payroll section and select Payroll History. 
3. Click on the payroll you would like to sync.
4. Click Sync at the top of the payroll detail page.
   • Note: If you have autosync enabled the data will automatically push over when you process payroll.
5. A timestamp will populate confirming the data was pushed over to Xero.
6. Sign in to your Xero account.
   • If you’re syncing a Manual Journal: You can find the posted journal in your Journal Report, which can be accessed from the Accounting menu.
   • If you're syncing a Bill: It will post to Accounts > Purchases.
     • If you chose to manually approve: Bills will sync over as “Awaiting Approval.”
     • If you chose to automatically approve: Bills will sync over as “Awaiting Payment.”

Note: If you do not see the Sync button, confirm your integration is still actively set up and is not disconnected.

View synced Bills in Xero

1. In Gusto, process a payroll.
2. If auto-sync is not enabled: Select Sync to send the entry to Xero.
   •  If auto-sync is enabled: Once you run payroll you’ll see a “Synced” status on the payroll summary in Gusto. 
3. Sign in to Xero. 
4. Choose Business.
5. Click Bills to pay. 
6. Under “Bills you need to pay,” find the new Bill for the payroll you ran.
   • The line items will now be tagged with Xero tracking categories based on your mapping selections.
   • Any employees or contractors not on a designated project will not have their corresponding payroll expense amounts tagged with a tracking category option.

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:

1. First, you may need to void any previously synced bills synced before March 21st, 2023. This will prevent duplicate entries from being created when you re-sync them. 
2. Sign in to Gusto.
3. Go to the Payroll section.
4. Choose Payroll history. 
5. Select the payroll you want to sync. 
6. Click Sync. 

To view the newly synced bills in Xero, follow the steps above.  

View synced Manual Journals in Xero

1. In Gusto, process a payroll.
2. If auto-sync is not enabled: Select Sync to send the entry to Xero.
   •  If auto-sync is enabled: Once you run payroll you’ll see a “Synced” status on the payroll summary in Gusto. 
3. Sign in to Xero.
4. Go to the Accounting menu and select Reports.
5. Under “Taxes and Balances,” click Journal Report. You can use the search field in the top-right corner.
6. Select the date range to search and the order to display the journals.
   • Optional: Select Show Tracking to show any tracking categories included in the manual journals. Choose Show Posted Manual Journals Only to eliminate any draft journals.
7. Click Update.
8. Select the journal you’d like to view.

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: 

• Employer Benefit Expense: This tracks the cost of employer contributions to benefits.
• Benefit Liabilities: This tracks the amount owed to the benefit provider. It's the total of employee deductions plus employer contributions.

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.

1. Sign in to your Xero Account.
2. Go to Accounts > Bank Accounts and open up Reconcile.
3. Locate the debit that corresponds with the payment of your benefit or deduction
4. Click Create from the right-hand column next to the debit.
5. Enter in the details, selecting the liability account under What.
6. Click Add Details to submit the entry.

Option 2: Create a Bill or Invoice and associate that item with the liability account.

1. Sign in to your Xero Account.
2. Go to the + in the upper right-hand corner and select Bill or Invoice under New.
3. Manually enter or select the liability account from the drop-down menu under Accounts.
4. Finishing creating the Bill or Invoice.
5. Click Save or Approve.

If you have an accounting integration, you can customize the date associated with Gusto’s entry to better fit your bookkeeping needs.

The date of an entry dictates what period the expense information will fall in. For example, an entry dated September 30 would fall into Quarter 3 financials, while an entry dated October 1 would fall into Quarter 4 financials. When a pay period has a payday (or check date) that falls in a different month or quarter, this can create problems when you go to balance your books.

Entry date options

Our accounting integrations give you the ultimate flexibility for reporting, allowing you to choose from three entry date options.

• Debit date: This is the date Gusto initiated the debit for taxes and net pay from your company’s bank account.
• End of pay period: This is the recorded end of the pay period.
• Check date: This is the date your employees received their payments.

Note: If you elect to have the end of the pay period as your entry date, Gusto will default to the check date for any payroll with no pay period, such as an off-cycle payroll or a contractor payment.

Change your entry date options

You can change your entry date selection anytime in Gusto.

1. Go to the App directory section.
2. Click the name of the accounting integration you'd like to edit.
3. Click the Settings tab.
4. Below "Entry date," click edit.
5. Select a new setting.

Your payrolls will now export with Entry Dates based on your selection. If you need to go back and retroactively sync any payrolls with these new settings, you can do so.

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 2 payroll bank transactions.

Step 1. Use the Split function to reconcile the 1st transaction

1. Sign in to your Xero account.
2. Under your bank account, click Reconcile Items.
3. There should be 2 Gusto bank transactions. Next to the 1st bank transaction, click Find & Match.
4. Find and select the Gusto payroll invoice that was synced to your Xero account.
5. Click the blue Split option next to the selected payroll invoice.
6. Enter the 1st bank account transaction amount.
7. Click Split. This will calculate the difference and allow you to apply only the amount of this one bank transaction to the invoice. Now the total should match the 1st bank transaction.
8. Click Reconcile.

Step 2. Reconcile the 2nd transaction

1. Next to the 2nd bank transaction, click Find & Match.
2. Find and select the same Gusto payroll invoice that you just reconciled the first bank transaction to. The amounts should match up perfectly.
3. Click Reconcile.

Disconnect your company's Xero Accounting integration

1. Sign in to your Gusto admin account. 
2. Go to the App directory.
3. Click Accounting.
4. Click the Xero tile.
5. Click Disable Xero Integration on the right-hand side of the screen.
   • You will no longer be able to sync Gusto payrolls with Xero.
   • If you think you may want to sync again in the future, click 'cancel' below and then select 'no' for auto-sync. This will stop the information transfer to Xero, and will keep your mapping information saved.
6. Click Remove.

Mapping

If I update my mappings, can I re-sync a payroll to update the Bill?

You can re-sync a payroll from Gusto at any time. If you're syncing Bills, you will need to remove & redo any bank transactions from the Bill in Xero before re-syncing from Gusto. If you're syncing Journals, we will update the existing Journal. If you switch your transaction type, a new transaction will be created. To prevent duplicates, you will need to void previously synced Bills or reverse previously synced Journals.

Do you book the wage expense as gross wages or net wages?

Gross wages, meaning the wage expense will include employee pay, employee taxes, and employee deductions. Employer taxes and employer contributions will have their own expense line item. 

Do you break out individual taxes?

You will see each Employer tax on a separate item in your Xero ledger. 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 Settings tab.

At this time, we only support one account mapping to 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. 

How do I break out individual employee wages?

You can change the journal consolidation method to “by employee.” 

Can I include employee benefit deductions on the Journal Entry?

Employee deductions are included in the gross wages amounts that are reported on the Journal Entry. These are not tracked separately because they're 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 Contributions (see Benefits & Garnishments above).

How do contractor payments sync over?

You have two options for syncing contractor payments. See Step 11 of "Set up the Xero accounting integration" above for mor information.

Can we remove mappings if the payroll item is no longer active?

Not at this time. Once a mapping has been created, it cannot be deleted even if the payroll item is no longer active.

The way to handle this is to map the inactive payroll item to any account in Xero. No information will push over, so it will not have any impact. 

Can I sync international contractor payments to my bookkeeping software? 

At this time, international contractor payments are not supported by Gusto’s bookkeeping integrations. These payments will need to be added manually into your bookkeeping software instead.

Can unique reimbursements be broken out through separate mappings?

No, all reimbursements will be pushed over as a lump sum (e.g. Cell Phone Reimbursement + Gym Reimbursement + Office Supplies Reimbursement, etc.)

Syncing

What does the timestamp indicate?

The exact time Gusto successfully synced a payroll into the accounting software.

Is there a way to retroactively sync all payrolls once I enable auto-sync?

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.

Can I re-sync an entry that has already been reconciled?

You can re-sync a payroll from Gusto at any time. If you're syncing Bills, you may need to remove & redo any bank transactions in Xero before re-syncing from Gusto. If you're using syncing Journals, we will update the existing Journal. If you switch your transaction type, a new transaction will be created. To prevent duplicates, you will need to void previously synced Bills or reverse previously synced Journals.

Can I sync Gusto or NEXT insurance invoices to Xero?

Not at this time.

Splitting payments

Will transactions automatically reconcile?

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 > Bank Accounts, click Match.

How do I reconcile the two debits (net pay and taxes) with the subtotal in my Xero bill?

Refer to this section: Split payments in Xero.