Integrate with Xero

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.  

Xero integrates with Gusto through the company's Gusto account. Each time you run payroll, the details of the transaction can be synced automatically or manually and will push the accounting Bill (taxes, wage expenses, liabilities) to your Xero account.

There are also options for additional levels of granularity within the entry based on earnings types, Gusto departments, and Xero Tracking Categories.

Click on the headers below to learn more.

Integration setup

  1. Click the Settings tab.
  2. Under Software Integrations, click Add New Integration.
  3. Next to Xero, click Connect to Xero.
  4. Enter your Xero credentials to get connected.
  5. Click Authorize to allow Xero and Gusto to sync.
  6. Map your chart of accounts.
  7. Select if the payroll sync will run automatically or manually.
  8. Elect whether you would like to automatically or manually approve the Bill in Xero.
    • Note: Gusto will default to approving the Bill automatically.
  9. Choose the specific date you'd like to have appear on the entries Gusto sends to Xero.
  10. Click Save.

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

Sync your payroll

  1. Navigate to the Reports tab.
  2. Navigate to the Payroll History tab.
  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.
  7. The Bill 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.”

Account mappings

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

  • Earnings Types (Regular, Bonus, Commission etc.)
  • Employer Taxes
  • Reimbursements
  • Benefit Expenses
  • Benefit Liabilities
  • Deduction/Garnishment Liabilities
  • Owner's Draw

Once all payroll items are matched with the corresponding accounts, the building blocks are in place for the Bill 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. More detail in the Bill results in 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.

Learn more about account mapping

Department mappings
 
Department mappings are another way to add additional granularity. With department mappings you can use different accounts for the different payroll items within a department.  This means you can have the earnings of one department go to one account and the earnings of a second department go to a different account.  This will expand the entry we send over into the accounting software.
 
As an example, I have two departments: Design and Marketing.  Before I enabled department mappings, all regular wages earned went to one "salaries and wages" expense account.  After enabling department mappings, I can use two expense accounts: a "Sales Wages" expense account and a "Marketing Wages" expense account.  When running reports in my accounting software I will have this additional breakdown.
 
Tracking Categories
 
When setting up your mappings, you will simply align a department with a Tracking Category. The result will be the same accounts in your default mappings that are used for each department will now be tagged with Tracking Categories. The line entry will then tie to your dimensional reporting needs in your accounting software. You can even have a combination of different expense accounts with different Tracking Categories.
 
 
Benefits and deductions
 
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.  
 

Splitting payments to reconcile expenses

Because there are two bank debits for each payroll (taxes and net pay), admins will need to use a tool called "Split Payments" to reconcile them to one invoice. Gusto can help with how to split payments in Xero.

 FAQs

Syncing

Q: What does the timestamp indicate?

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

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

A: You will need to un-reconcile an entry in Xero before you can re-sync it. If you re-sync a payroll prior to un-reconciling, a duplicate Bill will come over.

Mapping

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

A: Yes 

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

A: 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. 

Q: Do you break out individual taxes?

A: We do not break out individual taxes. By transitioning to Gusto you will no longer have tax payments coming over to your balance sheet as a liability. Taxes are handled on a cash basis instead of an accrual basis, our tax debits for each payroll are considered a closed transaction.

Q: Can I post over individual employee payroll information?

A: Gusto does not currently support mapping for individual employees.  Payroll information is pushed over at the company level.

However you can accomplish this by using Departments. Add one employee to each team, which can then map to specific accounts. Post this over to see the individual employee payroll details. 

Splitting Payments

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 using “Match” under Accounts > Bank Accounts.

Other

Q: Do you support Xero Tracking Categories?

A: Yes

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 the checks are cashed by your employees. We do incorporate the amount of each check in our Bill. 

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