Cloud accounting with bank feeds, invoicing and receipt capture.
Typical price
Check current pricing
Why we pick it
- Works with
Suits you once your shop has inventory, invoices and maybe a helper. It pulls details from receipts you photograph, and your accountant can see the books live.
Our approved alternative for the same job: QuickBooks
The guide
Each step in the order you'll need it.
Shops with inventory, invoices and staff ahead
You buy inventory in bulk, you may pay a helper, and you collect sales tax on your own site or at markets. Xero is cloud accounting with bank feeds and invoicing, and it has reports your accountant can read.
Xero suits you once you keep inventory records. With a few sales a month and no inventory records, you would pay for features you would not use.
If you buy inventory in bulk, such as liquidation pallets or wholesale cases, you need to see margin per line as well as total sales.
Bank feeds, receipts and sales tax
Xero imports transactions from your business account, and you match each one to a sale, a fee or a purchase. Receipt capture lets you photograph a receipt and attach it to the cost.
Marketplaces such as eBay, Etsy and Poshmark collect sales tax for you in most states; Xero tracks the sales tax you collect yourself. Plans differ in what they include, so compare them on Xero's US site.
Categories and a weekly reconcile
Connect your business bank account and your PayPal or marketplace payout accounts so payouts and fees come in automatically. Set up categories for inventory, shipping, packaging and platform fees.
Spend ten minutes a week reconciling. Photograph receipts for mailers, labels and inventory as you buy them so you have every one by tax time.
Give your accountant access to your Xero file before year end. They can review your categories during the year, which cuts the time they spend on your return.
QuickBooks or a spreadsheet
QuickBooks covers similar ground and is the package most US tax preparers know; its solo plans also estimate quarterly taxes. Pick it if your preparer prefers it.
With a few sales a month, a spreadsheet and each marketplace's annual report cover simple books for free. Move to Xero once you hold inventory and invoice customers.
For an LLC taxed as an S corp, or with payroll, Xero and QuickBooks both handle the extra bookkeeping.
Kit for this step
Form 1099-K and quarterly taxes
Marketplaces and payment apps send you a Form 1099-K once your payments pass the federal reporting threshold, and the IRS gets a copy. The figure is gross, so your books need to show the fees, refunds and cost of goods behind it; irs.gov has the current threshold.
If you expect to owe tax on your profit, the IRS expects estimated payments through the year. If you keep your books current in Xero, you can check each quarterly figure quickly.
Common mistakes
Each one costs you money or reviews, and each has a fix.
- Open a separate business account. Mixing personal and business spending slows reconciling.
- If you record a payout as income without its fees, you understate your costs. Record the gross sale and the fee separately.
- Reconcile weekly. A year-end backlog takes far longer than ten minutes a week.
- Some plans cap invoices or bills each month, so compare plan limits before you choose.
Guides that use it
Step-by-step help where this product does a job.
Questions
Straight answers to what sellers ask about this.
Does Xero file my taxes?
No. Xero keeps the books, and you or your preparer file the return using its reports.
Do I need Xero as a small seller?
Not at low volume. A spreadsheet covers simple books. Choose Xero once you hold inventory and invoice customers.
Can it handle marketplace fees?
Record each payout with its fees as separate lines, or use a connector app that splits them.
How much does Xero cost?
Xero sells monthly plans at different prices. Check current prices on Xero's US site.
Can my accountant use my Xero file?
Yes. Invite your accountant as a user and they work in the same records you keep.
Alternatives
Other picks for the same job, cheaper and pricier.
FreeAgent
FreeAgent files UK returns only, so it does not suit a US seller. For US books, use the Sage pick on this page, or any app that exports a Schedule C summary for your tax preparer.
Typical priceCheck current pricing
QuickBooks
Suits you if your reselling has become a business and you want income, costs and a running tax estimate in one place. It pulls in your bank and card transactions and sorts them into Schedule C categories.
Typical priceCheck current pricing
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Sage
Sage sells an accounting plan in the US, but its free starter plan is a UK product. For a US seller we point to QuickBooks, which more US tax preparers use and which groups costs the way Schedule C does.
Typical priceCheck current pricing