Hi there, I’m Nick Roberts, I am an accountant who has been working in public practice for the last 12 years.
I was an early adopter of Xero in 2007, and have been working with this platform (as well as other accounting systems since). I would like to use my expertise to help people with their use of Xero and other accounting software solutions.
For this blog post I am going to cover the options that can be used for managing Inventory within Xero.
Overview
- Use Xero’s inbuilt functionality to manage inventory, or connect a dedicated inventory app.
- Xero’s feature lets you save details of things you buy and sell regularly as inventory items. If you hold stock of these items, you can track the quantities and values you have on hand.
- If you have more complex inventory needs, Xero integrates with a number of specialist inventory apps that provide richer functionality.
Using inventory items
When you create an item, you can specify default price, account, tax rate and description details.
Use your item list to save time and standardise your invoices and bills. When creating a transaction, select from the item list to prefill transaction fields with the details saved in the inventory item.
Tracking inventory items with Xero
Tip
Tracked inventory is not related to tracking categories. Tracking categories are used to review and compare different areas of your organisation.
Track your inventory items if you want Xero to count stock and account for the cost of goods sold. You can also report on the quantity and value of stock you have on hand.
When a sale is made, Xero records revenue and related purchase costs in the same accounting period
Some restrictions apply to tracked inventory:
- You buy and sell finished goods only. Xero can’t track raw materials or work-in-progress.
- You must hold stock of the items you sell. You can’t operate negative inventory balances, or record the sale of an item if you haven’t recorded its purchase.
- You don’t already use a third-party app to manage inventory.
Managing inventory with an inventory app
For some organisations, an app inventory solution will be more suitable. You might consider using an app if your organisation:
- Has more than 4000 inventory items you want to track.
- Wants to use periodic inventory. That is, you only update your inventory at month end or year end, using inventory adjustments to update your inventory records.
- Manufactures goods for sale.
- Operates with negative inventory, that is, you sell goods before you’ve purchased them.
- Requires purchase order receipting.
- Needs to use a different inventory accounting method than average cost, for example, FIFO (first in, first out) or LIFO (last in, first out).
Check out the inventory app solutions available to use with Xero at the App marketplace (Xero website).
In future product spotlights I will be looking at different stock systems to let you know which ones are the best to use.
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Thank you for your time in reading this, if you have any questions or suggestions for future posts please contact me at nick@zero-tohero.com or on 022 405 9312.
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