Keeping tabs on inventory is a constant challenge for many small businesses. Accurately tracking stock levels and costs can feel like an uphill battle.
Luckily, Xero offers built-in tools and integrations to help simplify inventory control and provide greater visibility into your stock.
In this guide, you'll learn how to leverage Xero for key inventory management tasks like tracking stock in and out, monitoring reorder points, synchronizing data with POS systems, and more. You'll also get best practices to refine your processes for accurate reporting and minimal waste.
Introduction to Inventory Management in Xero
Xero is a popular online accounting software that offers robust inventory management features to help small businesses track stock levels and prevent wastage.
With Xero, you can:
- Easily create inventory items and record inventory purchases
- Track stock on hand across multiple locations
- Set up reorder points to be notified when stock runs low
- Perform inventory adjustments to account for spoilage, damages, etc.
- Generate insightful reports on inventory turnover, stock value, and more
By leveraging Xero's inventory management capabilities, businesses can optimize their stock levels, minimize carrying costs, and avoid out-of-stocks that lead to missed sales. Tight inventory control is key for improved cash flow and overall business performance.
Xero seamlessly integrates with many POS systems and inventory management apps as well to further enhance inventory tracking functionality. For retail stores and manufacturers, Xero delivers the end-to-end visibility needed to make data-driven decisions around inventory planning.
In summary, tracking inventory is a vital component of working capital management for product-based businesses. Xero makes inventory accounting simple through automation, real-time visibility across channels, and actionable insights.
How do you maintain inventory in Xero?
Maintaining accurate inventory records in Xero can streamline operations and provide greater visibility into stock levels and costs. Here are the key steps:
Set up inventory items
Create individual inventory items in Xero for each product you stock. Capture details like unit cost, sales price, and opening balances. You can also track purchase and sales details for each item over time.
Record inventory purchases
When you receive new inventory, create a bill in Xero or connect to a POS system to sync stock purchases. This updates the on-hand quantity and value of inventory items.
Record inventory sales
Similarly, sales in Xero or synced from a POS will reduce inventory quantities and update cost of goods sold (COGS). This gives you an updated picture of stock on hand.
Track inventory value
Xero automatically tracks the value of inventory by multiplying on-hand quantities by the unit cost of each item. This allows you to easily track the value of current inventory.
Calculate COGS
As sales occur, Xero calculates COGS based on the unit cost of the inventory items sold. This helps determine profit margins.
Adjust inventory as needed
Conduct periodic stocktakes to count physical inventory. Make adjusting entries in Xero to sync the system to actual stock on hand. This maintains accuracy.
Following these best practices will ensure you have real-time visibility into the state of inventory, allowing better cash flow control and purchasing decisions.
Does Xero have a stock management system?
Xero has built-in inventory tracking features that allow you to manage stock quantities and values directly within the software. Here's an overview of Xero's inventory management capabilities:
- Inventory items: You can set up details for the different products and items you stock and sell. This includes information like descriptions, sales prices, purchase costs, and inventory account coding.
- Recording purchases & sales: As you buy and sell inventory items, the stock quantities and values are automatically updated in Xero. Purchases increase your stock on hand, while sales reduce it.
- Inventory tracking: Xero maintains a running tally of your inventory quantities and the total value of your stock. You can view inventory reports to see what you have on hand across all locations at any time.
- Manual adjustments: You can also manually adjust your inventory when needed to account for things like waste, damage, returns, etc. This ensures your stock on hand records match your physical counts.
While Xero provides basic inventory management features, there are also dedicated inventory apps available on the Xero App Store if you need more advanced capabilities like warehouse management, batch tracking, manufacturing support, etc. But for many small businesses, Xero's built-in tools are sufficient to track stock quantities and maintain accurate inventory records.
How to do stock inventory control?
Keeping accurate stock records is crucial for effective inventory management. Here are some key techniques businesses can implement:
Prioritize location and accessibility
Store inventory in an organized manner that enables easy access and visibility. Use clearly labeled shelves, bins, or storage areas. Conduct regular inventory checks and updates.
Establish the floor and layout arrangement
Structure the physical warehouse space to optimize workflow and inventory monitoring. Keep high-volume goods near shipping areas. Assign consistent locations to specific products.
Get rid of unneeded stock
Identify and remove outdated, damaged, or excess products taking up space. This streamlines stock visibility and frees up room for other inventory.
Set a cycle count schedule
Conduct partial inventory checks on a routine basis, rather than relying solely on annual full stocktakes. This provides more frequent data to keep count accuracy high.
Check stock quickly after delivery
Promptly reconcile incoming shipments against purchase orders to verify accuracy. Address any delivery discrepancies with suppliers right away.
Label all products
Use barcode scanning or RFID tags for quick product identification. Consistent labeling improves count precision.
Keep an eye on expiration dates
Track shelf life of perishable or dated goods. Rotate oldest stock to front of shelves and remove anything past expiration.
Make sure you're keeping track of your inventory
Use inventory management software to monitor stock levels in real-time. This provides visibility for purchasing, sales, and operations planning.
Taking a proactive approach with these inventory control procedures will help businesses maintain optimal stock levels and accuracy.
How do I account for stock in Xero?
To account for stock inventory in Xero, follow these steps:
- Enter the details for each inventory item you want to track. This includes entering a Code and Name for the item.
- Check the "Track inventory item" box. This enables Xero to track the quantity of this item in stock.
- Select an "Inventory Asset" account. This tracks the value of your inventory as an asset in your chart of accounts.
- Select a "Cost of Goods Sold" account. This account tracks the direct costs attributable to the production of goods sold during a reporting period.
- When purchasing inventory, ensure the purchase invoice correctly updates the item's quantity and value.
- When selling inventory, ensure sales invoices correctly update the item's quantity, value, and cost of goods sold.
- Use inventory adjustment notes to record stocktakes, shrinkage, wastage, and other adjustments.
Accurately tracking inventory is crucial for understanding the true costs of goods sold and the value of stock on hand. Following these steps configures Xero to provide trusted inventory reports. Reach out for assistance if any part of the inventory accounting process remains unclear.
Getting Started with Xero Inventory Tracking
Properly tracking inventory is critical for businesses to maintain real-time visibility and control over stock levels. With Xero's inventory tracking features, companies can closely monitor inventory quantities and values to optimize stock control.
Understanding Tracked vs. Untracked Inventory in Xero
Xero offers both tracked and untracked inventory options:
Tracked inventory allows you to:
- Import and record specific inventory items
- Assign a unit cost for each item
- Track item quantities with each purchase and sale
- Generate inventory reports showing values and margins
This gives precise visibility into exactly which items are in stock and what they are worth.
Untracked inventory records inventory value in aggregate without tracking individual items. This simplifies accounting but lacks the detailed tracking needed for robust inventory management.
For advanced inventory control, tracked items are recommended.
Importing Inventory Items to Xero
To start tracking inventory properly in Xero:
- Navigate to the Settings menu
- Select Inventory
- Click Add an item
- Enter details like item name, description, quantity, unit cost etc.
- Click Save to add the item
Repeat this process to build out your item list. You can also import items in bulk via CSV import.
Accurately setting up inventory items is crucial for enabling precise tracking in Xero.
Utilizing Xero Inventory Management Apps
Xero offers a range of inventory management apps in their App Store for added functionality:
- Inventory management apps like Dear Inventory allow bulk item import/export, warehouse management, bundle products, etc.
- Retail Express and Vend integrate point-of-sale (POS) systems with Xero for retail inventory control.
- Unleashed provides multi-location inventory tracking with barcode scanning.
These apps optimize inventory processes directly within Xero for seamless stock management.
With Xero's robust tracking capabilities and integration with specialized inventory apps, businesses can achieve precise inventory control and data-driven decision making.
sbb-itb-be9f1e0
sbb-itb-be9f1e0
Recording Inventory Purchases in Xero
Accurately recording inventory purchases in Xero is critical for keeping stock levels and financial records up-to-date. This section will cover key tips for linking purchase invoices to inventory items and managing supplier relationships through purchase orders.
Linking Purchase Invoices to Inventory Items
When receiving inventory, it's important to connect the related purchase invoices to the right products in Xero. Here are some best practices:
- Enable inventory tracking in Xero for the items you want to monitor stock levels for. This allows you to tie purchase invoices to specific inventory codes.
- When entering bills in Xero, make sure to select the correct inventory item code that the purchase relates to. This will automatically update the on-hand quantity for that item.
- Set up repeating bills for routine purchases from suppliers. Associate these with inventory items so stock is deducted automatically with each payment.
- Use purchase orders to track expected inventory. When the shipment arrives, the PO will pre-populate the bill to ensure the correct items are updated.
Following these steps ensures your inventory stock values stay aligned with purchasing activities.
Managing Supplier Relationships and Purchase Orders
Streamlining supplier interactions can make inventory management much simpler. Here are some tips:
- Maintain a complete supplier list in Xero with contact details, payment terms, etc. This gives you a centralized database for managing relationships.
- Send online purchase orders to suppliers to communicate expected deliveries. This allows you to track inventory before it arrives.
- Set up repeating purchase orders for routine restocking. This reduces admin time spent reordering.
- Leverage Xero's purchase order workflow to automatically receive stock against open orders, generating bills for payment.
- Monitor overdue purchase orders to follow up with suppliers when expected deliveries don't arrive on schedule.
By systemizing supplier interactions through purchase orders, you can work more efficiently with vendors to keep stock levels aligned.
How to Adjust Inventory in Xero
Adjusting inventory levels in Xero can help ensure your records stay accurate as inventory is used, received, lost, or damaged. Performing periodic inventory adjustments is an important part of managing stock levels and analyzing business performance.
Executing Inventory Adjustments for Accurate Reporting
To record an inventory adjustment in Xero:
- Navigate to the Inventory section
- Select the item(s) you need to adjust
- Enter the new Quantity on Hand value
- Enter a reason for the adjustment (e.g. loss, damage, correction)
- Select the account it should post to (e.g. Cost of Goods Sold for loss/damage)
- Save the adjustment
Recording adjustments properly impacts your inventory reporting:
- The Quantity on Hand for each item updates to reflect additions or reductions
- Inventory and COGS accounts update based on the adjustment reason and posting account
- Dashboards and reports show accurate, up-to-date inventory levels
This helps provide transparency into stock counts and integrity in the data.
Inventory Adjustment Best Practices
Follow these best practices when adjusting inventory:
- Conduct regular stocktakes to compare physical and digital counts
- Adjust any discrepancies in a timely manner to maintain accuracy
- Provide clear reasons for each adjustment during recording
- Review reports frequently to catch and fix errors early
- Analyze adjustments to identify loss trends and optimize operations
Closely monitoring adjustments and sticking to best practices helps optimize inventory management over time.
Accurately tracking inventory is crucial for understanding business performance. Following these tips for making inventory adjustments in Xero can help streamline operations.
Streamlining Stock Control with Xero Features
Xero provides several useful features to help businesses efficiently manage inventory and stock levels. The business performance dashboard gives valuable insights into inventory health, while reorder points and alerts enable proactive stock control.
Leveraging Xero's Business Performance Dashboard
Xero's customizable dashboard allows you to monitor key inventory metrics at a glance. You can add widgets tracking:
- Total inventory value over time
- Top selling inventory items
- Inventory turnover rate
- Historical inventory levels
- Inventory performance vs targets
Reviewing these metrics regularly enables you to spot trends, identify fast/slow-moving items, and assess overall inventory performance. This helps guide purchasing decisions and inventory planning.
For example, noticing a spike in turnover rate and depletion of key products shows rising demand, signaling when to reorder more stock. Reviewing bestsellers shows which items may warrant larger reorder quantities. Slow-moving items might need promotions to boost sales.
Setting Up Reorder Points and Alerts in Xero
You can configure reorder points for each inventory item in Xero. Reorder points automatically trigger alerts when the stock quantity on hand drops below the defined level.
To set up reorder alerts:
- Go to Settings > Inventory
- Select an item and scroll to Reorder Point
- Check "Enable automatic reorder point"
- Set quantity based on average sales, lead times etc.
- Click Save
Xero will now display alerts when the item needs reordering. You can also run Inventory Reorder Reports identifying which items need restocking based on their reorder points.
Configuring reorder alerts ensures you proactively maintain adequate stock levels. By reordering based on predetermined optimal quantities rather than scrambling when stockouts occur, businesses can improve both customer service and profit margins.
Integrating POS Systems with Xero for Inventory Control
Integrating a point-of-sale (POS) system with Xero can provide businesses with valuable real-time inventory tracking and sales data analytics. This integration eliminates manual data entry and synchronizes inventory counts with sales transactions, ensuring you have an accurate picture of stock levels at all times.
Choosing the Right POS System for Your Business
When selecting a POS system to integrate with Xero, consider the following:
- Integration capabilities: Choose a POS system that offers a seamless, bi-directional integration with Xero. This allows real-time syncing of sales and inventory data between the two platforms.
- Inventory management features: Opt for a POS system with robust inventory tracking tools, such as inventory count adjustments and reorder notifications. This complements Xero's inventory reporting.
- Scalability: As your business grows, ensure your POS system can scale alongside increasing sales volumes and inventory. Cloud-based systems tend to offer the most flexibility.
- Cost: Balance features with affordability. Entry-level POS systems offer core functionalities for smaller retailers, while more advanced systems suit bigger product catalogs and sales volumes.
Synchronizing Sales Data with Inventory Levels
An integrated POS-Xero system automatically updates Xero with each sales transaction. This provides:
- Real-time tracking: Inventory counts in Xero decrement with each sale. You can view up-to-date stock levels at any time.
- Accurate ordering: As inventory depletes with sales, Xero sends alerts when items need reordering. This prevents stock-outs.
- Streamlined reporting: With all transactions recorded in one system, Xero can generate detailed sales and inventory reports. This assists purchasing decisions.
- Reduced wastage: By maintaining optimum inventory levels tied to actual sales demand, businesses avoid over-ordering. This saves costs.
Overall, a POS integration eliminates manual inventory tracking and gives retailers real-time visibility over stock movements. This keeps inventory aligned with sales trends for better operational efficiency.
Enhancing Xero with Inventory Management Software
Xero provides a robust foundation for basic inventory management needs, including tracking inventory quantities and values over time. However, businesses with more complex inventory requirements may benefit from integrating specialized inventory management software.
Exploring Advanced Inventory Management Systems
Advanced inventory management systems offer additional features like:
- Batch and serial number tracking - Trace inventory at batch or product level
- Multi-location management - Track inventory across multiple warehouses and locations
- Manufacturing support - Manage bills of material and work orders
- Barcode scanning - Enable fast, accurate inventory counts
- Custom reporting - Gain insights with tailored inventory reports
By connecting advanced systems to Xero, businesses can build on top of Xero's accounting foundation to handle intricate inventory scenarios.
Integrating Xero with Specialized Inventory Software
To integrate Xero with specialized inventory programs:
- Select software with Xero integration capabilities, such as DEAR Inventory, TradeGecko, or Unleashed. These tools connect directly with Xero for streamlined data flows.
- Configure the connection through the inventory platform, linking it to the appropriate Xero organization.
- Set up synchronized transactions, pushing inventory adjustments from the inventory system into Xero in real-time.
- Review inventory accounts, items, purchases, and adjustments in Xero after syncing.
- Use the inventory platform as the primary interface for managing inventory operations day-to-day. Rely on Xero for overarching financial reporting and accounting.
Choosing integrated solutions enables businesses to unlock advanced inventory management capabilities while maintaining Xero as the source of truth for overall finances and accounting.
Inventory Management Best Practices in Xero
Maintaining accurate inventory records is critical for effective stock control and optimized business performance. Here are some best practices for inventory management in Xero:
Maintaining Accurate Costing and Pricing
- Input purchase costs for inventory items accurately in Xero to reflect true costs
- Routinely update pricing in Xero when supplier costs change
- Perform periodic testing to ensure actual margins align with targets
- Set up inventory alerts for price changes of key products
Accurate costing and pricing prevents distortion in inventory valuation and contributes to reliable financial reporting. It also ensures prices remain aligned to margins as supplier costs fluctuate.
Regularly Reviewing Inventory Levels and Performance
- Run Xero's inventory and sales reports weekly or monthly
- Analyze stock turnover, margins, and other metrics over time
- Review bestselling items, dead stock, and products with minimal turns
- Assess trends to make informed decisions about inventory mix and volumes
Routine analysis provides visibility into how inventory is performing. Tracking metrics over time allows for data-driven decisions about what to stock more or less of, to maximize sales and optimize cash flow.
Following inventory management best practices helps businesses maintain efficient operations, accurate financials, and informed strategy. Leveraging Xero's reporting and analysis tools can provide the visibility needed to closely monitor and control inventory.
Conclusion and Next Steps in Xero Inventory Management
Managing inventory effectively in Xero can help streamline operations and provide greater visibility into stock levels and controls. Here are some key takeaways:
- Use the Items menu in Xero to track inventory items, set up reorder points, and record inventory purchases and adjustments. This helps maintain accuracy.
- Connect a barcode scanner or POS system to quickly record inventory transactions and simplify stocktakes. Apps like Dear Inventory seamlessly integrate.
- Review inventory reports regularly to identify fast/slow-moving items, optimize stock levels, and improve procurement practices.
- Set up automated purchase orders and transfers based on preset reorder points to maintain adequate stock.
- Consider an integrated inventory management platform like Unleashed or DEAR for more advanced functionality as business needs evolve.
Carefully evaluating current inventory workflows and identifying opportunities to implement the tips above can lead to greater efficiency, cost savings, and insights to inform smarter business decisions. Maintaining tight stock controls and visibility provides a key foundation for managing finances, sales, and operations.
