Simple inventory management software
Keep track of what’s in stock with inventory software. Populate invoices and orders with items you buy and sell.
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Unopened boxes containing new stock are stacked near a laptop that displays items in inventory management software.
Track items in stock
Xero keeps count of items and their value.
See what's selling
View reports on how well items are selling.
Add items to invoices
Use preset details in invoices and orders.
See how to monitor stock in real time
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Track items in stock
Keep count of the items you have in stock as you buy and sell with inventory software in Xero.
Track up to 4000 finished items through the inventory management system
Look up the quantity of items on hand and available to sell
See the total value of the stock on hand for any item
How we’re enhancing inventory management in Xero
Posted 9 months ago in Product
What is inventory accounting and why do it?
Inventory is the biggest cost facing many businesses. See how good inventory accounting can help.
A worker stacking crates of fruit into a delivery van and doing inventory accounting
What is inventory?
Inventory are the items that your business has bought, with the intention of on-selling to customers. The items may be resold without change, or they could be combined into a new product.
What isn’t inventory?
Equipment and supplies you’ve bought to run your business, such as work tools, vehicles and stationery, typically aren’t treated as inventory. They’re recorded as expenses.
If you’re in ecommerce, and the goods you sell are supplied directly from a third-party to the customer, then you don’t have inventory either. You must own something for it to be inventory.
What is inventory accounting?
Inventory has a value – even before you do anything with it – and so it’s listed as an asset on your business balance sheet. But it can lose its value fast if it gets old, out of date, damaged, or the market price for that type of product drops. It also costs money to store.
Inventory accounting helps you figure out the value and costs of your inventory. That’s important for things like setting prices, getting insured, budgeting, working out taxes, and selling your business. It can also help you identify where you’re making the most money in your business.
Benefits of inventory management
Here’s how inventory accounting and management can help you both save money, and make money:
Maximising sales: Make sure you never run out of a product that people are buying
Lowering your bills: Reduce storage (and write-off) costs by ordering fewer of your slow-moving items
Getting you better deals: Learn what you should be ordering a lot of, and shop for bulk discounts
Showing where you make a profit: Properly tracking stock costs will tell you the true margin that products make you
Helping you do clever marketing: Identifying seasonal sales trends will help you plan promotions
Controlling tax bills: Timing of your order can affect your tax and when it’s due
Good inventory management will also help your cash flow. Instead of tying up money in slow-moving stock, you can keep it as cash and use it for more productive things like paying down debt or improving the business.
How to do inventory accounting
To understand your inventory, you need to know how much there is, what you’re spending on it, and how much you’re selling it for.
You can use rough estimates or get super specific in how you work this out. It all comes down to your inventory accounting methods, and the systems you put in place.
Learn more in our guide to Inventory.
If you run a small, goods-based business, you’ll know that managing inventory well is critical to your success. But as the number and complexity of ecommerce channels continue to increase, and customer preferences continue to evolve, it can be overwhelming to manage inventory across multiple online and bricks and mortar stores.
You may manage your inventory using Excel, but this can be manual, time consuming and prone to errors. And while there are a number of inventory solutions on the market, many aren’t suitable for small, goods-based businesses. This can make it hard to understand the true cost and demand of your products, potentially impacting your revenue and cash flow.
That’s why we’re acquiring LOCATE Inventory (LOCATE), a cloud-based inventory management provider based in the US. The LOCATE team will be joining Xero to help us enhance our existing inventory solution in Xero, so you can better manage your inventory and improve your financial performance.
It’s still early days, but our vision is to provide an inventory management solution that will help you:
save time on manual and repetitive data entry, so you have more time to focus on tasks that help your business thrive
manage the balance of supply and demand in your business, so you don’t over-purchase stock and can better manage your cash flow
make smart decisions about how you price your products, so you can improve the profitability of your business
grow your business sales, by making it easier to sell on new sales channels and reach a wider audience
In the meantime, our product teams will be getting our platform ready by updating our existing inventory solution in Xero. In the months ahead, you’ll notice some pages will have a fresh new look. These will include the product details page (including history and notes), as well as the workflows to edit an item, make an adjustment to stock, import an item and import an opening balance.
This is all part of our work to upgrade the technology that underpins our platform, so we’re prepared to benefit from LOCATE’s inventory capability and expertise. As always, we’ll continue to listen to your feedback about what you’d like to see in Xero, so we can develop an inventory solution that gives you a complete picture of your profit margins by product and channel – all in the one place.
See what's selling
Run inventory management reports to find out how well different items are selling.
See the best-selling and worst-selling items
See the most profitable and least profitable lines
Use data to make informed buying decisions
Add items to invoices
Create reusable text - like item descriptions and prices - to use in quotes, invoices, and purchase orders.
Save the details of the items you buy and sell regularly
Select items to add them to an invoice, quote or purchase order
Amend the pre-populated description, price or sales tax