- Full coverage: Xero Fulfils Wishlist with Inventory and Practice Reports
Online accounting software company Xero has released a simple inventory for small businesses to track the quantity and value of the products they buy and sell.
This week’s release is an improvement on Xero’s existing ability to track inventory items and services, bringing it one step closer to the full inventory offered by desktop accounting software.
“It gives us a degree of parity with traditional desktop providers. Inventory is one area where we haven’t had such a strong story before. Now we can cater for simple inventory scenarios,” Tim Howell, Xero’s global product manager, said to Digital First. “We’re not trying to pretend that it’s a complex inventory solution.”
Which Businesses Are a Good Fit for Xero Inventory?
This fits a broad range of businesses that sell a small range of products. “It can suit plumbers who sell services predominantly but may want to track pipes and other parts in the back office,” Howell says. “It could suit a barber who may sell some shampoo or hair product. They don’t have massive quantities or many configurations.”
A hairdresser who sells a larger range or more complex configurations would be better off using Unleashed or Dear inventory software from Xero’s addon ecosystem.
Xero can track a buy and a sell price for individual items and calculate profit margins. Xero’s inventory is intended for finished products only; it would be unsuitable for selling products comprised of multiple parts of other products.
Tasks also out of its ambit include tracking negative stock, managing multiple storage locations (warehouses) or perishable items with use-by dates.
The images below show the main screens for inventory. Click to enlarge.
What Can Xero’s Inventory Do?
Businesses can now see the number of items on hand when they send out a quote or invoice. This will help them make better decisions around restocking or, if stocks are low, to supply alternatives that are in stock, Howell says.
““If you have 50 books in stock and you’re trying to sell 100 of them the system will tell you you don’t have that many to sell,” Howell says.
The items field will automatically show in a pop-up bubble how many of that item are on hand. The number in the pop-up is black if the quantity of items in the quote is less than the total stock available, and red if the order is above the stock on hand.
The Xero app for Android also displays inventory quantities.
This is a big improvement over the old method where a user had to look up inventory items in a separate screen.
As quotes are accepted, items are automatically updated on the balance sheet. This gives the business a real-time view of its financial position. “It could mean the business orders more of that particular item which keeps its revenue moving or they look to sell something else that they have in stock that they want to clear out,” Howell says.
The item details view shows the buy and sell price for the item. A panel on the right-hand side shows key information in a dashboard layout. It shows how many items are in stock, the average cost of the item, how many are on order and how many have been committed, and the total value of the stock held.
At the bottom of the item details view is a list of recent transactions showing how many items have been sold, billed or ordered.
“This improved visibility means you can see which products are selling well and which aren’t. That way you can plan the right level of inventory and reorder at the right time so you don’t have too much, or too little, of anything,” Xero said in its blog post.
Xero has split inventory items into two categories, tracked and untracked. Untracked items are anything a business doesn’t need to keep in count. For example, services, freight or items you drop-ship.
Tracked items are for products or stock levels that a business needs to keep an eye on.
Xero will only run inventory accounting on the tracked items. Xero updates the inventory on the balance sheet to display the real-time value of a business’ items. The cost of goods sold is calculated automatically to show the amount of profit.
Xero plans to add additional reports, archive of inventory items, setting and managing minimum re-order levels and inventory count (stock take).
Xero has produced a short video showing how Xero inventory works.
How to Set Up Xero Inventory
The first step to using Xero inventory is to set up your items and enter opening values and quantities. You can add your items all in one go, then step through the guided opening balances import. Inventory has been moved out of Settings and into the Accounts menu tab in Xero.
Xero has put together educational assets to guide you through the set-up process.
- Education videos: We’ve prepared Xero U education content for Inventory, with videos on ‘Setting up Tracked Inventory’ and ‘How to Use Tracked Inventory.’
- Documentation: And for more detailed instructions on how Inventory works, visit our Help Centre.
- Company blog post: Read the announcement by Xero.