Xero Inventory Management: When Xero Is Enough, and What to Do When It Isn’t

Xero has inventory management, and if you use Xero in the UK or Ireland, it may give you everything you need. If you buy and sell a manageable range of finished goods, Xero lets you track quantities and values, calculate cost of goods sold, and connect purchases and sales directly to your accounts.

The trouble usually starts as your operation grows. You open another location. Someone creates a spreadsheet to track something Xero cannot. You start buying stock for projects. You need serial-number or batch traceability. You add a workshop, trade counter, ecommerce channel or hire operation. You solve each new requirement as it appears: another spreadsheet, another app, another integration. Before long, you are running one connected physical business through a collection of disconnected systems.

You may have outgrown Xero as the system that runs your physical operation without having outgrown Xero as your accounting system.

What can you do with Xero inventory management?

Xero gives you straightforward stock control within your accounting workflow.

In the UK and Ireland, you can track up to 4,000 finished items. You can monitor quantities and stock value, add products to purchase orders and invoices, calculate cost of goods sold and report on product sales. Xero has also continued to improve its inventory functionality, including stock adjustments, purchasing workflows and backorders.

If you buy finished goods, hold them and sell them through a relatively simple operation, Xero can work very well.

Xero also offers Inventory Plus, which adds deeper inventory, order and ecommerce capabilities. However, Xero currently offers Inventory Plus in the US rather than Ireland or the UK.

If you need more sophisticated Xero stock control here, your next step will usually involve inventory or operations software that integrates with Xero.

When is Xero inventory enough for you?

If your stock follows a straightforward path, you may have no reason to add another system.

You buy finished goods. You know where you keep them. You sell them. You want to know how many you have, what they are worth, what they cost and what margin you made. If that describes your operation, stick with the simpler solution for as long as it works.

The point to reconsider your setup comes when stock starts participating in a wider operational process. At that stage, you need to know considerably more than what you bought, what you sold and what remains.

Where can you start to outgrow Xero inventory?

You probably will not wake up one morning and decide you suddenly need sophisticated inventory software. You will notice the workarounds first.

Your spreadsheets start filling the gaps

You still keep your accounts in Xero, but purchasing has a spreadsheet. Your warehouse has another. Someone keeps a serial-number list. Sales maintains its own view of available stock. Your project managers track materials somewhere else.

Before long, those spreadsheets have become an inventory system of their own. Your purchasing, sales, warehouse and project teams can now look at the same stock and see different answers.

You keep stock in more places

A single quantity tells you much less once you hold products in different warehouses, branches, trade counters, project sites or workshops.

Now you need to know where something is, what you have already committed, what you can actually promise to a customer, whether another location could fulfil the order and whether you should transfer stock or buy more. Your stock-management problem has become an operational one.

You need to know exactly which item went where

Sometimes quantity is not enough. You may need to know which serial number or batch you received, where you stored it, which customer received it and what happened to it afterwards.

If you sell high-value equipment, handle warranties, work in a regulated sector or service what you sell, that history can matter as much as the quantity on hand.

You use stock as well as sell it

Your stock does not always leave the shelf because a customer buys a SKU. You might buy materials for a project, issue parts to an installation, consume stock during a service visit or use components in a workshop repair.

Now you need to answer another question: What did this job actually cost you? If your operational systems cannot tell you, your finance team has to reconstruct the answer later.

You stay involved after the sale

This is where Xero’s inventory model can become particularly restrictive for product and equipment businesses.

You may sell a piece of equipment and then deliver it, install it, maintain it, repair it, supply parts for it, bring it into your workshop, hire another unit to the same customer and eventually replace it.

Your relationship with that product now runs far beyond buy → stock → sell.

Your product does not stop existing when it leaves inventory. Why should your operational system stop following it?

Fragmentation is where you start paying the real price

When you encounter a new operational problem, adding another specialist application can look like the obvious answer.

You add a stock-control app for inventory. A field-service platform for service. A project package for jobs. A POS system for your trade counter. A rental package for hire. You use Excel to bridge the gaps. Each choice can make sense at the time.

Then you start paying for the connections between them. You duplicate product records. You maintain customers in several systems. Your people re-enter information. Your integrations become critical infrastructure. Someone checks three applications before answering a customer’s question. Your finance team tries to reconcile what actually happened afterwards.

You have one business, one customer and one product moving through a connected commercial journey. Your software has split that journey into pieces.

You can often see the symptoms in your accounts

Weak inventory and disconnected operations do not stay in the warehouse. You can see their effects in your cash, margins and management information.

You tie up cash in stock

As you grow, inventory can consume cash surprisingly quickly.

Some products sell quickly while others sit for months. If your team does not trust the stock information, people often compensate by holding more “just in case”. Better visibility helps you decide what to buy, when to buy it and whether you already have suitable stock somewhere else.

You struggle to explain margin

Your supplier changes a price. You write stock off. Your sales team discounts an order. A project consumes more materials than expected. Your workshop uses parts nobody allocated properly to the job.

Xero can tell you that your gross margin changed. Your operational system should help you understand why.

Your finance team becomes the clean-up crew

If your team spends month end posting large stock adjustments, investigating differences and reconciling spreadsheets against your accounts, you are using finance to compensate for weak operational information.

That takes time away from analysing your business and turns routine reporting into reconstruction.

Your customers notice

Your customer does not care which system caused the mistake. They care that you promised stock you cannot find, delayed their project because a part did not arrive, or cannot tell them when their order will ship.

What begins as a stock-control problem can quickly become a customer-service problem.

You can outgrow Xero inventory without outgrowing Xero

Your business can become operationally complex without becoming financially complex.

You may still like Xero. Your accountant may like Xero. Your finance team may know it inside out. It may still give you exactly the accounting, VAT, reporting and financial workflows you need.

A second warehouse, a workshop or a hire operation does not automatically create a reason to replace your general ledger. It may simply mean you now need your financial system and your operational system to do different jobs.

You can keep Xero as your financial system while specialist operations software manages the detailed workflows around your products, equipment, customers, stock and work.

Your operational teams get a system built around what physically happens in your business. Your finance team gets the accounting information it needs without rebuilding your operation in spreadsheets.

What should good inventory and operations management give you?

You should be able to trust the information you use to run the business. Your purchasing team should see real demand before placing an order. Your sales team should know what it can genuinely promise. Your warehouse should know where your stock is and what you have already committed.

If you run projects, you should know which materials each job consumed. If you service equipment, your team should see the equipment history and the parts you have used. If you run a workshop, you should know what work you completed and what it cost.

Your finance team should receive clean financial information without rebuilding your operation at month end. And you should be able to understand what is happening without gathering the answer from five systems and three spreadsheets.

What should you look for in inventory software that integrates with Xero?

Start with what actually happens to products and equipment in your business.

If your lifecycle mostly looks like this:

buy → stock → sell

a conventional inventory-management system may fit you extremely well.

Your operation may be more complicated. You might sell through several channels, buy materials for projects, install equipment at customer sites, hold spare parts, run a workshop, service what you sell and hire some of the same equipment.

In that case, ask whether your next system can give you:

• control across your warehouses, branches and stock locations;
• batch and serial-number traceability;
• purchasing that responds to real demand;
• project purchasing and material consumption;
• visibility of equipment after you sell it;
• workshop parts and labour;
• service history;
• hire, off-hire, inspection and repair;
• trade-counter and fulfilment workflows;
• integration with Xero without duplicating all of your operational detail.

Then ask one more question:

How many other applications will you still need?

Many strong inventory products focus primarily on distribution, manufacturing, ecommerce or field service. That can work very well when your business fits neatly into one of those categories.

Your challenge grows when you do several of them at once. As your operation becomes more complex, solving every new workflow with another disconnected application can eventually create a bigger problem than the gaps you originally set out to fix.

Operations software for the full product and equipment lifecycle

Turbo Inventory, part of the same group as Big Red Cloud, takes a broader approach.

Turbo is operations software for the complete product and equipment lifecycle.

Imagine you sell a piece of equipment. It first arrives in your warehouse as stock. You sell and install it at your customer’s site. Two years later, it comes back for service. Your workshop uses spare parts to repair it. You lend or hire the customer another unit while you work on theirs. Eventually, you take the original equipment back and replace it.

To your customer, that is one continuing relationship with your business. To you, it is one commercial and operational lifecycle.

Other tools can split it across inventory, projects, service, workshop and hire. Turbo lets you keep that lifecycle connected, from purchasing and stock through sales, projects, service, workshop and hire.

One connected operational thread through the full product and equipment lifecycle.

If Xero still works for your accounts, keep it. Turbo integrates with Xero so your operational teams can manage the detail in Turbo while your finance team receives the relevant accounting information in Xero.

You still need to get the process right

Better software will only help if your people can trust the way you use it.

You need accurate opening stock. You need sensible product and unit structures. Your locations need to match the real world. Your people need to know how and when to record stock movements. Purchasing, sales, warehouse, operations and finance all influence the quality of your inventory information.

So onboarding, training and ongoing support part of the inventory project itself. With Turbo, our Customer Success team works proactively with you through onboarding and beyond. We continue training your team as you use the system and help you embed the processes you need to keep your operational information reliable.

If you are in Ireland, you can also access free certified inventory-management training

In Ireland, you can access free certified inventory-management training through the Education and Training Boards.

That gives you a way to build inventory knowledge across your team rather than concentrating it in the person who happened to implement the system. The more your purchasing, warehouse, sales, operations and finance teams understand the process, the more value you can get from the software behind it.

Have you outgrown Xero inventory?

You may need more than Xero’s native inventory if several of these sound familiar:

• You rely on spreadsheets to understand your stock.
• You hold products across several operational locations.
• Your teams disagree about what is really available.
• You need batch or serial-number traceability.
• You buy or consume stock for projects.
• You sell equipment that you later install, service or repair.
• You run a workshop.
• You hire or rent equipment.
• You operate a trade counter or more complicated fulfilment process.
• You manage different stages of the same product lifecycle in different applications.
• Your finance team spends too much time reconciling operational information.
• You still like Xero and would rather not replace it.

If none of those describe you, Xero’s inventory may be exactly what you need. If several do, you probably do not need to replace a perfectly good accounting system. You need to give your increasingly complex operation a better place to live.

If your products keep moving after the sale, your operational system should keep moving with them.

Keep Xero. Give your operations room to grow.

See how Turbo Inventory works with Xero across purchasing, stock, sales, projects, workshop and service, hire and the full product and equipment lifecycle.

Frequently asked questions about Xero inventory management

Does Xero have inventory management?

Yes. If you use Xero in the UK or Ireland, you can use its native inventory functionality to track relatively straightforward finished goods, quantities, values, purchases and sales.

Is Xero Inventory Plus available in Ireland or the UK?

No. Xero currently offers Inventory Plus in the United States rather than Ireland or the UK.

Can you keep Xero and use more advanced inventory software?

Yes. You can keep Xero as your accounting platform while specialist inventory or operations software manages your more detailed product, stock and equipment workflows. You can then pass the relevant financial information between the two systems.