Xero Inventory Management Guide: How it Works & Limitations

Xero is primarily cloud accounting software with some inventory management features to help businesses maintain stock levels and track inventory movements. 

Xero inventory enables businesses to efficiently manage their essential product items, ensuring that stock levels are accurately tracked to prevent shortages or overstocking. Xero maintains detailed supplier records, to streamline procurement processes and help businesses build strong relationships with their suppliers.  

Inventory management in Xero includes the following features: 

• Basic inventory tracking allows you to manage stock levels for essential inventory items to keep track of what you have in stock. Inventory tracking is particularly beneficial for retail businesses that need a reliable system to monitor inventory in real time.
• Supplier record maintenance with detailed records for each supplier, can help streamline procurement processes. Providing accurate and comprehensive information ultimately fosters stronger relationships with your suppliers.
• Sales and purchase order tools that enable you to track and manage your business transactions effectively. Maintaining accurate records of your sales and purchase transactions ensures your inventory levels are always up-to-date and reflect the most recent business activities. This is especially useful for businesses that deal with a high volume of orders and need to keep their inventory data current.
• Robust inventory reporting capabilities, allowing businesses to generate detailed reports on stock levels, movements, and trends. These reports can provide valuable insights into inventory performance and help you to make informed decisions about stock replenishment, pricing strategies, and overall inventory management.
• Inventory management in Xero supports bulk imports of inventory lists, enabling businesses to save time on data entry by importing multiple items at once. This feature is particularly beneficial for companies with extensive inventories and need an efficient way to update their inventory data quickly. 

Overall, Xero's inventory management functions provide a number of benefits to businesses, including improved stock management accuracy, streamlined procurement processes, effective transaction tracking, insightful inventory reporting, and time-saving data import capabilities. 

Xero's inventory management system offers users cost-effective, streamlined processes, and real-time insights into stock levels and financial data.  

Four main benefits of using a Xero inventory management system are: 

1. Cost-effectiveness: Xero is a cost-effective solution for small to medium-sized businesses looking to manage inventory without incurring high costs
2. User-friendly interface: Xero simplifies inventory processes with an accessible and easy-to-navigate platform, keeping all your inventory and financial information in one place
3. Automated updates: Xero automatically updates stock levels as sales and purchase orders are processed. This feature helps prevent stockouts and overstocking and enables more efficient inventory management
4. Seamless integration: Integration with financial data allows for real-time insights and more informed decision-making. Xero’s ability to integrate with other software is one of its most valuable features 

While Xero offers a robust inventory management system, it comes with certain limitations that are important to consider. Among these, Xero lacks advanced features such as batch and expiry tracking. This can be a significant drawback for businesses that deal with perishable goods or require detailed batch tracking. However, this functionality is available in more specialised systems like Unleashed.  

Xero also has a maximum limit (4000) on how many inventory items it can efficiently manage. This may pose challenges for companies with extensive product lines, potentially necessitating a different solution as their inventory grows. 

Additionally, inventory reporting in Xero inventory management are not as detailed or customisable as those offered by specialised inventory systems. 

Before you start, take some time to explore and familiarise yourself with Xero’s user interface to track inventory transactions effectively. Once you’re familiar with the dashboard there are five steps to follow: 

1. Adding inventory to Xero 

Begin by accessing the inventory section in Xero and inputting item details manually or via bulk import using CSV files. To do this, navigate to the inventory tab and select the option to add new items. You can enter each item's details, including name, description, purchase and sale prices, and stock levels.  

The bulk import feature offers an efficient method for managing many stock items. To use this feature, prepare a CSV file that includes all relevant item details following Xero's template guidelines and upload it directly into the system. 

2. Monitor inventory levels 

Monitor inventory levels actively through Xero's dashboard by regularly checking stock levels, reorder quantities, and sales patterns. This ensures that inventory levels are optimised preventing both overstock and stockouts. Stay updated on critical inventory metrics by utilising notifications and alerts to enable timely restocking and informed decision-making. 

Additionally, take advantage of Xero's integration capabilities to streamline inventory management. Integrating with third-party apps can provide additional functionalities, such as real-time inventory updates and automated order processing, tailored to your business's needs. For advanced features, consider integrating Xero with Unleashed, which offers comprehensive inventory solutions including batch tracking and advanced reporting.  

3.Integrate Xero with third-party apps (if needed) 

If the built-in inventory management features do not meet your needs, consider integrating Xero with third-party inventory management apps for additional functionality. These apps can offer enhanced features tailored to businesses like eCommerce, wholesale, or manufacturing. 

Leveraging Xero's built-in tools and third-party integrations can help you maintain a well-organised and efficient inventory system that supports your operational goals and growth.  

4.Utilise Unleashed for advanced features 

For businesses requiring advanced inventory management, Unleashed offers comprehensive integration with Xero. This includes automated transaction sync, real-time inventory tracking, batch tracking, serial number tracking, and advanced reporting capabilities. 

The robust feature sets of Unleashed complement Xero's capabilities, making it an ideal solution for businesses looking to enhance their inventory management system. Whether you are managing stock for eCommerce, wholesale, or manufacturing, Unleashed provides the tools needed to streamline operations and support business growth. 

5.Xero inventory tracking 

To set up Xero inventory tracking, you must ensure your inventory data is ready to upload and includes detailed descriptions and pricing. Set up supplier details and familiarise yourself with Xero’s interface to begin tracking inventory transactions efficiently. 

Start by categorising your inventory items to match the structure of your business. This involves setting up product categories, units of measurement, and pricing tiers to ensure accurate tracking and reporting. Input detailed descriptions for each item, including SKU numbers, supplier information, and reorder points to streamline reordering processes. 

Update your inventory data regularly to reflect real-time changes and use Xero's notification system to stay informed about low stock levels and reorder needs. Integrate Xero with barcode scanning systems to enhance inventory management and enable quick and accurate data entry. This reduces manual errors and improves inventory accuracy. 

For users who need more features, Xero offers integration with various third-party inventory management apps to up their inventory game. If you require more functionality than Xero offers for inventory management, numerous apps are available to enhance and extend your capabilities. These apps seamlessly integrate with Xero, providing additional features that cater to specific business needs across various industries. 

Unleashed Xero inventory management system 

Unleashed offers comprehensive integration with Xero, including automated transaction syncing, stock adjustments, real-time inventory tracking and intelligent demand planning. It also provides features like batch tracking, serial number tracking, and advanced reporting. Learn more here. 

Xero with Unleashed is a strong combination for most product businesses looking to gain greater inventory visibility or achieve rapid growth: 

• Unleashed seamlessly integrates with Xero to automatically push sales invoices and credit notes, ensuring that your accounting records are always current without manual intervention. Syncing purchase orders from Unleashed to Xero to maintain accurate supplier records and improve payment processes.
• Real-time inventory tracking enables prompt decision-making and ensures that stock levels are always accurate. This helps to avoid overstocking or stockouts. Track and manage stock levels with adjustments directly reflected in Xero, for accurate financial reporting.
• Batch tracking capabilities enable traceability and control over stock, from raw materials to finished goods. This is particularly useful for food and drinks businesses or those dealing with products that have expiration dates to help with compliance.
• Manage orders from quote to despatch with a user-friendly interface that tracks the entire sales process. Unleashed integrates seamlessly with Xero to enhance this process, offering real-time inventory management and automated transaction syncing. This ensures that sales invoices and credit notes are automatically reflected in Xero, maintaining up-to-date accounting records without manual entry.
• Advanced reporting features in Unleashed provide comprehensive insights into inventory performance. You can generate detailed reports that provide insights into your inventory performance, for better decision-making, strategic planning and inventory management.
• Manage individual items with unique serial numbers, providing accurate tracking and accountability for high-value items. Serial number tracking further ensures the accurate management and accountability of high-value items. Access a wide range of reports with advanced reporting functionality, including sales, costs, and stock reports. Generate 
• Advanced inventory reporting shows what to order and when, based on actionable insights from historical trends. Forecast demand and plan purchasing, automatically find under and overstocked lines to improve cash flow, plus much more to align on one sole source of truth.
• For businesses operating internationally, Unleashed supports multi-currency transactions, simplifying the management of global sales and purchases. Handle transactions in multiple currencies, making it easier to manage international transactions. 

These features make Unleashed a powerful tool for any business looking to efficiently manage inventory while seamlessly integrating with Xero for comprehensive financial management. 

• Try for free: Trial Xero integration with Unleashed for 14 days

Below is a list of some popular Xero inventory apps that can help with inventory management: 

Dear Systems 

A comprehensive inventory management solution designed to streamline operations and increase efficiency for businesses of all sizes. Its key features include real-time tracking, batch management, multi-currency support, ensuring accurate data, enhanced control, and seamless international operations. 

TradeGecko 

A robust inventory and order management platform catering to modern wholesalers, distributors, and eCommerce businesses. It offers customisable workflows, real-time analytics, and seamless integration with various eCommerce platforms, enhancing operational efficiency and decision-making. 

Orderhive 

An easy-to-use inventory management software designed for multichannel sellers to automate and synchronise their operations seamlessly. It features real-time tracking, automated order processing, and integration with major eCommerce platforms, saving time and reducing errors. 

Stitch Lab 

An inventory control tool that helps brands focus on growing their business by simplifying the management of multiple sales channels. It provides advanced reporting, easy integration with eCommerce platforms, and automated order processing. 

Veeqo 

An inventory management system that integrates seamlessly with Xero to manage stock across multiple channels and warehouses. It offers features such as real-time tracking, order automation, and detailed analytics to enhance efficiency. 

Craftybase 

Specifically tailored for makers and manufacturers, offering inventory, pricing, and production tracking. It provides detailed cost breakdowns and compliance documentation, ensuring accurate pricing and regulatory adherence. 

Stock&Buy 

Provides a flexible inventory and order management system for small businesses looking to centralise their operations. It includes features such as multi-warehouse management, real-time stock updates, and comprehensive reporting to improve accuracy and efficiency. 

A2X 

Designed for eCommerce sellers, providing inventory automation to simplify stock accounting and insights. It seamlessly integrates with accounting software and real-time financial reporting for better decision-making.