Creating Item Records in Xero

If your business buys and sells products, Xero can help you with the necessary record-keeping.

When it comes to keeping track of inventory, product-based small businesses are probably a little envious of companies that sell services. Service companies may have occasional scheduling and staffing difficulties, but they don’t have to keep a close watch on how many they have of everything, constantly. Service companies might also have unsatisfied customers from time to time, but they don’t have to deal with returns or exchanges – and the bookkeeping those require.

If you do have inventory you have to manage, Xero provides tools that help you:

  • Create records for items that you buy and/or sell,
  • Include those items in transactions like invoices and credit notes,
  • Order your inventory items using purchase orders, and,
  • Run reports to learn the status of your stock.

Building records

If you have an inventory item file that is in – or can be converted to – CSV format, Xero will import it. This process requires absolute precision and accuracy, so it’s best to let us help you with it.

You can also manually enter your items manually using Xero’s pre-built record templates. To get started, open the Settings menu and select Inventory Items. Click +New Item to get a blank version of this window:

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Figure 1: Simply fill in the blanks and select options from drop-down list to create an item record in Xero.

Tip: If you pay or charge sales tax on items you buy or sell, you’ll need to set these up before creating item records. Go to Settings | General Settings | Tax Rates and select +New Tax Rate.

Before you start building these inventory item records, you should have devised a procedure for assigning an Item Code to each item for your internal use. In the screen shot above, “GB1-White” signifies that this is one white golf ball. Enter the desired code, then the Item Name. This should be short and easily understood.

If you buy items that you then sell, click in the box in front of I purchase this item to enter a checkmark. Do the same for I sell this item. In the first blank field, enter the price you pay to buy one item. Click the arrow to the right of the field under Account to open your list of accounts and select one. This will most likely be Cost of Goods Sold (talk to us if for some reason you believe it should be different). Then select a Tax Rate and type in the description that you’ll use in your communication with suppliers, including purchase orders.

Fill in the sales fields similarly, keeping in mind that your customers will see the Sales Description on invoices, etc. When you’re done, click Save or Save & add another.

Using items, keeping tabs

Once you’ve saved an item record, it will have its own page in Xero that contains the information you just entered. You can click on Edit item to modify it, Delete to remove it, and the third small icon in the upper right to attach a document. Below the sales and purchase information, you’ll see a list of recent transactions that includes the item and a history of the changes made to it. You can also add notes here.

When you create an invoice, for example, you’ll be able to select your item(s) from a drop-down list on the form:

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Figure 2: Xero makes it easy to add items to sales transactions.

Your inventory-related transactions will appear in numerous reports. Three that you should pay special attention to are:

Inventory Items Summary: Shows you where inventory items have been used in transactions. This report also includes Qty columns that tell you how much you bought and sold during the selected period, and a Net Qty column that subtracts the total sold from those purchased.

Inventory Item Sales: Displays related invoices that have been approved and payments that have been received for individual items.

Inventory Item Transactions: Just what it sounds like. Shows transactions you’ve entered for each item.

Note: You will have to “drill down” from other reports to display the second two listed here. If you’re not familiar with this concept, we can show you how it works.

It’s easy to create item records in Xero, but understanding the flow of inventory-tracking can be challenging. And it’s important that transactions are entered correctly and resulting data analyzed accurately. Before you take it on, let’s sit down and go over the critical concepts you’ll need to know.

 

 

 

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