About Tracked Inventory
Inventory items are converted as 'Un-tracked Items' this allows the items to be connected to the COGS account and the Sales account. Your source file may allow tracked items to be connected to the COGS account, sales account and inventory account.
In this scenario inventory accounts are set up as 'other assets' and as Xero does not have an 'other assets' account the inventory accounts are generally converted as a 'fixed asset'. Xero will not allow you to change the 'fixed asset' to an 'inventory asset' account so there is some manual work to implement tracking post-conversion.
Setting up Inventory Tracking in Xero
This is a two-step process:
Step 1: Setting up Inventory Asset Accounts & Inventory Tracking:
- Set up Inventory accounts - Inventory (Asset), COG and Adjustment (Expense) (Check each code and category)
- Export Inventory items as a .csv
The details contained in each row will become the default settings for that particular Inventory Item. If the purchase and name details are missing you can copy the sale description column and paste it into the purchase description and name column.
Note: Xero will not allow you to bring in a .csv file if there are over 1000 items. If you have over 1000 items please split the .csv so that there are under 1000 items.
Step 2: Importing opening balances:
Once the items have been re-imported into Xero you can now update the opening balances.
- Under the Business tab select 'Products and Services'
- From the Import drop-down select opening balances
- Select your Opening Balance Date.
- Download template with existing opening balances
- Update template Including the quantity balances for each item
- Save as a .csv
- Import updated figures into Xero
If you're not changing the balance of the account that holds the value of your inventory item your Adjustment Account will be the same as your Inventory Asset Account. However, if you are changing the balance of this account, the Adjustment Account and the Inventory Asset Account will be different.
For example, if you want to move the balance from the original Inventory account then you will need to use this as the Adjustment Account.
Any purchase orders and quotes that are in existence will need to be updated to reflect the new accounts and details. This will ensure that the details flow into the inventory for all purchase orders, quotes, invoices and bills.
Once you have imported the opening balances for inventory it is worthwhile checking your tax defaults for the sales and purchases to ensure that this remains consistent. You can check your tax defaults for sales and purchases in your financial settings. This helps with the flow when creating future purchase orders, quotes and invoices.
If you are unsure use the Demo company for practice before importing it into your Xero organisation.