Tracked inventory

Use tracked inventory to manage and count your inventory items. Tracked inventory also automatically updates your inventory accounting records.

To access Inventory, go to Accounts, then select Inventory.

What is tracked inventory?

With tracked inventory, Xero keeps a count of your inventory items and updates the count for items purchased and sold. Xero also calculates the value of items on hand and updates your accounting records.

With tracked inventory, your organization can:

Is tracked inventory suitable for your organization?

Xero's tracked inventory is suitable for your organization if you:

  • Have fewer than 4000 inventory items you want to track.
  • Can use the average cost inventory accounting method.
  • Want to enter your inventory purchases and sales as you make them.

Tracked inventory is not suitable for your organization if you:

  • Are already using a third-party inventory app.
  • Operate with negative inventory. That is, you sell goods before you've purchased them. Xero won't allow you to have negative inventory.
  • Use the periodic inventory method. That is, you only update your inventory at month end or year end, using inventory adjustments to update your inventory records. You can't enter bulk inventory adjustments in Xero.
  • Manufacture goods for sale.
  • Require purchase order receipting.

If Xero's tracked inventory is not right for your organization, check out our inventory app solutions on the App Marketplace (xero.com website).

Important information you need to know about tracked inventory

Before you get started with tracked inventory, make sure you understand the following information.

  • Once an item is marked as tracked, Xero updates its quantity and value on hand when a transaction is approved, not as at the transaction date

    For this reason, before you convert an untracked item to a tracked item, make sure you've entered and approved in Xero all transactions dated before the inventory tracking start date which use your item. Transactions that affect a tracked item's quantity and value on hand are invoices, bills, credit notes, spend money and receive money transactions.

    How can I enter a tracked inventory transaction dated before my tracking start date?

  • You can only convert a tracked item to an untracked item in some situations

    Troubleshooting for inventory

How does Xero value tracked inventory?

Xero uses the average cost method to value tracked inventory items. This is calculated as:

Item value = (opening balance value + purchases value - cost of goods sold value) / quantity on hand

What is included in purchases value?

Purchases value includes the cost of items in:

  • Bills with the status Awaiting Payment and Paid (that is, approved bills)
  • Spend money transactions

What is included in cost of goods sold value?

Cost of goods sold value includes the cost of items in:

  • Invoices with the status Awaiting Payment and Paid (that is, approved invoices)
  • Receive money transactions

How does Xero account for inventory?