How to Track Inventory in Xero?


Ways to Track Inventory in Xero

There are two primary ways to track inventory in Xero.

  1. Tracked
  2. Untracked


Difference Between Tracked and Un-Tracked Inventory

The major difference between Xero’s tracked and Untracked inventory is that in the former, the quantity of each of your stocks is updated after every transaction involving that particular item.

In the case of Untracked Inventory, the individual quantity of the items is not maintained. In fact, a generic, “Inventory Asset” account is maintained that shows the total monetary value of all your stock at a particular time. Whilst you might use equipment such as portable man lifts and platforms along with manpower to keep track of how much physical stock you have, this might not be helpful if you are unable to track the monetary value of your stock.

We’ll talk about the difference in the accounting of both tracked and untracked inventory in different articles.

Whether you want to track inventory or not, this is decided at the item level in Xero. This means that you have the liberty of having both tracked and untracked inventory within a single organization.

However, an item can only be tracked or untracked at a single time you cannot assign both features to a single item at a single time.


Can you revert from Tracked to Un-tracked and Vice Versa?

An un-tracked inventory item can be changed to a “Tracked” inventory item but you cannot change an item’s status from Tracked to un-tracked. So this is the basic rule you should keep in mind before deciding how to set up your inventory item.


Problem with Overselling!

Once you start tracking your item, you have to make sure that you do not oversell. This simply means that you cannot sell more than what you have in your system.

On the face of it, this sounds logical.

I mean, how can you sell more than what you’ve got it’s quite normal in business operations where businesses usually sell more than what they own.

For e.g. a business may give an in-transit inventory that it is expecting to receive however, it’s not part of its normal inventory yet. Similarly, accounting software allows for dealing with negative inventory even if this is because of erroneous record keeping.

The reason behind this leniency is just to make sure that normal operations of a business are not halted because of some error and that the businesses will identify them later when they’ll perform audits.

However, this feature is not allowed when you track your inventory in Xero as it simply does not let your inventory go in negative.


How to Add Tracked Inventory in Xero?

By default, the items are added as Untracked. In order to make them “Tracked”, you need to checkmark a box, “I track this item”. That’s not all, there are certain other steps as well to follow. So why not start from the beginning.

Xero Tracked Inventory - Checkbox
Xero Tracked Inventory Checkbox – Fig (i)


Step by step guide to track your inventory

  1. From the main page (Dashboard) of your Xero account, click the “Accounts” menu.
  2. Click the “Inventory” sub-menu from the drop down.

    Xero Tracked Inventory - Dashboard
    Xero Dashboard – Fig (ii)
  3. Click the “New Item” button

    Xero Tracked Inventory - New Item
    Xero Add New Item – Fig (iii)
  4. After entering the Item Code and Item Name make sure that you check the “I track this item” checkbox mentioned above.
  5. As soon as you will mark the inventory as “Tracked”, Xero will ask you to assign an “Inventory Asset” account. Why does Xero need that account? You can know about this by reading this article about the accounting for tracked inventory in Xero.
  6. [Optional] You can also add the purchase price, sales price while setting up the item. This only gives you the convenience of not entering the purchase or sales price on every bill or invoice respectively.

Once done, just save the information and you’ve just added a tracked inventory item.


Adding Inventory Items in Xero Using CSV File

The above method is the direct way of adding items in Xero. However, there’s also one more way of adding items in Xero and that’s by importing a spreadsheet template in Xero.


Xero provides a pre-defined spreadsheet/CSV template using which you can add your items. This method is way quicker than the one explained above especially when you have bulk of items to be added. All you have to do is add those items in that CSV template and then import it in Xero.


However, the problem is that people get confused which columns to fill when importing tracked items as compared to when importing untracked items since the template to import both types of inventory items is same.

Before mentioning from where you can download this template and how you can import it back in Xero with all the data filled in, let’s see how the template actually looks like and what columns are you supposed to fill in order to add tracked inventory.

So here is what the template looks like

Xero Inventory Item Template
Xero Inventory Import Template – Fig (iv)


To add a tracked item, you need to make sure that these two columns are filled with the relevant data besides the mandatory columns:

a. InventoryAssetAccount

b. CostoOfGoodsSoldAccount

Once done, you can import this template by following the below procedure:

  1. from the main page (Dashboard) of your Xero account, click the “Accounts” menu. [See Fig (ii)]
  2. Click the “Inventory” sub-menu from the drop down. [See Fig (ii)]
  3. Click the “Import” button and then select the option of “Items”. [See Fig (iii)]
  4. From this window you can both download and upload the template. Since we need to import the template in Xero, we’d be selecting the file from our computer (of course after filling the required information) from the option 3, “Import the Updated Template File” by clicking the “Browse” button.

    xero item template upload
    Upload Item Templates – Fig (v)
  5. Select the file from your computer and click OK.
  6. Once done, click the “Continue” button.
  7. Xero will ask for confirmation and if everything is fine, the items will be imported within Xero.

So that’s how you can add tracked items in Xero. In case you need to know something else and feel that I’ve not been comprehensive enough, just let me know in the comments section.