Within the Expenses section on the Xero add-ons settings page, you will have the option to send completed stock order totals to Xero where an accounts payable invoice will be raised, as either Asset or Expense.
Choosing Asset requires an asset to be chosen for the purchases account and an expense for the cost of goods sold. Choosing Expense requires an expense for the purchases account.
- Choosing to record inventory purchases under Asset is a perpetual system. This configuration updates Xero inventory balances continuously in real-time with purchases and sales. Using the Asset configuration, you will need to choose an asset for the purchases account and an expense for the cost of goods sold.
- Recording inventory purchases under Expense is a periodic system. With this configuration, an occasional count measures the level of your inventory and COGS in Xero. This count is a set period which can be once a month, once a quarter or even once a year. Using the Expense configuration, you will need to map purchases to a Xero Expense account.
Your stock orders will be available to be viewed on Xero when received. They will flow through into Xero as standard as a bill and will be assigned to your Asset or Expense account, based on your inventory purchases configuration in the Xero add-ons settings page.
We recommend using the Asset configuration as it gives you a real-time view of both your COGS and gross profit. But please bear in mind that this configuration is purely a recommendation and this does not constitute financial advice. If you are ever in need of advice on how to configure your Xero account, it is always best to seek the financial advice of an accountant.