How quickbooks handles inventory management

Can Quickbooks Online or XERO do inventory management? : Stack The Facts

Can QuickBooks online or Xero do inventory management? Short answer yes. Long answer? Not for the long term.

Accounting platforms that eCommerce business owners have grown to love and live by, such as Quickbooks Online and Xero, offer functions to track inventory. It makes sense that small business owners would turn to these online accounting platforms to manage both their accounting, inventory tracking, and daily administrative tasks under one platform.

Unfortunately, Xero and QuickBooks don’t offer the advantages for eCommerce companies that also need to track manufactured inventory. These systems truly do not “manage” inventory in the way cloud-based inventory management systems ( or IMS ) do; they are limited in their capabilities regarding operations and creating workflows. 

What inventory management features do platforms like Xero offer? 

Xero is a brilliant option for your accounting, and it also boasts “simple inventory management” features. However, let’s look closer at these features and why they don’t offer advantages for eCommerce companies that need to track manufactured inventory. 

  • Track items in stock: There are significant limitations to this feature. Unfortunately, Xero can not track raw goods or work-in-progress goods. Additionally, you can’t operate on negative balances, and it won’t allow you to sell products not currently in stock. The “Track items in stock” feature is a poor choice for those that operate in a “just-in-time” inventory model or want the ability to presell items. 
  • Get reports on inventory and sales data- Because you can not input raw or manufactured details into tracking, your reports will not be accurate unless you sell a complete finished good. 
  • Invoicing- Xero does allow invoicing and purchase orders to update with your top-performing inventory products. However, it is manual and limited in its ability to reconcile reports against active inventory.

What features should an IMS have? 

If Xero is not a full inventory management system, what functions should you prioritize in an IMS? It can be overwhelming to look through the feature comparison charts for Inventory Management Systems in places such as Capterra, especially if you aren’t familiar with what an inventory management system should have. So to give a basic overview and just a few of our most significant talking points, ecommerce business owners should look for these key features when trying to find a platform that appropriately manages their inventory: 

  • Inventory forecasting: The ability to forecast inventory and buy accordingly to your sales data and current stock levels
  • Stock notifications: Never miss a beat on a re-order point again. You will get stock notifications when you are low. 
  • Multilocation management: Have several warehouses? Track multiple inventory locations under one platform so all departments can stay on the same page
  • Tracking of manufacturing materials: If your organization provides any produced materials or products, you can track manufacturing materials and costs, so your COGS are accurate
  • Inventory demand calculations: Know when and how much inventory to order with demand calculations and reports
  • Purchase Orders: Better overall workflows and updated reconciliations with purchase orders, packing slips, and invoices. 

The truth is, you need both.

A “one system fits all” that handles everything would be the dream for many ecommerce business owners. The reality is you need both online accounting and a cloud-based inventory management system.  That is unless you are willing to spend 75k or more (we’ve heard quotes as high as $300K) implementing an ERP system, 

Combining both a cloud-based accounting system and inventory management system allows you to have security and peace of mind that your essentials are maintained. Reduction of stress is only one small benefit when we integrate these two platforms. You will also find your business more able to scale and will become more sustainable. Overall, critical business decisions are made easier, your financials are validated, and your workflows are improved.