Welcome to the Fit Small Business
Xero training course. In this lesson we're
going to cover how to set up products
and services in Xero. To follow along
with me
login to your Xero account now or click
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this link to access our full Xero course
and other helpful resources. Let's get
started! One of the benefits of using an
accounting software program like Xero is
the amount of time it will save you when
it comes to managing your day-to-day
business operations. Unless the products
that you sell are custom-made for each
customer, you will generally have a list
of core products and services that you
sell to your customers. By taking the
time to setup your products and services
in Xero, you will be able to create
invoices, purchase orders, and other forms
in a few short minutes. Instead of having
to type out each product or service on
the form, you will be able to make your
selections from a drop-down list. For the
purposes of this lesson, we will discuss
how to enter inventory items
individually into Xero. However, if you
are converting from another accounting
software program and you have a lot of
items you, can import them into Xero from
a CSV or excel file. Head over to our how
to import products and services lesson
for step-by-step instructions on how to
do this. You can access this lesson by
clicking this link.
There are two ways to set up inventory
in Xero.
First off, if you sell products or
services that you do not need to keep
track of the quantity and cost for, those
items will be set up as untracked
inventory. For example, any kind of
service such as consulting or
bookkeeping services would be considered
untracked inventory. On the other hand,
products that you need to keep track of
the cost and quantity purchased and sold
will need to be set up as tracked
inventory. For example, if you purchase
cases of water that you turn around and
resell to your customers, then you should
keep track of what you paid for the
water as well as how much you sell the
water for. This will allow you to run
reports, so that you can gain a better
understanding of your sales and profit
margin. Whether they're setting up
untracked inventory or tracked inventory
items, the steps are exactly the same.
Let's walk through the steps to add a
new inventory item to Xero.
From the accounts menu, we want to go ahead and select inventory.
So this is a list of
our inventory items that we have
currently set up in Xero, so we'll go
ahead and click the new item button here.
Let's walk through each of these fields,
so that you can see what information you
need to provide in order to set up a new
item. We'll go ahead and set up a build
website item for Acme Web Pros Plus.
The item code field is a unique code, up to
30 characters long that should be
assigned to the item so that you can
easily identify it.
For example, if your items have an SKU, an ISBN number, or UPC code,
use this number as your item code.
For services, you could use a shorter
version of the item name as we are doing
in this example.
So our item code is website and then the item name will be
billed website.
The item name is a description that tells you exactly what
the item is that should be included here.
This field can be up to 50 characters
long by marking the "I track this item"
field, you want to track the quantity and
cost for anything that you select here.
So once you've select it, the account
outfield will display to the right and
this will show the account that will be
used to track the item for accounting
purposes and for this example the
account is inventory. If you are setting
up a service or product that you do not
need to keep track quantity and cost for
then there is no need to put a checkmark
in this field. One thing that you should
note, is once you have posted
transactions to an inventory item that
you are tracking you can no longer make
any changes or revisions to the actual
account field. This field here.
"I purchase this item": If the item that
you are setting up is a product that you
purchase from a supplier and you want to
keep track of the quantity and cost of
those purchases make sure you put a
check mark here in this box. Enter the
unit price select the accounts and the
tax rate for the item as well.
This information will help you to quickly
populate purchase orders that you create
and send to suppliers. Keep in mind that
you can always change this on a per
transaction basis. If you sell the item
to a customer you will need to enter the
sales price information here. You will
need to enter the unit price here, the
sales account that you want to keep
track of the income, the tax rate, and a
brief description that you want to
appear on quotes, estimates, invoices, and
receipts for customers. Once you have
completed all the fields, you want to
make sure and save your changes.
Once you save your changes, you should receive a
notification here that shows you the new
item has been added. While the steps to
edit an inventory item are a piece of
cake, there are some restrictions on what
can and cannot be changed for both tracked
and untracked inventory items.
Let's discuss the limitations first and then
we will walk through how to make changes
For both tracked and untracked inventory
items, if you change the item code,
it will flow through to existing
transactions, quotes, and purchase orders
that use that inventory
item. For both tracked and untracked
inventory items, if you change any field
other than the item code, it will only
affect future transactions, quotes, and
purchase orders that use that inventory
item. You can convert an untracked item
to a tracked item. Additional information
on how this works, can be found if you
click the link below.
For tracked inventory items
you cannot deselect the "I purchase this
item" or "I sell this item" checkbox.
And finally a tracked item cannot be
converted to an untracked item, therefore
we suggest that you set up a brand new
item if you need to untrack an
existing inventory item. Let's go ahead
and see how we would edit an inventory
item. So we will go ahead and circle back
to the inventory by clicking accounts
and then inventory and then you just want to
select the item that you'd like to
change by clicking on it.
To edit this item we would simply need to just click
the Edit item button here, and any field
that is not grayed out you can make
changes to. Once you have made all the
changes necessary, be sure to save your
work. When it comes to deleting
anything in an accounting software, the
rule of thumb is generally that you
should not do it. The primary reason for
this is to ensure that historical
information remains intact. Similar to
editing, there are limitations on what
inventory items can be deleted. Most of
the limitations apply to tracked
inventory because of the impact on cost
of goods sold and the inventory value.
Let's discuss the limitations first and
then we'll walk through the steps on how
to delete an inventory item. You can't
delete a tracked inventory item if it's
been used on an approved invoice or an
approved bill. One of the many features
that makes Xero stand out ahead of its
competitors is the ability to assign a
role with
specific permissions to a user.
Depending on user permissions, you can set up
employees who can only create
transactions and you or someone else
must approve them. You will learn how
user permissions work and how to invite
users lesson. Click this link to access
this lesson.
You can't delete a tracked
inventory item if it's been used in a spend
money or receive money transaction
A spend money or receive money
transaction is when you pay for
something,
for example spin, or receive money, for
example receive, like picking up lunch
for the office or receiving a rewards
check from your credit card company.
You can't delete a tracked inventory item that
you've added an opening balance - and
finally you can't delete a track
inventory item that you've made an
adjustment to. You can't delete a tracked or
untracked inventory item if it is used
on a recurring invoice or bill. However,
you can remove the item from the
repeating recurring invoice or bill
first, and then you can delete the item.
Step-by-step instructions on how to do
this can be found in the link below.
To delete an inventory item, you simply want
to select the item that you would like
to delete.
Click on the options button
here in the upper right hand corner and
select delete. As you can see, we received
a notification here that lets us know
the impact of deleting an inventory item
and so in this case it says deleting
inventory items will not affect reports
or historical transactions and this is
due to the fact that this item has not
been used in the transaction. Please
understand that once you click the
delete button there is no undo button.
If you realize later on that you need an
inventory item that you have deleted, you
will have to add it back to your
inventory item list. We recommend that
you make an inventory item inactive
before you delete it.
If you have an inventory item that you
no longer plan to use but you cannot
delete it because it has been used in a
transaction, then you can make it
inactive. You can mark tracked and
untracked inventory items as inactive.
To make an inventory item inactive, you want
to go ahead and select that item
and then click the drop down options button
and select mark as inactive. It says the
item has been updated. Items that have
been marked as inactive will still
display on your item list with inactive
in the item name. And as you can see
that's what's taking place for this
particular item that we just inactivated.
It's still on the list with an inactive
stamp to the right here. If you need to
start using an inventory item that you
previously marked as inactive, you can
make this change pretty quickly. So we'll
go ahead and select this item that is
currently inactive and you can click on
the options button once again and select
the mark as active option. It says the
item has been updated if we go back to
our inventory list. Now we see this item
is listed here and the inactive mark or
stamp has been removed. Another benefit
of keeping track of your products and
services
in Xero is that you will have access to
reports that will give you insight into
your cost, quantities, and sale of all
inventory items. To navigate to the
inventory reports, we'll go to reports
and select all reports and on the screen
the reports are grouped by category
so we want the inventory grouping here.
So you can see there's three reports
listed here but if we click on these
dots we've got a couple more. So there
are total of five inventory reports
listed here. Two of the reports are older
reports and the reason why I say that is
because they don't have the new stamp
here like these three do.
For the purposes of this lesson, we will focus on
the three new
reports. The new reports are part of
zeroes recently updated reporting
package that features greater
customization. We'll discusses in more
detail in our reporting in Xero course.
Click this link to access this course.
So let's first take a look at the inventory
items summary report. The inventory item
summary report shows all tracked, untracked,
active, and inactive inventory items for
a period of time. This report will show
the opening balances, purchases, cost of
goods sold, adjustments, closing balance,
and sales for each item. The next report is
inventory item details report. The
inventory item details report shows the
quantities on hand and changes to the
value for all active inventory items.
This report will not show any items that
you have made inactive or that have been
deleted. And finally the inventory item
list report. The inventory item list
report shows the total quantity and
value for all tracked and untracked
inventory on hand. As you can see this
report shows you the item code, item name,
the description of the items, the type,
whether it's untracked or tracked, unit
costs, unit sales price, the value of any
inventory on hand, and the quantity on
hand.
That wraps up the lesson on how to
set up products and services in Xero.
To access our full Xero course or any of
the other lessons in this series click
this link. You can also find a link below
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