Xero inventory manufacturing setup

We can help you set up a manufacturing methodology in Xero to accurately track your cost of sales and quantity on hand.

It's important to note however that manufacturing cannot be done in Xero as a standard inventory workflow.

This means:

  • There is no bill of materials functionality to allow the manufacture, or perform an assembly of, several raw material inventory items into a single finished good item.
  • There is no automatic calculation for cost  of sales when a finished good, comprising of a number of separate raw materials in inventory, is sold.

What Xero does allow however is for you to purchase raw materials into stock and track the quantity and cost of that inventory.

Here are some videos on the three methods to handle inventory:

If you do not want to just do an overall stock adjustment journal each month (method 1) then there are two ways of using Xero to track cost of sales after you have bought in the raw materials:

  • Once a month, and based on what was sold, you expense the raw materials to cost of sales (method 2). Finished goods set up as untracked ‘service’ items
  • After each manufacturing run convert the raw materials used in the process into a specific quantity of available finished goods. This reduces raw materials on hand and increased finished goods (method 3). Finished goods set up as tracked items

    If you would like a hand setting this up after watching the videos above then please book a workshop with our systems team and we can guide you through the process and answer any questions specific to your business.