Xero has built-in stock control called tracked inventory. For a Singapore retail shop or F&B outlet, it keeps a running count of each item you buy and sell, values your stock using weighted average cost, and posts cost of goods sold (COGS) automatically when a sale is recorded. It works well for businesses with a manageable product list, one stock location and a disciplined way of getting sales into Xero.
This guide explains how retail and F&B SMEs actually use Xero for stock control, what a sensible setup looks like, where the built-in features stop, and the mistakes we see most often when reviewing Xero files for Singapore SMEs.
What Is Xero Tracked Inventory?
Tracked inventory is a setting on each product in Xero’s Products and Services list. When you switch on tracking for an item, Xero links it to three accounts: an inventory asset account, a cost of goods sold account and a sales account.
From then on, stock moves automatically with your transactions:
- Approving a supplier bill for the item increases quantity on hand and the inventory asset value.
- Approving a sales invoice for the item reduces quantity on hand and moves the cost into COGS.
- An inventory adjustment corrects the quantity or value, for example after a stocktake or when goods are damaged.
Items you do not track (untracked items) still save descriptions and prices for faster invoicing, but Xero does not count them or value them. Most businesses use a mix of both.
Tracked vs untracked items at a glance
| Tracked item | Untracked item | |
|---|---|---|
| Keeps quantity on hand | Yes | No |
| Values stock on the balance sheet | Yes, at weighted average cost | No |
| Posts COGS automatically on sale | Yes | No, purchases go straight to an expense or COGS account |
| Best for | Resale goods with meaningful value | Services, low-value consumables, packaging |
How Xero Calculates Stock Value
Xero uses the weighted average cost method for tracked items. Each time you approve a bill at a new purchase price, Xero blends that price into the existing average. When you sell, COGS is posted at the current average.
Here is a simple illustration in SGD:
- You hold 100 bottles of olive oil bought at S$8.00 each. Stock value is S$800.
- You buy 50 more at S$9.20 each (S$460). You now hold 150 bottles worth S$1,260.
- New average cost is S$1,260 ÷ 150 = S$8.40 per bottle.
- When you invoice 10 bottles, Xero posts S$84.00 to COGS.
Built-in Xero does not offer FIFO costing. If your supplier prices swing a lot, for example imported produce or seasonal goods, your margins in Xero will move gradually rather than reflect each new price straight away. That is normal under average cost, but it is worth explaining to anyone reading your management reports.
How Retail SMEs Use Xero for Stock Control
Retailers such as gift shops, hardware stores, beauty supply shops and specialty food retailers tend to get the most out of native Xero inventory, because most of what they sell is bought in and resold without changing form.
1. Build a clean item list before switching on tracking
Each item needs a unique item code (your SKU), a name, purchase and sale prices, and the correct GST tax rates. In Singapore, a GST-registered retailer will usually set the sales tax rate to standard-rated at 9% and the purchase tax rate to the matching standard-rated purchases code. Import items in bulk using Xero’s CSV template rather than keying them one by one.
2. Record purchases through bills, not bank transactions
Purchase orders in Xero are useful for documenting what you ordered, but stock on hand only increases when the bill for tracked items is approved. If a staff member pays a supplier and simply codes the bank payment to an expense account, Xero never sees the stock arriving.
3. Get item-level sales into Xero every day
This is the step that makes or breaks stock control for retailers. Xero relieves stock only when a sales invoice containing the tracked item is approved. Many shops record their daily takings as a single lump sum, which means revenue is right but quantities never fall.
The practical fix is a daily sales summary invoice: one invoice per day, with each item sold listed as a line. If your point-of-sale system can post an itemised daily summary to Xero, use that. If it only posts a total, your stock figures in Xero will drift from reality.
4. Use reports to make buying decisions
Xero’s inventory reports show what is on hand and how each item is performing:
- Inventory Item Summary: quantity on hand, average cost and total value for each item.
- Inventory Item Details: every purchase, sale and adjustment for an item, useful when a count does not match.
- Sales by item: best and worst sellers, and the most and least profitable lines.
A quick monthly review of slow movers is often enough to stop cash being tied up in stock that will not sell before the next festive season.
How F&B SMEs Use Xero for Stock Control
F&B is harder. A café buys coffee beans, milk and pastries, then sells lattes and sandwiches. Native Xero has no recipe or bill-of-materials feature, so it cannot reduce milk stock automatically every time a latte is sold.
In practice, Singapore cafés, bakeries and restaurants that rely on Xero alone use one of two approaches.
Approach A: Track resale items, count ingredients periodically
Items sold as they are bought, such as bottled drinks, retail coffee bean bags or packaged snacks, are set up as tracked items and flow through the daily sales invoice like retail stock.
Ingredients are handled through a regular stocktake. You record purchases on bills, count what is left weekly or monthly, then post an inventory adjustment for the difference. The adjustment amount becomes your ingredient cost for the period.
Approach B: Expense ingredients and post a closing stock journal
Smaller outlets often set ingredients as untracked and code purchases straight to cost of sales. At month end, the accountant posts a journal for the value of ingredients still on hand. This is simpler but gives you no item-level visibility between counts.
Which approach suits your outlet?
| Approach A (tracked + periodic count) | Approach B (untracked + closing journal) | |
|---|---|---|
| Admin effort | Medium | Low |
| Visibility of individual ingredient costs | Good at each count | Limited |
| Recording wastage | Separate adjustment lines | Hidden inside the monthly figure |
| Good fit for | Cafés and bakeries with a stable menu | Very small kiosks or stalls |
Recording wastage and spoilage
Wastage is a real cost in Singapore F&B, especially with fresh produce in our climate. Record spoiled or expired stock as a separate inventory adjustment to a dedicated account such as “Stock Wastage” rather than burying it in COGS. Over a few months, this tells you which items you consistently over-order.
Where Xero's Built-In Stock Control Stops
Native Xero inventory is designed for straightforward buy-and-resell businesses. Knowing its limits early saves a painful clean-up later.
| Need | Native Xero | What this means for you |
|---|---|---|
| Number of tracked items | Up to 4,000 tracked items (Xero's stated limit) | Fine for most shops and cafés; large catalogues may outgrow it |
| Multiple outlets or warehouses | Not supported; one stock count per item | Two outlets cannot see stock by location |
| Recipes and assembled products | Not supported | F&B ingredient usage must be counted, not calculated |
| Batch, lot or expiry tracking | Not supported | Track expiry dates outside Xero |
| Costing method | Weighted average only | No FIFO option in Singapore |
| Landed costs (freight, duties) | No automatic allocation | Add freight and duties to item cost manually; GST-registered importers normally claim import GST as input tax instead |
Xero has also started rolling out backorders for tracked items, which lets you approve an invoice even when stock on hand is short. Check whether this is live in your organisation before relying on it.
Common Mistakes We See in Xero Stock Records
- Opening balances that do not match a physical count. Do a proper stocktake on your go-live date and enter quantity and value from that count.
- Paying suppliers without a bill. Stock never increases, so quantities go negative or sales cannot be invoiced.
- Posting daily sales as a lump sum. Revenue is correct, stock is not.
- Tracking every item. Low-value consumables such as straws, bags and napkins create admin without useful insight. Leave them untracked.
- Never reviewing adjustments. A steady stream of negative adjustments on the same items usually points to theft, wastage or a recording problem.
Which Xero Plan Do You Need for Stock Control in Singapore?
From 1 November 2026, Xero’s Singapore plans are priced as follows (SGD per month, GST included):
| Plan | Monthly price | Points relevant to stock control |
|---|---|---|
| Starter | S$42 | Limited to 20 invoices and 5 bills per month, too tight for daily sales invoices |
| Standard | S$77 | No invoice or bill limits listed; suits most single-outlet retail and F&B SMEs |
| Premium | S$99 | Adds multi-currency, useful if you import and pay suppliers in USD, MYR or other currencies |
A retailer posting one sales invoice per day already needs about 30 invoices a month, so Starter is rarely practical once stock control is switched on. Pricing changes from time to time, so confirm on Xero’s Singapore pricing page before subscribing.
Keeping Your Stock Records IRAS-Ready
IRAS requires Singapore companies to keep proper records, including source documents and accounting records, for at least five years from the relevant Year of Assessment. For stock, that means keeping:
- Supplier bills and delivery orders
- Daily sales summaries from your POS
- Stocktake sheets showing who counted, when, and what was found
- Support for write-offs, such as photos or notes on damaged or expired goods
Xero stores the transactions and lets you attach supporting files such as delivery orders to bills and invoices. Keep signed stocktake sheets with your month-end records so the evidence is easy to find if IRAS or your auditor asks for it.
A Simple Monthly Stock Control Routine in Xero
- Approve all supplier bills for the month and attach delivery orders.
- Confirm every trading day has an itemised sales invoice.
- Do a physical count of tracked items (or at least your top 20% by value).
- Post inventory adjustments for differences, with wastage on its own account.
- Run the Inventory Item Summary and reconcile its total to the inventory asset account on the balance sheet.
- Review slow movers and margin by item before placing next month’s orders.
Get Your Xero Stock Control Set Up Properly
Getting stock control right in Xero is mostly about the setup: the right items tracked, sales arriving at item level, and a monthly routine your team will actually follow. 361DC works with Singapore retail and F&B businesses on Xero implementation, so we can review your current file, fix opening balances and set up a stocktake process that fits how your outlet runs.
Speak to our team at 6515 7906 or email enquiry@361dc.com to arrange a review of your Xero stock setup.
Frequently Asked Questions
Yes. Xero's Singapore edition includes tracked inventory, which records quantity on hand, stock value and COGS for each tracked item. It suits businesses with simple stock needs at a single location.
Xero states a limit of 4,000 tracked inventory items. Untracked items do not count towards this limit.
Not natively. Xero has no recipe or bill-of-materials feature, so ingredient usage is usually captured through periodic stocktakes and inventory adjustments.
Native Xero uses weighted average cost only. FIFO is not available in the built-in inventory feature for Singapore organisations.
Select the tracked items in Products and Services, create an inventory adjustment, and enter the counted quantities. Xero calculates the difference and posts it to the account you choose.
Stock only reduces when an approved sales invoice includes the tracked item. If sales are recorded as a lump sum bank deposit or a total-only POS summary, quantities will not change.
IRAS requires records to be kept for at least five years from the relevant Year of Assessment. This includes stock lists, stocktake records and supporting documents.
