Yes, you can track stock levels in Xero without buying a separate inventory app. Xero’s built-in tracked inventory records how many units you have on hand and what they are worth, and it updates both automatically every time you approve a supplier bill or a sales invoice.
For many Singapore SMEs that sell from one location and carry a manageable product range, this is enough. This guide shows you how to set it up, how stock moves through Xero day to day, how to run a stocktake, which reports to check, and the clear signs that it is time to move to a dedicated system.
Can Xero Track Inventory on Its Own?
Xero lets you create two types of items under Products and services. The difference decides whether Xero counts your stock.
| Tracked item | Untracked item | |
|---|---|---|
| Records quantity on hand | Yes | No |
| Records stock value on the balance sheet | Yes (inventory asset account) | No |
| Posts cost of goods sold automatically | Yes, when you approve a sale | No, purchases go straight to an expense account |
| Best for | Physical products you hold in stock | Services, drop-shipped goods, made-to-order work |
Most product businesses use a mix. Track the items you physically hold and resell, and leave services and one-off purchases untracked.
What Xero's Built-In Inventory Can and Cannot Do
Before you commit, it helps to know exactly where the native feature stops. Here is how Xero’s core inventory stands for a Singapore organisation as of October 2026.
| Capability | Xero tracked inventory |
|---|---|
| Quantity on hand | Updates automatically from approved bills, invoices and credit notes |
| Stock valuation | Weighted average cost only |
| Number of tracked items | Up to 4,000 tracked items |
| Stock locations | One pooled quantity per item, no separate warehouses or outlets |
| Purchase orders | Included, but stock only increases when the bill is approved |
| Bulk stock adjustments | Included for quantity changes after a stocktake |
| Selling below zero | Blocked: you cannot approve a sale for more units than you have on hand |
| Batch, serial number or expiry tracking | Not available |
| Assemblies or bills of materials | Not available |
| Automatic reorder points | Not in core Xero. Xero Inventory Plus offers this but is currently US only |
How to Set Up Tracked Inventory in Xero
Setup takes an afternoon for most small catalogues. Getting it right at the start saves hours of correcting average costs later.
Step 1: Check Your Chart of Accounts
You need two accounts in place: an inventory asset account (a current asset) and a cost of goods sold account (a direct cost). Every tracked item links to the inventory asset account, and Xero moves value from it to cost of goods sold when you sell.
Step 2: Decide Which Items to Track
Only track items where the count matters. Packaging, consumables and low-value sundries usually cost more time to track than they save. A tidy list of 150 tracked items is far more useful than 1,500 items nobody counts.
Step 3: Create or Import Your Items
Go to Sales or Purchases > Products and services. Add items one by one, or download Xero’s CSV template and import your full list. For each tracked item, set:
- Item code: a short, unique SKU your team will recognise
- Purchase details: cost price, the inventory asset account and the purchase tax rate
- Sales details: selling price, sales account and the sales tax rate
- Tracking: turn on inventory tracking for the item
Step 4: Enter Opening Quantities and Values
Do a physical count on your go-live date and record the quantity and total value for each item. Agree the method with your accountant so that the inventory figure on your balance sheet matches your count and your previous system. Skipping this step is a common reason stock values look wrong in the first month.
How Stock Moves in Xero Day to Day
Once items are tracked, you do not update stock by hand. It moves with your normal documents.
| Transaction | Effect on stock |
|---|---|
| Purchase order sent | No change. It is a commitment, not a receipt |
| Supplier bill approved | Quantity and value go up |
| Quote or draft invoice | No change |
| Sales invoice approved | Quantity goes down; cost of goods sold posts at average cost |
| Customer credit note (return) | Quantity comes back into stock |
| Inventory adjustment | Quantity or value corrected, for example after a stocktake or damage |
The practical rule: convert the purchase order to a bill and approve it when the goods arrive. Approving a bill before delivery makes Xero show stock you do not have yet, and leaving it too long blocks sales of items already on your shelf.
How Weighted Average Cost Works: A Worked Example
Xero recalculates the average cost of an item every time you buy more of it. Here is a simple example in SGD:
- You hold 100 units bought at S$10.00 each. Stock value: S$1,000.
- You buy 50 more at S$13.00 each. New total: 150 units worth S$1,650.
- Xero’s new average cost is S$1,650 ÷ 150 = S$11.00 per unit.
- You sell 20 units. Xero posts S$220 to cost of goods sold and leaves 130 units worth S$1,430.
This is why accurate purchase prices on bills matter. A wrong unit cost on one bill flows into the margin on every sale that follows.
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Singapore GST and Landed Costs
If your business is GST-registered, enter bills with the correct purchase tax rate so that the 9% GST is claimed as input tax and kept out of your stock value. The same generally applies to import GST paid to Singapore Customs.
Freight, insurance and customs duty are different. They are part of what the goods cost you, but Xero will not spread them across items automatically. Many SMEs add them through an inventory value adjustment on the affected items after the shipment lands. If you import regularly, this manual step is often the first real pain point.
How to Run a Stocktake and Bulk Adjustment in Xero
Xero now supports bulk inventory adjustments, so you no longer need to correct items one at a time. A clean month-end or year-end count looks like this:
- Pick a cut-off time and stop processing bills and invoices for tracked items until the count is done.
- Export your item list from Products and services to use as a count sheet.
- Count physical stock and note the differences.
- In Products and services, select the items that need correcting and choose to create an adjustment. You can also import the adjustments from a file.
- Choose the account for the adjustment, such as a stock write-off or shrinkage account, then review and submit.
- Compare the inventory value report with the inventory asset balance on your balance sheet.
Bulk adjustments handle quantity changes. If you also need to change the value of items, for example to add landed costs, do that as a separate value adjustment.
Which Xero Reports Show Your Stock Levels?
You can check stock without leaving Xero:
- Products and services list: quantity on hand, average cost and value for each item at a glance
- Inventory Item Summary: quantity, value and sales activity per item for a chosen period
- Inventory Item Details: the transactions behind each item’s movements, useful when a count does not match
- Balance sheet: your inventory asset balance, which should agree with the inventory reports
A monthly habit worth keeping is to tie the inventory report total to the balance sheet. If they differ, someone has posted to the inventory asset account directly from a bank transaction or journal.
Common Mistakes When Tracking Stock in Xero
- Tracking everything. Services and consumables clutter the list and make stocktakes slower.
- Entering sales before purchases. Xero will not approve an invoice for more units than it shows on hand. Enter supplier bills promptly so sales are not held up.
- Treating purchase orders as received stock. Only the approved bill adds stock.
- Editing old transactions. Backdated changes to bills or invoices can shift historical cost of sales. Set lock dates after each month-end close.
- Posting stock purchases straight from the bank feed. Coding a supplier payment directly to the inventory asset account bypasses item quantities. Use a bill with item codes instead.
- Being on the wrong plan. Xero’s Starter plan limits you to 20 invoices and 5 bills a month, which rarely suits a product business. Premium is the only plan that handles foreign currencies, which matters if you pay overseas suppliers in USD or RMB.
Signs You Have Outgrown Xero's Built-In Inventory
Xero’s tracked inventory works best when stock is simple. Consider a dedicated inventory system when one or more of these apply:
- You hold stock in more than one place, such as a warehouse plus a retail outlet, or a Singapore and a Johor Bahru store.
- You must trace batches, serial numbers or expiry dates, common in food, health supplements, cosmetics and electronics.
- You assemble or manufacture products and need bills of materials.
- Your catalogue is large and growing, approaching Xero’s 4,000 tracked item limit or with frequent new SKUs.
- You sell across several channels and need stock synced with Shopify, Lazada or Shopee.
- You need reorder alerts and landed cost allocation instead of spreadsheets.
Where Unleashed Fits
Unleashed is an inventory management system that connects to Xero. It adds multi-warehouse stock, batch and serial number tracking, assemblies and bills of materials, landed cost allocation and reorder levels. Xero stays your accounting ledger and receives the invoices, bills and cost of goods sold from Unleashed.
In our implementation work, the move usually makes sense when the manual workarounds in Xero start taking more time each month than the system would cost. If you are running a separate spreadsheet beside Xero just to know what is in which location, you are probably there already.
Which Xero plan do I need to track inventory in Singapore?
Inventory tracking is available across plans, but Starter’s monthly limits on invoices and bills rarely suit a product business. Standard works for local trading. Choose Premium if you buy or sell in foreign currencies. Xero has announced price changes from 1 November 2026, so check current pricing on Xero’s Singapore site.
Need Help Setting Up Inventory in Xero?
361DC helps Singapore SMEs set up Xero tracked inventory properly, from cleaning up the item list and opening balances to training your team on stocktakes. When Xero is no longer enough, we implement and connect Unleashed so your stock and accounts stay in sync.
Talk to our team at 6515 7906 or enquiry@361dc.com for a practical review of how you track stock today and what would make it easier.
Frequently Asked Questions
Yes. Xero includes basic inventory on its accounting plans. Tracked items record quantity on hand and stock value, and update automatically from approved bills and invoices.
Xero supports up to 4,000 tracked inventory items. Untracked items do not count towards this limit.
Xero uses weighted average cost for tracked items. FIFO is not available in core Xero.
Not in core Xero. Each item has one pooled quantity. Xero Inventory Plus adds basic multi-location stock but is currently only available in the US, so Singapore businesses with several locations typically connect an app such as Unleashed.
Xero does not allow a tracked item to go below zero. If the invoice quantity is higher than the quantity on hand, approve the supplier bill first or correct the stock count with an adjustment.
No. A purchase order records what you ordered. Stock increases only when you approve the related supplier bill.
Inventory tracking is available across plans, but Starter's monthly limits on invoices and bills rarely suit a product business. Standard works for local trading. Choose Premium if you buy or sell in foreign currencies. Xero has announced price changes from 1 November 2026, so check current pricing on Xero's Singapore site.
