Chapter 6

Inventory management software

Inventory management software may give you the extra time you need, or the ability to take things to the next level.

A person outside of a warehouse full of inventory

What does inventory software do?

At a basic level, inventory software tracks your orders and sales to work out what your inventory is. This is also known as a perpetual inventory system.

When well run, these systems can:

  • show your inventory levels at any time
  • reorder inventory for you
  • show you how much each product is making for your business.

How does inventory software work?

Inventory software works by recording your inventory for you when it comes in – either through manual data entry or through a system such as:

  • barcode scanning
  • SKU numbers (stock keeping unit)
  • serial numbers
  • RFID (radio frequency identification) tags
  • QR (quick response) codes
  • NFC (near field communication) tags

When an item is shipped or sold, your invoicing or point-of-sale (POS) software identifies the item and adjusts the inventory records automatically. Think about the scanner at the supermarket checkout – that’s part of an inventory management system.

Once it knows what inventory you do or don’t have, the software is able to do a number of other things, depending on its features.

A warehouse full of inventory

Scan new items as they arrive into the warehouse and the software will automatically add them to your inventory.

inventory being processed through point of sale

Items are removed from inventory as they’re processed through your point of sale system.

What to look for in inventory management software

You might be able to use your accounting software for inventory management as many packages come with inventory management capability built in. So before you go spending money on a bells and whistles piece of inventory management software, check what you actually need and if your accounting software can do the following:

  • provide you with real-time data
  • streamline reordering with low inventory alerts
  • integrate and automate all the tasks from quoting to ordering to billing to shipping
  • manage multiple locations from anywhere
  • integrate with POS software
  • scan barcodes, QR codes or read RFIDs
  • forecast seasonal demand
  • manage batch and expiry dates and lot tracking
  • handle returns and exchanges
  • attach documents such as photos and supplier contracts
  • integrate with ecommerce software
  • scale-up as your business grows
  • stocktaking functionality

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

Guide to inventory

Inventory management is more than just knowing what’s been sold and what you’ve ordered. Find out what else is involved.

Download our complete guide to inventory

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