Managing inventory in your accounting software with the help of a bookkeeper
Inventory management is one of the areas where the choice between software tools can be overwhelming. As a bookkeeper I help a lot of small business owners use MYOB or Xero and it is one of the areas where getting the setup wrong has the most direct impact on the bottom line.
If your stock records do not reflect what you actually have on hand, you are making purchasing decisions, quoting jobs, and filing tax returns based on figures that do not represent reality. For businesses where stock is central to how money is made, that gap between the accounting system and the physical world is where profit quietly disappears.
As a bookkeeper I share my expertise and point of view when using either MYOB or Xero’s inventory management features to highlight which one is stronger and apply that to different business types.
Why accurate inventory is critical to a business owner
Stock is not just a number on a shelf. In accounting terms, inventory is an asset that sits on your balance sheet until it is sold, at which point it becomes a cost of goods sold expense that flows through your profit and loss. The difference between what you paid for your stock and what you sell it for is your gross margin and if that number is wrong because your inventory records are inaccurate, every financial report your business produces is built on a flawed foundation.
Beyond the accounting implications, poor inventory management has very practical operational consequences. Ordering too much ties up cash in stock that is sitting idle. Ordering too little means turning away customers or delaying jobs. Carrying items that are slow-moving at the wrong cost price means pricing jobs or products incorrectly for months before anyone notices. And at the end of the financial year, an inaccurate stocktake produces a cost of goods figure that neither you nor your accountant can rely on.
For businesses in trades, retail, manufacturing, hospitality, healthcare or any business where physical goods are central to revenue, iinventory is not an optional bookkeeping feature. It is a core operational data requirement. Which platform handles it better, and how, matters significantly.
MYOB: a native inventory platform
MYOB has long been regarded as the stronger of the two major platforms for businesses with serious inventory requirements, and the depth of its native functionality justifies that reputation.
Building items and components
In MYOB AccountRight, you can not only create items to use on invoices, you can also build items — taking two or more component items to produce a finished item. For example, you could transfer the quantity of timber and fabric to produce a furniture item. This can be done manually as a one-off, or set up to auto-build items for transfers you repeatedly make, allowing you to track the actual cost of a product.
This Bill of Materials (BOM) functionality is available in MYOB AccountRight Premier and represents one of the most significant differentiators between MYOB and Xero for businesses that manufacture, assemble, or kit products. A business that buys raw materials and transforms them into finished goods cannot accurately track its cost of production without this feature and Xero’s native platform does not offer it at all.
Stocktakes and inventory ddjustments
MYOB AccountRight Plus and AccountRight Premier plans include stocktake functionality, with AccountRight Premier being the only monthly subscription that offers multi-location inventory management. The stocktake process in MYOB allows you to count your physical stock, compare it against the system records, and post adjustments to specific accounts — such as a Shrinkage/Spoilage expense account — so that the reason for any discrepancy is captured in the financial records, not just corrected as a number.
MYOB AccountRight Premier’s multi-location inventory management allows businesses to track inventory held at multiple physical locations, recording where purchased items are received, where sold items are shipped from, and the movement of items between locations.
For a business operating from multiple premises, or a trade business with stock held both at a depot and in service vehicles, this capability is practically important.
Inventory costing
MYOB uses average cost inventory valuation — the total cost of all units of an item divided by the number of units on hand. This updates automatically as new stock is purchased at different prices, giving the business an accurate ongoing picture of what its stock is costing. The average cost feeds through to COGS calculations when items are invoiced, ensuring that the gross margin figures in the profit and loss statement reflect the actual cost of goods sold.
Premium inventory for MYOB Business
For businesses on MYOB’s cloud-based Business platform (as opposed to AccountRight), MYOB Business with Premium Inventory adds tracked item management with stock on hand quantity, average cost, total value reporting, inventory adjustment tools for shrinkage and revaluation, and inventory reporting including automated procurement with stock reorders and analysis of item sales by revenue, profit, and margin.
Where MYOB excels
MYOB’s inventory is genuinely deep for a mid-market accounting platform but its most advanced features require the AccountRight Premier plan and, critically, the desktop installation. MYOB’s inventory management and reporting features, including Bill of Materials and multi-location tracking, are currently available as download-only features for desktop PCs — not Mac computers or mobile devices.
For a business owner who wants to access their stock data from any device via a browser, this is a real constraint.
Xero: Inventory features with limitations
Xero’s approach to inventory is designed for simplicity and accessibility, it works well for businesses with straightforward stock tracking needs, but it reaches its limits relatively quickly for businesses with complex inventory requirements.
What Xero’s native features offer
Xero’s built-in features let you track individual inventory items by quantity and value, automate cost of goods sold calculations upon sale, and maintain an accurate inventory asset account on your balance sheet. When you add an item to a purchase order or invoice, stock levels update automatically. You can manage up to 4,000 tracked inventory items, and Xero has recently added bulk inventory adjustment functionality, allowing businesses to update multiple item quantities in one process that is useful for stocktakes and EOFY reconciliations.
Xero uses the average cost method for inventory valuation — the same method as MYOB — meaning cost of goods sold figures are calculated on the average cost of items in stock at the time of sale.
Where Xero has limitations
The limitations of Xero’s native inventory are well-documented and directly relevant to any business with more than basic stock tracking needs.
Xero’s core software doesn’t track inventory in multiple locations. You can only track finished goods — it doesn’t track raw materials or work-in-progress. There is no Bill of Materials or kitting functionality. Batch or serial number tracking is not supported natively. And it doesn’t support FIFO or other inventory valuation methods beyond average cost.
Xero’s native inventory is ideal if you have low stock volumes, a single inventory location, and don’t require complex COGS calculations or advanced reporting. For growth-oriented product businesses, limitations will quickly become apparent.
Xero’s App ecosystem is the game changer
Xero connects with hundreds of third-party apps to extend its inventory capabilities — including Cin7 Core, Unleashed, Katana, and ZapInventory for greater automation over multiple sales channels. For businesses that need multi-location tracking, manufacturing bill of materials, batch and serial tracking, or ecommerce integration, there is almost certainly a Xero-integrated app that provides the functionality.
Xero Inventory Plus adds multi-location tracking and multi-channel sales syncing with Shopify and Amazon, with the ability to set automations like alerts when stock drops below a certain level.
The trade-off with the app ecosystem approach is cost and complexity. Adding a specialist inventory app to Xero means an additional monthly subscription, additional setup and configuration work, and an ongoing requirement to ensure the two systems stay synchronised. For many businesses this is the right solution — but it requires someone with the knowledge to select the right app, implement it correctly, and maintain the integration.
Small business inventory examples by industry
Understanding the platform features in the abstract is useful but understanding what they mean for your specific type of business makes the decision practical. Here are the business types where inventory is genuinely critical, and what each platform means for how that business operates day to day.
Trade Businesses — Plumbers, Electricians, HVAC Technicians
A plumbing or electrical business carries materials inventory — pipe fittings, conduit, cable, fixtures — purchased in bulk from suppliers and consumed across individual jobs. The bookkeeping challenge is job costing: allocating the right materials cost to each job so that the profitability of each job is visible, not just the overall business result.
MYOB handles this well through its items and job tracking combination. Materials can be set up as inventory items with average costs that update as new stock is purchased, and each item can be allocated to a specific job when used. The invoice reflects both the labour and materials for that job, and the cost of goods flows correctly through the profit and loss.
A plumber who does not track this properly will find that high-revenue months with large jobs do not produce the profit they expected — because the materials cost is not being correctly allocated. The business appears to be making money on turnover but is not understanding where that money is going.
Xero handles trade inventory adequately for straightforward single-location setups. If the business also runs an online parts store or stocks items at a separate depot, Xero Inventory Plus or an integrated app becomes necessary.
Retail Businesses — Clothing Boutiques, Hardware Stores, Homewares
A retail business lives or dies by its inventory management. What is on the shelf, what has sold, what needs reordering, and what is sitting as slow-moving stock that should be discounted — these are daily operational questions that the accounting system must be able to answer.
For a clothing boutique with hundreds of SKUs across multiple sizes and colours, Xero’s 4,000 item limit is unlikely to be a constraint, but the lack of native multi-location support may be if the business operates a second store or a warehouse. Xero Inventory Plus addresses this, but adds cost and setup complexity.
MYOB AccountRight Premier handles unlimited items across multiple locations, making it a better fit for a growing retail business with multiple premises or a combination of physical and online sales.
The practical bookkeeping issue for a retail owner is the end-of-financial-year stocktake. In both platforms, the stocktake process involves counting physical stock and posting adjustments for any discrepancy. In MYOB, this is managed directly through the Inventory command centre with adjustment accounts for shrinkage and obsolescence. In Xero, the bulk adjustment update makes this more manageable than it was previously, but the workflow is less purpose-built than MYOB’s. Either way, a bookkeeper managing this process ensures that the adjustments are posted correctly — to the right accounts, with the right dates, and with a clear record of what changed and why.
Hospitality — Cafes, Restaurants, Catering Businesses
Food and beverage inventory is fundamentally different from product inventory. Ingredients are perishable, portions are variable, waste is constant, and the cost of a dish is an aggregate of many individual components that fluctuate in price with the market.
For a cafe or restaurant, neither MYOB nor Xero’s native inventory is well-suited to full food cost management. This is a domain where specialist hospitality management software or at minimum, a third-party inventory app integrated with the accounting platform that is needed to manage recipe costing and waste tracking properly.
What MYOB and Xero do well for a hospitality business is managing the purchasing side: entering supplier invoices for food and beverage purchases, tracking what has been spent with each supplier, and maintaining a cost of goods sold account that flows into the profit and loss. A bookkeeper ensures that supplier invoices are entered correctly, that the cost accounts are structured so that food cost percentage can be calculated and monitored, and that the end-of-period figures reflect actual purchases rather than estimates.
Manufacturing and Assembly Businesses — Furniture Makers, Food Producers, Cabinet Makers
If your business takes raw materials and transforms them into finished products, MYOB AccountRight Premier is the stronger platform by a significant margin over Xero’s native functionality. The Bill of Materials and auto-build functionality in MYOB allows the business to define exactly what components go into each finished product, track the depletion of those components when finished goods are produced, and calculate the actual cost of production based on the current average cost of the ingredients.
A cabinet maker using timber, hardware, and finishing materials to produce custom joinery items can set up each finished product with its component list in MYOB, record production runs that automatically deplete the raw material quantities and create finished goods inventory, and invoice those finished goods at a cost that reflects what was actually spent to produce them. This is the kind of functionality that in Xero requires an additional manufacturing app such as Katana to replicate.
For a small food producer — a jam maker, a sauce company, a small-batch confectionery business — the same logic applies. The cost of a jar of product is an assembly of base ingredients, packaging, and labour. Without build items or Bill of Materials functionality, the accounting system cannot reflect this accurately, and the cost of goods figure is at best an approximation.
Pharmacies, Medical Practices, and Healthcare Retailers
Healthcare businesses that carry physical product inventory — pharmacies dispensing medication, medical practices with consumables and equipment, NDIS providers managing assistive technology stock — face specific inventory requirements around controlled items, expiry dates, and regulatory compliance.
Neither MYOB nor Xero provides pharmaceutical-specific inventory management natively, but MYOB’s batch tracking capability (in AccountRight Premier) and its ability to tag items with specific attributes makes it a more natural foundation for integration with pharmacy management systems. Xero’s extensive app marketplace includes healthcare-specific integrations, but the level of configuration required is more substantial.
For a general medical practice managing consumable inventory like gloves, syringes, dressings then Xero’s native inventory is adequate. For a pharmacy or a healthcare retailer with controlled substances and expiry-date tracking, specialist software integrated with the accounting platform is required regardless of which platform is chosen.
Trades Supply and Wholesale Businesses
A business that operates as a wholesale supplier — buying in bulk from manufacturers and selling to trade customers or retailers — needs inventory management that can handle large item counts, multiple pricing tiers for different customer categories, supplier cost tracking, and reorder point management.
MYOB AccountRight Premier handles multiple customer price levels natively, allowing the business to set different prices for different customer categories (trade, retail, wholesale) within the same item record. The stock alert feature shows items that need to be ordered or built to fulfil existing customer commitments, providing an early warning system for stock shortfalls.
Xero does not support multiple pricing levels natively. For a wholesale business with tiered pricing, this is typically addressed through a third-party app, adding cost and complexity. For a straightforward wholesale operation with a single price list, Xero’s native inventory combined with Inventory Plus for reorder automation may be entirely adequate.
How can a bookkeeper help with inventory management
No, I won’t come and count your stock but understanding the platform features is only the first part of the inventory management challenge. The second part and the part where businesses most commonly encounter problems, is the ongoing maintenance of accurate inventory records within whichever platform is chosen.
Inventory in an accounting system drifts from reality for predictable reasons: items are received but not entered, adjustments are made to stock quantities without corresponding accounting entries, supplier invoices are coded to expense accounts rather than inventory asset accounts, and year-end stocktake adjustments are not posted before the financial statements are prepared. Each of these errors is small in isolation. Together, over time, they produce a cost of goods sold figure that is unreliable and a balance sheet with an inventory asset value that does not reflect physical reality.
A bookkeeper maintaining your inventory records ensures that
- every supplier invoice for stock items is entered against the right inventory account, not coded directly to cost of goods sold, which would bypass the inventory asset entirely and produce incorrect balance sheet figures.
- ensure that when stock adjustments are required (for damage, spoilage, theft, or correction of errors) those adjustments are posted with clear memo descriptions and allocated to the correct expense accounts.
- manage the end-of-financial-year stocktake process, reconciling the physical count against the system records and posting any adjustments before the accounts are closed for the year.
- select and configure the right tools for the business in the first place.
A cabinet maker who needs Bill of Materials functionality should be on MYOB AccountRight Premier, not Xero — and that recommendation should be made before the business invests time setting up the wrong platform.
A cafe with simple purchasing needs and Shopify integration requirements should be on Xero and the integration should be configured properly from day one rather than added later as a workaround for a problem that has already created months of reconciliation work.
The platform is only as useful as the setup behind it and the discipline applied to maintaining it. Getting both right is what a bookkeeper with inventory experience provides — and for any business where stock is central to operations, that expertise is not optional.
Choosing the right software
For the purpose of this piece, the decision between MYOB and Xero for a business with inventory should be driven by three questions:
How complex is the inventory?
A single-location business with fewer than 4,000 finished goods and no assembly or manufacturing component will be well served by Xero’s native inventory. A business with multiple locations, build items, or raw material tracking needs MYOB AccountRight Premier or a Xero-integrated specialist app.
How many items?
Xero’s native platform handles up to 4,000 tracked items. For most small businesses this is sufficient. A growing wholesale or retail business approaching that limit should plan ahead.
What is the priority — depth of native inventory features or breadth of software integrations?
MYOB wins on native inventory depth. Xero wins on the range of third-party apps available to extend its capabilities. The right answer depends on whether you want functionality built into the accounting system or assembled from connected components.
Yes there are other alternatives. For example QuickBooks Online occupies a distinct position in the Australian market for inventory management as it sits between Xero’s streamlined simplicity and MYOB’s deeper native functionality, offering a practical inventory solution for small to medium businesses that do not need the full complexity of MYOB AccountRight Premier but want something more structured than Xero’s basic tracking.
QuickBooks Online’s inventory tools, powered through its integration with Employment Hero for payroll and its own native accounting features, allow businesses to track stock levels, set reorder points, and automatically adjust quantities when items are bought and sold. The COGS calculation updates in real time as inventory moves, and purchase orders can be raised directly within the platform and matched against bills when stock arrives.
Where QuickBooks Online falls short relative to MYOB is in assembly and build item functionality, it does not natively support Bill of Materials in the same depth as MYOB AccountRight Premier, and multi-location inventory requires a third-party integration.
Where it has an advantage over Xero’s native tools is in its reorder point management and reporting, which are more developed out of the box. For a retailer, a trades supply business, or a small wholesaler with a straightforward single-location product range and a need for clean purchase-to-sale inventory flow, QuickBooks Online is a genuine option worth evaluating particularly for businesses already using the platform for their broader accounting.
As with both MYOB and Xero, however, the inventory setup requires professional configuration to ensure that stock items, cost accounts, and COGS coding are structured correctly from the start.
How do you compare all the options?
For businesses whose inventory requirements genuinely exceed what any accounting platform can handle natively — whether in MYOB, Xero, or QuickBooks — dedicated inventory management systems offer a level of depth that accounting software is not designed to replicate.
- Cin7 Core (formerly known as Dear Inventory) is one of the most widely used in Australia for small and mid-market businesses, offering multi-location stock management, Bill of Materials and production order functionality, batch and serial number tracking, and direct integrations with both Xero and MYOB.
- Unleashed is another strong option, particularly well regarded by wholesalers and manufacturers who need detailed cost management, supplier performance tracking, and real-time inventory valuation across multiple warehouses.
- Katana is purpose-built for small manufacturers and is tightly integrated with Xero, making it a natural choice for a business that wants Xero’s clean accounting interface combined with proper production planning and raw materials tracking.
For ecommerce-heavy businesses selling across multiple channels — Shopify, Amazon, eBay — platforms like Cin7 Omni or Shopify’s own inventory tools, integrated with the accounting platform via a bookkeeper-managed connection, provide the real-time channel sync that native accounting inventory cannot deliver reliably.
The important consideration with any of these systems is that adding a specialist inventory platform to an accounting platform creates an integration that must be set up correctly, maintained consistently, and reconciled regularly to ensure the two systems stay aligned.
An inventory system that is out of sync with the accounting file produces errors in cost of goods sold, balance sheet inventory values, and GST reporting that can be time-consuming and costly to unwind.
A bookkeeper with experience across these integrations is the person who makes the combination work — configuring the connection, maintaining the data flow, and catching discrepancies before they compound. In either case, the configuration should be done by someone who understands both the platform and the specific inventory requirements of the business.
The features I’ve described above are genuinely powerful but they produce accurate, useful results only when they are set up correctly, maintained consistently, and reconciled regularly against what is physically in stock.
