Inventory Management and Accounting Overview

1.  Purchase Order (PO) Creation

o The process begins with creating a PO in Odoo when inventory levels fall below the reorder point.

o The PO includes details such as product name, quantity, price, and vendor.

2.  Goods Receipt and Verification

o When goods are received, they are verified against the PO to ensure the correct quantity and product.

o The storage location for the inventory is updated in Odoo.

3.  Inventory Value Update

o The inventory value should be promptly updated in Odoo to reflect the correct cost of goods.

o Accounting Entry in Odoo: (this syncs with Xero)

§  Dr Inventory

§  Cr Inventory Clearing Account 

4.  Invoice Processing (via Dext → Xero)

o Supplier invoices are uploaded via Dext and synced with Xero.

o Accounting Entry:

§  Dr Inventory Clearing Account

    Dr GST Paid

§  Cr Accounts Payable

5.  Inventory Usage (via Barcode / Scrap in Odoo)

o Barcode scanning or the Scrap feature is used in Odoo to track the usage of inventory.

o Accounting Entry (when inventory is used):

§  Dr Cost of Goods Sold (COGS)

§  Cr Inventory

6.  Reorder Point Management

o Each inventory item has a defined reorder quantity in Odoo.

o When inventory levels reach or fall below the reorder point, the system triggers a prompt for the administrator to create a new PO.

7.  Inventory Adjustment and Month-End Clearing

o If discrepancies arise between PO and invoice amounts (often due to shipping costs or other adjustments), the Inventory Clearing Account is adjusted at month-end.

o Accounting Entry:

§  Dr Shipping Expense Account

§  Cr Inventory Clearing Account

8.  Inventory Stocktake / Adjustment

o Regular stocktaking is done to ensure physical inventory matches Odoo records.

o Discrepancies are adjusted, and the inventory values are updated in both Odoo and Xero.