This article takes a "deep dive" into understanding the way BusinessMind's Xero integration handles inventory accounting. This article will probably be most helpful to those with some accounting and technical expertise.

Note that it is not the intent of this article to attempt to explain all available options, features, or usage possibilities pertaining to using Xero with BusinessMind. Only the core concepts and best practices of inventory accounting using BusinessMind + Xero integration will be addressed here.

When inventory is received into BusinessMind, the following entries will appear in Xero.

The received inventory is recorded as a debit to 1410 BusinessMind Inventory Asset. A suggested liability account shown here as 2010 BusinessMind Receiving is credited to indicate that the received stock in BusinessMind has not yet been reconciled with the bookkeeping department.

When the supplier invoice is entered into Xero by the bookkeeping department, the entries made will be as follows.

When the supplier's invoice is correctly accounted for in Xero, the balance of the 2010 BusinessMind Receiving liability account will always net to $0.

When entering payables in Xero that pertain to inventory (to be) received in BusinessMind, the operator must select the 2010 BusinessMind Receiving account for the inventory purchased, not the 1410 BusinessMind Inventory Asset. If a mistake is made, this can be easily corrected in Xero.

The operator entering payables into Xero is responsible for assigning accounts to transactions to achieve the desired effect on the organizations accounting, with respect to the entries that are automatically created through the BusinessMind integration. In this manner, the operator has fine grained control over managing all accounting aspects of the operation.

Entering a payable in Xero with accounts selected for coordinating with BusinessMind integration.

It is important to understand that there is no dependency on the order of entries made between Xero and BusinessMind. Inventory may be received into BusinessMind first before payables are entered into Xero, or, payables can be entered into Xero first, before inventory is received into BusinessMind.

The integration is designed to allow the two systems to work together with maximum flexibility in this regard. In this manner, a balance can be kept between stock receiving and accounts payable while allowing those two departments to have the flexibility to operate on independent schedules.

To aid in coordination between inventory receiving in BusinessMind and entry of payables for received stock in Xero, it is recommended that the operator receiving inventory in BusinessMind use the supplier's invoice number or supplier purchase order number as the Receiving Reference ID value for the field of that name in the BusinessMind receiving screen.

The receiving reference id used to group/tag received inventory in BusinessMind is a useful identifier across systems.

This makes it simple for operators to match transactions across systems between BusinessMind and Xero in the event there is need for verification or validation of information entered.

The integration uses both internal and operator supplied identification markers to track individual transactions between BusinessMind and Xero, as shown in Xero here.

If inventory is received into BusinessMind with the accounting department unable to specify a receiving id to use, everything can still work normally. The best practice would be for the BusinessMind operator to assign a unique receiving id based on date, time, and supplier name, which can then be communicated to the accounting department. The accounting department can later lookup the receiving information in BusinessMind using the receiving reference id to further compare and coordinate when the supplier's invoice becomes available for entry in Xero.

Inventory adjustments made in BusinessMind are recorded in Xero as follows.

In the example above, inventory has been reduced by $10, due to breakage for example. The corresponding debit of $10 is made to the mapped adjustments account shown here as 1420 BusinessMind Inventory Adjustments.

The 1420 BusinessMind Inventory Adjustments account is meant to be treated as a clearing account. Your bookkeeping department will most usually make journal entries to clear the accumulated value of this account into expense accounts or other accounts as deemed appropriate or necessary.

In this manner, accounting concerns surrounding inventory adjustments are handled by the accounting department and do not become manipulated by operators in the inventory management department.

Inventory sales made in BusinessMind are recorded in Xero as follows.

In the example above, inventory of $1000 cost has been sold. The corresponding debit of $1000 is made to the mapped cost of goods account shown here as 5010 BusinessMind Inventory Cost Of Goods. (The entries to sales, A/R, cash, etc, are not shown here as this article has a focus on inventory.)

Likewise, a customer returning purchases in BusinessMind reverses these entries in Xero.

At this point, you should have a good idea of how inventory accounting is handled through BusinessMind's Xero integration feature. Please see our other articles in the accounting section of the BusinessMind documentation center for information on other accounting aspects.