Recording COGS by SKU to Xero Inventory
Xero has a Inventory feature where you can track the purchases and sales of products using the average costing method to record the Costs of Goods Sold (COGS).
For Xero Inventory to record COGS using Sales Invoices, it needs the exact SKU and number sold of that item to be recorded on the invoice. The A2X Invoice Setting, "Group Sales by SKU", aggregates the settlement sales by SKU and number sold.
When it is sent to Xero, the SKUs and number sold of each SKU is detailed on Amazon invoices. Then when the invoice is approved, the number of products sold by SKU reduces the Quantity on Hand in Xero Inventory. This change to inventory records the Cost of Goods Sold.
Inventory Changes Other Than COGS
Other changes to Xero Inventory, such as returns and lost items, do not get accounted for in Amazon Settlements. Therefore, these changes will need to be entered into Xero manually.
Manual Entries for Xero Inventory
Xero Inventory is designed to handle simple inventory tracking. Amazon Inventory is more complex. For example, Amazon allows for a longer SKU than Xero Inventory does. When Amazon creates a SKU for a new item which is longer than Xero allows, the SKU has to be shortened in Amazon and entered into Xero Inventory before the A2X settlement will import into Xero.
SKUs in Amazon Inventory have to match exactly to SKUs in Xero Inventory for A2X settlements to send to Xero.
Because of the less automated elements of the processes involved with Group Sales by SKU, it is best suited for 5 SKUs or less.
A2X COGS and Inventory Valuation - A Scalable Alternative
To help our users reduce their manual Inventory management, A2X offers a COGS and Inventory Valuation feature. By uploading and maintaining average Costs for products in A2X, users can send COGS entries from A2X for every settlement period.
At the end of each month, A2X imports Amazon's month-end Inventory Valuation Report which gives the final value for inventory, including all inventory changes other than COGS.