Advanced Setup > Inventory Setup

ConnectWise Inventory (IV) allows for the management of all Stock on Hand (SoH) levels, serialization of products and costing methods (First in First Out (FIFO),Last in First Out (LIFO), Average Costing (AC)) to effectively manage the value of the stock that you buy and the goods that you sell. Only the balance affecting transactions are posted to Xero, thereby alllowing all SOH management to be completed in ConnectWise, without the need to double handle transactions in the two systems.

The entire process is managed in ConnectWise, so it is important that you have a working knowledge of the Inventory and Procurement Modules in ConnectWise.

When the Inventory module is enabled in ConnectWise, the following additional Accounting Transactions will appear in the Accounting Integration > Unposted Procurement grid.

  • Inventory Transfers
  • Inventory Adjustments

When the feature is enabled in Wise-Sync to Sync Inventory, the following additional processes are completed as part of a Sync:

  • Posting Inventory Class product purchases to the corresponding Xero Inventory Asset Account
  • Posting General Journals for Inventory Transactions where Items are sold from Warehouse
  • Posting General Journals for Inventory Transactions where Items are sold from Warehouse
  • Posting Inventory Adjustment where adjustments are applied to inventory valuations / stock on hand levels.
  • Posting Inventory Transfers where inventory is transferred between warehouses.

Additional Reading & Learning

What do I do?

Step 1: Setup ConnectWise XRef's

Wise-Sync uses both the Warehouse : Location XRef and the Product Type : Type Xref to link transactions made against warehouses and Inventory Items. Only items which contain the valid XRefs will be mapped through to an Inventory Account through Wise-Sync.

  • Warehouse: Location Xref - Must contain a Valid (and Unique) warehouse ID
  • Product Type: Type Xref - Must be an "Inventory Part"

Wise-Sync uses the Warehouse Location XRef to link transactions made against warehouses specifically against the corresponding Asset Account for that warehouse in Xero. You can elect to post to either different Asset Accounts, or the same, depending on whether you wish to keep a inventory value for each warehouse (location) in ConnectWise.

Set Warehouse Xref in ConnectWise

Here's how to do it:

  1. In ConnectWise, navigate to Setup Tables > Warehouse List
  2. Click on Each Warehouse in the List (including the default if it is present)
  3. Add a unique Warehouse ID to the Location Xref field.
  4. Save each record.

Tip:

We recommend that you enter the corresponding Asset Account in Xero for ease of reference in the next steps.

In our example, our Inventory Accounts in Xero are:

Therefore the following Location Xref's would be applied:

WarehouseXero AccountLocation Xref
Default140140
Clearwater145145
Tampa146146

Set up ConnectWise - Product Part Xrefs

Wise-Sync will only post through to the Inventory Accounts and Warehouse the Inventory Parts as defined in the Product Type Table. Only items which contain the valid Xrefs "Inventory Part" will initiate a transaction against the Inventory when Brought or Sold.

Here's how to do it:

  1. Navigate to Setup Tables > Product Type
  2. Select from the List the items which will be defined as "Inventory Parts". These items will be processed against inventory where they are:

    a) Brought or Sold through one of the defined Warehouses.

    b) Are Not "Drop Shipped" items.

    Note: Wise-Sync will only post through to the Inventory Accounts and Warehouse the Inventory Parts as defined in the Product Type Table. Only items which contain the valid Xrefs "Inventory Part" will initiate a transaction against the Inventory when Brought or Sold.

  3. Select the items from the list, which will be defined as "Inventory Parts"
  4. Define the "Type Xref" as Inventory Part
Step 2: Setup Inventory Mapping in Wise-Sync

Activating Inventory in Wise-Sync

Here's how to do it:

  1. Log into Wise-Sync and click on the "Companies" link at the top.
  2. Click on the Company that you wish to edit from those listed.
  3. Click on Inventory Tab
  4. Click on the "Enable COGS Inventory" checkbox, to display the remaining part of the form.
  5. Select to process Inventory Transactions as either Bill or Manual Journal.
  6. Enter the Transaction Prefix that will be used for "Inventory Transactions" in Xero. This prefix will be used for all transactions which are posted when an invoice is created for a customer, and an item contained on that invoice has been sold from Inventory.
  7. Enter the Adjustment Prefix that will be used for "Inventory Adjustments" processed in ConnectWise. Adjustments that are processed will be posted to Xero with this prefix.
  8. Enter the Adjustment Customer Name. Where the option to post Adjustments as an AP Invoice is selected (Currently Default), the customer record selected for the xero invoice will be as per this Customer Name. We suggest that you use your company name with (Warehouse) as per the example. This will help to identify any transactions when searching by Company in Xero.
  9. Enter the Transfer Prefix that will be used for "Inventory Transfers" processed in ConnectWise. Transfers that are processed will be posted into Xero with this prefix.
  10. Enter the Transfer Customer Name. This has the same implication as the Customer Name
  11. Option: Select to process Inventory COGS to override account. This will process all adjustments where a COGS account is not specified to the selected account. This feature is most commonly required after an Initial Import.
  12. Option: Select to process Drop Shipped inventory items through the specified Drop Ship asset account. All items processed as Drop Shipped that are Inventory Class / Type will be processed through this specific account.

    Note: Do not use the same account number as your warehouse accounts, as you will not be able to report on this separately against the Inventory Valuation reports in ConnectWise.

  13. Location Xref Mapping to Xero Account. Enter the corresponding Xero Asset Account, for each of the Warehouses Listed. If you entered the Xero Account into the Location Xref at Step 1 of the process, these will be displayed here making the process even easier.
  14. Save your Settings, Inventory is Now Enabled in Wise-Sync

Note:

You can use the same Asset Account in Xero for multiple warehouses. This may be appropriate where you have different warehouses for asset location (and whereabouts), but they are not required to be reported separately.

Step 3: Setup Inventory Adjustment GL Mapping

Adjustments are required to adjust the current stock levels, and valuation where there are in-balances between the Inventory Valuation report in ConnectWise and the Valuation of the Asset account in Xero. There can be a variety of reasons why these account balances could be out, primarily though if due process is followed during the procurement and invoicing cycles, then all balances should be in check, providing that all stock as indicated in ConnectWise is accounted for (physically during a stocktake).Where there is an out-of-balance event, such as a stock discrepancy, an adjustment must be posted in ConnectWise.

ConnectWise provides for a number of adjustment types to affect the SoH by default, including:

  • Damaged
  • Missing
  • Written Off

Note: Additional types can be added through the Setup Tables > Adjustment Types, to suit your business requirements.

With a system type for adjusting the inventory valuation without affecting the Stock on Hand counts.

  • Audit Trail Correction

Note:

The Audit Trail Correction adjustment type is hard-coded and will not be found in the Adjustment Types setup table. This adjustment type is solely used to correct audit trail entries that affect the Inventory Valuation Report. This adjustment type will not change the current on-hand count and will not create a journal entry for the Accounting Package

When Adjustments are posted to Xero, the associated offset can be posted to either an "Expense" account or other non-operating expense type account.

 Create GL Account Mapping for Inventory Adjustment Type

It is recommended that Adjustments be mapped at the "Inventory: Adjustment Type" to provide greater levels of reporting and audit capability. The following example shows two accounts, which will be used for expensing the adjustments applied to "Revaluations" and "Lost, Stolen or Missing" goods.

Here's how to do it:

  1. Select the Account Type: Inventory Adjustment
  2. Select the Table: Inventory: Adjustment Type
  3. Select the Record Type
  4. Enter the Account Number for your Default Warehouse
  5. Enter the Non-ProductID only for the "Audit Trail Correction" Type.
  6. Enter into the COGS account the Xero Expense Account to Allocate Adjustment costs to.
  7. Repeat this process for each Adjustment Type reason listed in the "Record" drop down list.

Note: Where an COGS account is not provided Wise-Sync can be configured to refer to a default Inventory Adjustment COGS account. 

Step 4: Setup Inventory Transfer GL Account Mapping

No Setup is required for GL Mapping of Inventory Transfer Accounts, as the transfers in ConnectWise are to merely move the value of stock between one Xero Asset account to Another. Wise-Sync manages the asset account for the transfer, however additional information may be required to be setup if you utilise Xero Tracking features.

Note:The following only applies if you are utilising Xero Tracking.

Create GL Mapping for Each Location.

  1. Select Inventory Transfer from the Account Type List
  2. Select My Company: Structure if you are mapping to the Location Level
  3. Select the desired record to map to
  4. Enter the appropriate Tracking Code in the Office Level

When an inventory Transfer is processed, the following transaction is affected in Xero.

Note: Inventory Transfers are posted as a $0 invoice, which cannot be edited if a batch is deleted for re-sync to Xero. To allow a batch to re-sync, you must edit the lines of the invoice so that it has a value > $0.

 
Step 5: Completed: Start Syncing

You're Done! Syncing Inventory is Easy.Once you have completed the setup of your Inventory Setup in ConnectWise and Xero, you're ready to start syncing.

As a reminder, the following records are created as part of the Inventory Processes

  • Inventory Transactions - Created at the time of Invoice, where a "Inventory" class products is sold.
  • Inventory Transfers - Created when you transfer a product from one Warehouse to another.
  • Inventory Adjustments - Created when you make a Stock on Hand (or Valuation Adjustment) to your Inventory Balances.

Note:

When you start syncing your Inventory to Xero, Wise-Sync will start processing the transactions according to details contained in each batch. If you have had Inventory running in ConnectWise for some time before, you might need to make some manual adjustments to your ConnectWise Inventory levels, before you start batching your inventory.

Common Challenges when switching over to "Inventory"

Sync Inventory - Issue > COGS Is artificially inflated as items were initially purchased into inventory, Client Invoice Synced to Xero After Inventory was switched on.

Advanced Setup Option > Inventory Part Compliance 

Many partners who use Inventory are aware of some of the nuances on the way that ConnectWise Handles Inventory. Wise-Sync has developed some proprietary ways of managing the inventory flow, based on some settings that you can define in Wise-Sync Setup for each company that you are syncing out to.

These options include:

  1. Drop-Ship Inventory Posting Override

    This option will force all Drop-Shipped inventory through a designated Asset Account, to ensure that the Cost of Sale is reported together with the Revenue. Traditionally ConnectWise will record the Cost of Sale of a Drop-Shipped Item at the time of receipt into ConnectWise, as this is not defined as a "Warehoused Item". Wise-Sync will provide the option to pass all Drop Shipped items through an asset account that you define in the setup settings in Wise-Sync.

  2. Inventory Part / Class Compliance

    ConnectWise will only account for Inventory if the following conditions are true. a) That the Inventory is a "Inventory" class product item, and b) That the Product Type as defined in the TypeXRef is set to "Inventory Part". Several balancing issues can occur if both of these settings are not set correctly. Wise-Sync will provide for the flexibility to treat all items of an Inventory Part based on a compliance level as defined in the article below.

Part 1: Drop-Ship Inventory Posting Override

Items that are drop shipped may still need to be treated as inventory to ensure that revenue correctly aligns to Cost of Goods Sold (COGS) based on the timing of the purchase and sale of Drop Ship. Partners that wish to defer the "COGS" to the time of sale can set the option to post Drop Shipped Items to an Inventory (Asset) account and treat them in the same manner as all Inventory Items.

Note:

It is recommended that you set the Account to different (or exclusive) account for the purpose of Drop Shipped items. This will assist in the tracing / tracking of items which have been drop shipped separately to those items held in your Warehouse Inventory Accounts.

Part 2: Inventory Part / Class Compliance Options:

When processing Inventory Transactions, Wise-Sync can be configured to check the settings of the parts which can affect Inventory in ConnectWise.

Product Type : Inventory Part

Product Class : Inventory

Drop Ship: True / False

Setting Wise-Sync to either of the following compliance options will determine when Wise-Sync will check the various settings in ConnectWise used to define an Inventory Transaction. To ensure strict or less strict compliance against the products settings in ConnectWise.

Options Settings in Wise-Sync

Inventory Transaction Posting ConnectWise Item Compliance: 

  1. Product Class (Inventory) + Product Type (Inventory Part) *

    When set, Wise-Sync will only process transactions where the conditions match. I.e. That the Product Class = 'Inventory', and the Product Part Type is an 'Inventory Part'. Where both of these conditions are not met; a Transaction will NOT be posted through to your accounting package.

  2. Product Class (Inventory)

    When set, Wise-Sync will only process transactions where the condition matches. I.e. That the Product Class = 'Inventory'. Where a product type is not set to a "Inventory Part" type, then a warning will display advising that the item should be reviewed in ConnectWise; a Transaction WILL be posted through to your accounting package.

  3. Product Type (Inventory Part)

    When set, Wise-Sync will only process transactions where the condition matches. I.e. That the Product Type = 'Inventory Part'. Where a product Class is not set to a "Inventory" class, then a warning will display advising that the item should be reviewed in ConnectWise; a Transaction WILL be posted through to your accounting package.

    As you can see from the above options, the settings range from "Strict" compliance in option 1: through to less strict compliance on whether the item is classified as Inventory in ConnectWise.

Drop Ship Inventory Override:

Items that are drop shipped may still need to be treated as inventory to ensure that revenue correctly aligns to Cost of Goods Sold (COGS) based on the timing of the purchase and sale of Drop Ship. Partners that wish to defer the "COGS" to the time of sale can set the option to post Drop Shipped Items to an Inventory (Asset) account and treat them in the same manner as all Inventory Items.

Note:

It is recommended that you set the Account to different (or exclusive) account for the purpose of Drop Shipped items. This will assist in the tracing / tracking of items which have been drop shipped separately to those items held in your Warehouse Inventory Accounts.

P
Paul is the author of this solution article.

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