Integrating Inventory and Accounting: Getting Stock and Finances in Sync

If you’re managing inventory in one system and accounting in another, you already know the pain. Stock levels say one thing, financial reports say another, and nobody fully trusts either number. Purchase orders live in the inventory system but the costs show up in accounting. A stocktake reveals discrepancies that take days to trace.

The root cause is almost always the same: your inventory system and your accounting software aren’t properly connected. Data is flowing one way, flowing late, or not flowing at all. And someone on your team is manually reconciling the gap.

This guide covers what needs to sync, how to set it up, and where the common integration failures happen.

What Data Needs to Flow (and Which Direction)

The first mistake businesses make is treating inventory-accounting integration as a one-way sync. It’s not. Different data flows in different directions, and getting this wrong creates more problems than having no integration at all.

From Inventory to Accounting

• Sales transactions — when stock is sold, the accounting system needs to record the revenue and reduce the inventory asset value. This includes line-item detail: what was sold, the quantity, the unit price, and any discounts applied.
• Cost of Goods Sold (COGS) — every sale has a cost side. Your inventory system knows the landed cost of each item. That cost needs to flow to accounting so your profit margins are accurate, not estimated.
• Stock adjustments — damaged goods, write-offs, internal transfers, and stocktake corrections all affect inventory value on the balance sheet. If these only happen in the inventory system, your accounting is wrong.
• Purchase receipts — when stock arrives and is received into the inventory system, accounting needs to know. The inventory asset increases, and the purchase order can be matched to the supplier invoice.

From Accounting to Inventory

• Purchase orders — many businesses create POs in the accounting system. The inventory system needs visibility of what’s been ordered, expected delivery dates, and quantities — so your team knows what’s incoming.
• Supplier invoices — when a supplier invoice is entered in accounting, the landed cost may differ from the original PO (freight, currency fluctuations, surcharges). The inventory system needs the actual cost to maintain accurate stock valuations.
• Payment status — knowing whether a supplier has been paid affects purchasing decisions. If your inventory team can see payment status, they can prioritise suppliers and manage relationships better.

The COGS Problem

Cost of Goods Sold is where most inventory-accounting integrations either shine or fall apart. Getting COGS right means your profit margins are real. Getting it wrong means you’re making business decisions based on fiction.

The challenge: your inventory system tracks cost at the item level — purchase price, freight, duties, landing costs. Your accounting system needs COGS at the transaction level — what did it cost you to fulfil this specific sale?

Three common costing methods:

1. Weighted average cost — the total value of stock divided by total units. Simple and commonly used. Most inventory systems calculate this automatically.
2. First-in, first-out (FIFO) — the oldest stock costs are expensed first. Better for businesses with price-sensitive or perishable inventory.
3. Specific identification — each unit has its own cost. Used for high-value, serialised items (vehicles, equipment, jewellery).

Your integration needs to use the same costing method in both systems. If your inventory system calculates weighted average cost but your accounting system uses FIFO, your COGS will never reconcile.

Common Integration Approaches

Native Connectors

Dedicated inventory platforms like Cin7, DEAR (now Cin7 Core), Unleashed, and TradeGecko (now QuickBooks Commerce) offer native integrations with Xero, MYOB, and QuickBooks. For standard workflows — sales orders creating invoices, purchase orders syncing across, basic COGS tracking — these native connectors handle the job.

Limitations: They sync on a schedule (often every 15-30 minutes), handle limited customisation for account code mapping, and struggle with complex scenarios like partial deliveries, drop-shipping, or multi-currency purchasing.

Middleware (Zapier/Make)

Middleware can bridge gaps that native connectors don’t cover, but inventory-accounting sync pushes middleware to its limits. The multi-step logic — receive stock, update valuation, match to PO, create accounting entry with correct account codes and GST — is difficult to build reliably in a visual automation tool.

Custom Integration

For businesses with complex inventory — multiple warehouses, bill of materials, batch tracking, landed costing with multiple cost components — a custom integration is often the only option that handles the full picture. It costs more upfront but eliminates the manual reconciliation that eats hours every week.

Where Integrations Break Down

Partial Deliveries

You order 100 units from a supplier. 60 arrive now, 40 arrive next week. Your inventory system receives 60. Your accounting system has a PO for 100 and a supplier invoice for 100. The integration needs to handle partial receipts, matched against the full PO, without duplicating costs when the remaining 40 arrive.

Most native integrations handle this poorly. They either wait until the full order is received (delaying your inventory accuracy) or create duplicate accounting entries when the second shipment arrives.

Multi-Location Stock

If you have stock in multiple warehouses, stores, or vehicles, your inventory system tracks quantities by location. Your accounting system typically tracks total inventory value on the balance sheet — it doesn’t care where the stock sits physically. The integration needs to aggregate location-level data into financial totals without losing the location detail your operations team needs.

Returns and Credits

A customer returns goods. The inventory system receives the stock back. The accounting system needs a credit note or refund entry, and the COGS for the original sale needs reversing. If the returned item is damaged and written off, that’s a different accounting treatment than restocking a saleable item. Your integration needs to know the difference.

GST on Purchases

Australian businesses need GST tracked correctly on purchase transactions. A single supplier invoice might include GST-inclusive items, GST-free items, and capital purchases with different BAS treatment. The integration needs to map each line item’s GST status from the inventory system to the correct tax code in accounting.

Getting Started

If your inventory and accounting systems aren’t properly connected, here’s the practical path forward:

1. Audit the current state. Where does data flow today? What’s manual? Where do discrepancies appear? The answers tell you what to integrate first.
2. Agree on source of truth. For every piece of data — stock quantities, item costs, supplier details, product codes — one system owns it. Document this before building anything.
3. Map your account codes. Work with your accountant to create a mapping table: every product category, stock movement type, and cost component mapped to the correct accounting code and GST treatment.
4. Start with one direction. Get inventory-to-accounting working reliably before adding the reverse flow. One-directional sync is simpler to debug.
5. Plan for exceptions. Returns, write-offs, partial deliveries, and price adjustments all need handling. If your integration ignores these, your team fills the gap manually — and that’s where errors creep in.

The goal isn’t perfect real-time sync of every data point. It’s accurate financial reporting that reflects what’s actually happening with your stock — without anyone on your team spending days every month making two systems agree.