What is one of the first steps needed to set up tracked inventory in Xero?

Setting up tracked inventory in Xero begins with establishing inventory accounts. This step is essential because inventory accounts are necessary for proper accounting and tracking of inventory values. By creating specific accounts within the Chart of Accounts, you ensure that all transactions related to inventory—such as purchases, sales, and adjustments—are correctly recorded and reported on financial statements.

This structured account setup allows Xero to accurately manage inventory levels, costs, and valuations, which are critical for businesses that rely heavily on tracking stock. Having these dedicated inventory accounts provides the foundation for all subsequent actions related to inventory management in Xero, including the creation of purchase orders, tracking sales, and managing stock levels.