For any business that holds stock, inventory is a double-edged sword. It is the engine of your sales, but it is also one of the largest assets on your balance sheet, tying up significant cash. Manage it well, and you have a powerful competitive advantage. Manage it poorly, and you suffer from a cascade of costly problems: stockouts losing you sales, overstocking draining your cash flow, and inaccurate financial reports that make strategic planning impossible.
Many businesses try to solve this with standalone inventory management software. These tools are often excellent at specific tasks, but they create a fundamental, high-risk problem: they separate your physical reality (what’s in the warehouse) from your financial reality (what’s in your accounting system). The “sync” between these systems becomes a fragile data bridge, prone to errors that can silently corrupt your financial statements.
As a firm of accountants, we view this problem differently. Inventory is not an operational silo; it is the heart of your company’s financial health, impacting every department and supporting company-wide efficiency and decision-making. Its valuation directly impacts your Cost of Goods Sold (COGS), your gross profit, and your balance sheet. Getting it right is non-negotiable.
This is why we have moved beyond the fragmented “best-of-breed” model to champion a unified platform like Odoo. Odoo’s Inventory module isn’t just an add-on; it’s a core, integrated component of a complete ERP, built on a foundation of financial integrity. This guide is our deep dive into Odoo’s inventory capabilities, viewed through the critical lens of an accountant and for those who want to build expertise, we recommend our Odoo accounting course.
The Foundation: Odoo's Double-Entry Inventory System
Before we touch on features, we must start with the philosophical principle that sets Odoo apart: double-entry inventory management. For more insights and expertise on Odoo ERP solutions, visit the WAO Group blog.
Inspired by the centuries-old accounting principle of double-entry bookkeeping, this system dictates that every stock movement has a source and a destination. A product cannot simply “appear” or “disappear.” It must move from one defined location to another.
- Receiving Goods:
When 50 units arrive from a supplier, they move from the virtual “Vendor Location” to your physical “Receiving Zone.” - Internal Transfer:
When you move those 50 units to a picking aisle, they move from the “Receiving Zone” to “Aisle 3, Shelf B.” -
Selling Goods:
When a customer’s order is dispatched, the units move from “Aisle 3, Shelf B” to the virtual “Customer Location.”
The Accountant’s Angle: This is the holy grail of inventory control. Because every movement is a balanced transaction, the system is inherently auditable and traceable. There is no need for a fragile “sync” to your accounting software because every stock movement is a real-time accounting transaction. When you enable automated inventory valuation, the value of your stock on the balance sheet is always, to the second, a perfect reflection of the physical reality in your warehouse. Odoo’s approach functions as a perpetual inventory system, providing continuous, real-time stock data and improving stock control. This eliminates a massive source of error and provides a level of financial integrity that disconnected systems simply cannot match.
Warehouse & Location Management: The Structure of Control
Effective inventory management begins with a well-organized warehouse, and Odoo provides the tools to digitally mirror your physical space with granular precision.
- Multi-Warehouse Management:
Odoo allows you to manage multiple physical warehouses from a single system. This is essential for businesses with multiple distribution centres or retail locations, providing a consolidated view of all stock while allowing for distinct operations at each site. - Hierarchical Locations:
Within each warehouse, you can create an unlimited number of specific storage locations, such as zones, aisles, racks, shelves, and bins. Odoo also supports unlimited warehouses, making it highly scalable for businesses with expanding storage needs. This hierarchical structure is the foundation for a true Warehouse Management System (WMS). -
Stronger Retailer Partnerships:
Seamless EDI communication with major supermarkets, ensuring smooth order flow and compliance. - Enhanced Decision-Making:
A solid foundation of accurate and reconciled data, empowering Alka Power with the insights needed for strategic planning and growth. - Putaway Rules:
You can create smart “putaway rules” that automatically direct incoming products to their ideal storage locations based on capacity, product type, or other defined logic. This optimises storage space and dramatically speeds up the receiving process.
The Accountant’s Angle: A well-defined warehouse structure is not just for operational efficiency; it’s for financial accuracy. By knowing the exact location of every item, you can perform highly targeted and efficient cycle counts, ensuring your physical stock count constantly matches your system records. This reduces the need for disruptive, full-scale stocktakes and provides continuous confidence in your asset valuation.
Warehouse Operations (WMS): Optimising the Flow of Goods
Odoo’s inventory module is a full-fledged Warehouse Management System (WMS) designed to streamline every physical process from receiving to dispatch. For more insights on inventory management and Odoo solutions, consider subscribing to relevant industry newsletters.
- Multi-Step Routes:
You can configure custom, multi-step routes for your operations. For example, a receipt might go through a three-step process: Unload -> Quality Control -> Put to Stock. A delivery might follow a Pick -> Pack -> Ship process. This enforces process discipline and provides visibility at every stage. Odoo’s WMS streamlines order fulfillment by managing inventory handling, warehousing, and shipping, ensuring timely and accurate delivery to customers. - Smart Removal Strategies:
Odoo allows you to define product removal strategies to optimise picking. Common strategies include: -
FIFO (First-In, First-Out):
Ensures older stock is sold first. - FEFO (First-Expired, First-Out):
Critical for perishable goods, this strategy prioritises picking items with the nearest expiry date to reduce spoilage and financial loss. - Advanced Picking Methods:
For high-volume warehouses, Odoo supports advanced picking strategies like batch picking, cluster picking, and wave picking to dramatically improve picker efficiency.
Barcode Scanning: The Engine of Accuracy
Manual data entry is the enemy of accurate inventory. Odoo’s native Barcode application is designed to eliminate human error at every touchpoint by integrating seamlessly with USB, Bluetooth, or dedicated mobile computer scanners.
Barcode technology plays a crucial role in product identification, ensuring each item is accurately tracked throughout the warehouse and minimizing the risk of misplacement or confusion.
You can use barcodes to streamline virtually any warehouse operation:
- Receipts:
Scan products as they come off the truck to instantly verify quantities against the purchase order. - Picking & Dispatch:
Scan items as they are picked to ensure the right product and quantity are going into the box, dramatically reducing shipping errors. -
Inventory Adjustments:
Perform cycle counts quickly and accurately by scanning a location barcode and then scanning the products within it. - Traceability:
Scan lot or serial numbers at every stage to build a complete, end-to-end traceability history.
The Accountant’s Angle: Barcode scanning is the single most important investment a business can make in the integrity of its inventory data. By enforcing accuracy at the point of action, you ensure that the data flowing into your accounting ledger is a perfect reflection of reality. This reduces the need for costly manual reconciliations and write-offs, and it provides the solid, trustworthy data needed for accurate financial reporting.
Purchasing & Replenishment: The Science of Smart Forecasting
Holding the right amount of stock is a delicate balancing act. Odoo provides intelligent tools to automate and optimise this process, ensuring you can meet customer demand without tying up unnecessary cash in overstock.
- Reordering Rules:
For each product, you can set minimum and maximum stock levels. When the forecasted quantity dips below the minimum, Odoo can automatically generate a draft purchase order to replenish stock up to the maximum level. Odoo also allows you to factor in supplier lead time when setting reorder points, ensuring timely replenishment and reducing the risk of stockouts. Its automation features, such as automatic reorder triggers and workflow automation, streamline the purchasing process and help maintain optimal inventory levels. - Make to Order (MTO):
For products you don’t keep in stock (e.g., custom items), you can use the MTO route. When a customer confirms a sales order for an MTO product, Odoo automatically triggers a purchase order or manufacturing order for that specific demand. -
Demand Forecasting:
Odoo’s reporting tools allow you to analyse historical sales data to project future demand, helping you make more informed purchasing decisions. For even more advanced forecasting, Odoo can be integrated with specialised tools like Inventory Planner, which uses your Odoo sales data to provide sophisticated demand predictions and replenishment recommendations.
The Accountant’s Angle: This is all about cash flow optimisation. Reordering rules and MTO strategies prevent you from tying up capital in slow-moving stock. Accurate forecasting allows you to align your purchasing with your revenue cycle, ensuring you have enough cash on hand to run the business effectively.
Inventory Valuation & Landed Costs: The Financial Truth
This is where an accountant-led implementation becomes absolutely critical. To a non-accountant, the cost of a product is what you paid the supplier. To an accountant, the true cost includes all the ancillary expenses required to get that product onto your shelf.
- Costing Methods:
Odoo supports the primary inventory valuation methods required for proper financial reporting: - Standard Price:
Manually defined cost, used for valuation regardless of purchase price. -
Average Cost (AVCO):
The cost is the weighted average of all units in stock. - First-In, First-Out (FIFO):
Assumes the first units purchased are the first ones sold. - Landed Costs:
This is a game-changing feature for any business that imports goods. Odoo has a dedicated landed costs module that allows you to add additional costs—such as freight, insurance, customs duties, and taxes—to an incoming shipment and automatically apportion them across the products in that shipment. You can split these costs by quantity, weight, volume, or current cost. When new inventory is received, Odoo ensures it is accurately tracked and valued as it enters the system, including all associated landed costs, so your inventory management and financial records remain precise. The four main methods of managing inventory include Just-in-Time (JIT) management, Economic Order Quantity (EOQ) management, perpetual management, and materials requirement planning (MRP) management.
The Accountant’s Angle: Landed costs are the difference between knowing your real profit margin and simply guessing. Without this feature, your COGS is understated, and your profitability is artificially inflated. By correctly applying landed costs, Odoo ensures that the inventory asset on your balance sheet reflects its true, fully burdened value. This provides the accurate data you need to make critical decisions about pricing, promotions, and product viability.
Inventory Management Software Integration: Connecting Odoo with Your Business Ecosystem
In today’s fast-paced business environment, inventory management software integration is no longer a luxury—it’s a necessity for companies seeking to streamline operations, maintain optimal stock levels, and maximize profit margins. Many business owners prefer cloud inventory management software for its lower hardware expenses and ease of subscription-based deployment. By connecting Odoo with your broader business ecosystem—including e-commerce platforms, wholesale distributors, and shipping carriers—you unlock the full potential of your inventory management system, transforming how you track inventory and manage business operations.
Seamless integration with Odoo enables real-time inventory tracking across all your sales channels and multiple locations, providing instant visibility into stock levels and inventory data. This real-time inventory visibility empowers your team to make informed decisions, respond quickly to changes in demand, and avoid costly issues like excess inventory or lost sales. Inventory management software helps increase customer satisfaction by reducing stockouts and delays in shipping. Whether you’re managing inventory for a single warehouse or coordinating stock across multiple warehouses, integration ensures that your inventory levels are always accurate and up to date.
One of the standout benefits of inventory management software integration is the automation it brings to your workflow. Automated replenishment features in Odoo can generate purchase orders the moment inventory drops below a set threshold, helping you maintain optimal stock levels without manual intervention. Integration with e-commerce platforms and online marketplaces means that every sale, return, or adjustment is instantly reflected in your inventory tracking, eliminating manual tasks and reducing the risk of errors.
Advanced reporting capabilities are another critical advantage. With integrated systems, you gain access to actionable insights through customizable dashboards, low stock alerts, and detailed analytics. This allows you to identify trends, optimize warehouse space, and improve demand forecasting—ultimately supporting better control over your inventory and enhancing your ability to make data-driven decisions.
Barcode scanning, batch tracking, and production planning features further streamline order management and fulfillment, ensuring accuracy and efficiency at every stage. By integrating Odoo with your shipping carriers and wholesale distributors, you can automate order management, track shipments, and provide customers with timely updates, all while maintaining a single source of truth for your inventory data.
For small businesses and medium-sized businesses, choosing the best inventory management software is crucial. Solutions like Zoho Inventory, Unleashed Software, and Odoo offer robust integration capabilities, allowing you to manage sales orders, supplier management, and inventory optimization from a unified platform. This not only improves customer experience but also drives business growth by increasing efficiency and reducing costs. The cost of inventory management software can start as low as $10 AUD per month for subscription services, making it accessible for businesses of various sizes.
Conclusion: Inventory is a Financial Function, Not a Logistical Problem
Effective inventory management is far more than just knowing what’s on the shelf. It’s about understanding the financial value of that stock, the cost of holding it, and the profit it generates. Additionally, it can enhance operational agility by allowing businesses to detect and respond to market trends effectively, ensuring they stay competitive in a dynamic marketplace.
Standalone inventory management software can solve logistical problems, but it often creates financial blind spots. Odoo, with its unified architecture, double-entry system, and deep financial features, treats inventory as what it is: a core component of your company’s financial health. Odoo's unified architecture is especially beneficial for growing businesses that need scalable solutions. As your business grows, Odoo adapts seamlessly, handling increased complexity and volume with ease.
However, the software is only a tool. Its power is only unlocked when it is implemented with the rigour and foresight of a financial professional. A technical implementation can make it work. An accountant-led implementation ensures it tells the truth.
Is your inventory software giving you financial clarity or just a stock count?
If you’re ready to move beyond logistical management to true financial control, schedule a complimentary, no-obligation Financial Process Audit with our team of chartered accountants. We’ll help you identify the hidden risks in your current inventory processes and map a clear path to a more profitable and predictable future.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalised advice from professionals. As our lawyers would say: “All content on WAO’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, WAO is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.