It’s no secret that we think Xero is a fantastic piece of kit. And when businesses make the move over from Sage, they love the improvements in accessibility and customisation they see.

But that doesn’t mean the transition between the two is simple.

We’ve put together this quick guide for any wholesale business that’s thinking about a move from Sage to Xero.

In the first part of this guide, we’ll talk about the limits of using Xero without an inventory add-on app.

When we release the second part of our guide, we’ll talk about the next steps – how to choose the right inventory app for your wholesale business, and a few things you need to put in place before and after the move.

While there are plenty of useful tips in this guide, it’s no substitute for the tailored advice you’ll get on a call with one of our specialists. So if you’re serious about moving your wholesale business over to Xero, take advantage of one of our free consultations by booking a call here.

Understanding the limits of Xero

As we previously covered in our Sage 200 vs. Xero analysis, there’s a big difference between Xero as a standalone product, and Xero with its best add-ons.

The vanilla version of Xero on its own won’t be right for everyone. So here’s a general rule of thumb to help you decide if your business can get away with using Xero on its own:

A wholesale business with a turnover above £1 million is highly likely to need an inventory app to get the most out of Xero.

Why? Because the vanilla version of Xero has certain limits. A larger business with more complicated needs might start to push those limits – and they might need an inventory app to help them stay inside those limits.

So if you’re a wholesale business moving from Sage to Xero, and you want to know whether you’ll need an inventory app, here are three of the most important limits you’ll need to think about:

1.   Sales invoices and purchase invoices

Xero on its own (without an inventory app) has a limit on the number of sales and purchase invoices it can handle – around 1,000 sales invoices and 1,000 purchase invoices each month (for a total of 2,000).

It’s important to note that this isn’t a hard cap. You won’t find that Xero refuses to process numbers higher than these, or that it suddenly breaks and shuts down.

But when your monthly invoices start to reach numbers like these, you’ll start to see some slowdown: in the way that Xero operates, and in the way it links with other systems and integrations.

An inventory app can’t remove these limits: they’re baked into Xero itself. But with the right add-on, there are ways to work around them – such as grouping high numbers of transactions into one consolidated transaction, which keeps your total number of transactions below the Xero limit.

Looking at moving your wholesale business to Xero? book a call here.

2.   Stock product codes

Any business that deals with a high number of products is going to have a huge number of product codes to process.

And for a wholesale business using the vanilla version of Xero, the limit of 4,000 product codes could cause you problems.

Unlike the soft cap of sales and purchase invoices, the limit on stock product codes is a hard cap. So if you’re over that limit and try to process your VAT Return, Xero will time out – there’s simply too much data to process.

For most businesses, this is huge. One of the biggest things driving companies to Xero is the need to be compliant with Making Tax Digital (MTD). If you want to be compliant with MTD, you need to be able to report your VAT to the system.

(And that means you don’t want your accounting software to time out when you need it most!)

3.   Order processing and order templates

Wholesale businesses often have completely different needs to other businesses when it comes to their orders and invoices.

They need to be able to:

• Create multiple separate invoices from one initial quote or order
• Produce different templates for different types of clients
• Work with different prices tiers, customer-specific pricing, and quantity-based pricing.

On its own (without an inventory app), Xero has a fairly linear and simple ordering process. You have a single draft invoice that you approve, and that single invoice is then paid and completed. And for wholesale businesses, a one-track process like this just isn’t enough.

So how do you know if you’ll need an inventory app?

If your wholesale business has a revenue above £1 million – but you’re confident that you can fit inside all of Xero’s limits – then you might not need an inventory app.

And if you’re a wholesale business with revenue below £1 million, there’s a decent chance that your needs won’t be complicated enough to demand an inventory app (but you’ll have to get used to lots of clumsy spreadsheets!)

Now that you’ve got a good idea of whether your business will need an inventory app, we can start to look at some of the different options you have when you choose one – so check back next week for the second part of our guide.

But if you just can’t wait that long, don’t worry: you can take advantage of one of our free consultations to get the friendly, no-obligation advice and guidance you need.