When Should You Create Separate Product Categories in Odoo

Managing your inventory is never easy. You have to deal with multiple products, and beyond that, you have to manage even a single product with multiple variants, brands, sizing, and more. We know exactly how all those headaches can be avoided if you create a structured and well-categorized product setup. But yes, even after categorizing it, you still have to think about how the value of your product will be captured based on its category. in this blog we are going to discover when you should create Separate Product Categories in Odoo.

In standard Odoo functionality, we know that we can create numerous product categories. But somehow, we end up drowning in hundreds of categories without getting any real benefit from that categorization.

So before we create multiple categories, we must understand when exactly we need a separate category for a product, and what indicators should trigger us to start categorizing.

Here are some points you need to start thinking about before jumping into categorization:

Different Accounting Structure

We know that in some cases, you might wish to track your income or expenses based on the category. For example, if you have two types of products — services and physical products — and you wish to track them separately, then in this case, yes, it’s better to have separate product categories with different income and expense accounts set up inside.

Costing Methods

There are some conditions where you will need different costing methods (Standard, FIFO, AVCO) for your products. What we mostly find is that raw materials are set to FIFO, while regular products might use Standard costing. So in these cases, it will be easier for you to define your method based on the category.

Different Procurement or Reordering Behavior

If you treat the buying/stocking process differently, then in advanced setups, categories can help with automation and reordering rules. For instance, Odoo has the ability to treat products in the Fast Moving category with tighter reorder thresholds.

Better Reporting

We know that for reporting purposes, categorization is always best. We can see the top sales categories, the most purchased categories, and much more. So in these cases, your categorization will help you build reports across modules that are related to products.

In conclusion, all these conditions are about accounting and inventory team workflows, so both teams must be aligned. That way, they will get their expected results without clashing with one another.

Are your categories a burden to you? Stop using product folders, and use product category in Odoo 18 to get financial and operational benefits. Partner with us now!