Using Tracking Categories in Xero for Better Analysis

Accounting Prose empowers our clients with the accurate data they need to make crucial financial decisions and successfully scale their business. Think in terms of departments, teams, offices, product lines, job types, or clients. Creative agencies juggle multiple clients, campaigns, and deliverables across teams. Understanding which clients are profitable (and which are draining resources) is essential for pricing services correctly and managing project scope. Tracking Categories help agency owners see the financial picture client by client. You can instantly see expenses broken down by location, department, client, project, and more for at-a-glance analysis.

How to Add a Tracking Category in Xero

This step is all about identifying the key dimensions of your business that you want to analyze independently. Franchisees managing multiple units under a parent brand need to evaluate each location’s financial health. Retailers with brick-and-mortar locations often want to understand which stores are performing best.

Set tracking defaults on repeating invoices, contacts, or bills to speed things up and reduce manual entry errors. With Tracking Categories, you can compare these in custom P&Ls with just a few clicks. Each business can set up two active Tracking Categories, and each category can contain up to 100 individual options.

What is the difference between Xero projects and tracking categories?

This section covers processes for consistently entering rich tracking detail to transactions within Xero for meaningful analysis. When creating a tracking category, the Transaction Types mapping controls where this field will appear within Xero for data capture. Tracking categories give you flexible tracking at the transaction line level. Xero Projects gives you specialized project management features for keeping projects separate and billing them out. You need to specify a descriptive name for the category, such as “Department,” “Location,” “Project,” etc. It’s also recommended to assign a category group if you want to organize multiple related categories together in the reporting chart of accounts.

Step 3: Apply Them to Transactions

Whether it’s tracking locations, sales reps, brands, or other attributes, tracking categories let you tag transactions for deeper slicing and dicing of your financial data. Xero allows organizations to have two active Tracking Categories, with each category supporting up to 100 tracking options or names. When entering transactions such as invoices, bills, and bank transactions within Xero, you can assign tracking categories to tag the financial data. Xero’s tracking categories feature allows users to tag transactions and track performance across different segments of their business. This provides enhanced visibility into financial data and helps inform better decision making. With some planning and configuration, tracking categories offer a flexible way to enhance business insights within Xero.

Utilizing Xero Tutorials for Tracking Category Mastery

• To avoid analysis paralysis from too many granular categories, structure your categories hierarchically.
• By leveraging multiple categories, you gain greater visibility into the key drivers behind your financial KPIs.
• By implementing strategic tracking categories in Xero, businesses can gain unprecedented clarity into their finances.
• You can view year-over-year trends, compare segments, and identify top and bottom performers.
• If you try to “encode” both project and job into one long tracking option (e.g., “Long Street 123 — Foundation Works”), your list explodes and reporting becomes messy.

Construction job costing is typically driven by invoices and commitments (RFQs, POs, subcontracts, progress claims), not just time entries. That’s why many contractors rely on tracking categories how to use xero tracking categories for reporting and connect a dedicated cost-control tool for the heavy lifting. With advanced tracking fully implemented, you can better understand the performance of business units, campaigns, projects and more.

Gain Clarity Without a Messy Chart of Accounts

Knowing where your revenue is strongest or which departments are over budget helps you prioritize investments, adjust pricing, or cut costs. This would allow you to later filter the invoice in financial reports by those criteria. Transactions tagged with those options can then be easily filtered by office location in reports. This is where you can manage the tracking categories used to tag transactions in Xero.

These cover tracking concepts in more detail and include step-by-step setup guidance with screenshots. Referencing Xero Central can supplement internal teams in building out an effective tracking framework. Leveraging such real-world scenarios facilitates practical application of tracking categories for common use cases. For example, create a rule that assigns the “Marketing” category to expenses from your MailChimp account. Or assign the “East Coast” regional category to customers from Eastern states. Use Xero’s rules engine to automatically assign categories based on certain criteria.

• When first implementing tracking, focus on the Getting Started tutorial.
• Under the Settings menu, choose “General Settings.” On the General Settings page, click on “Tracking” in the left sidebar.
• That’s why many contractors rely on tracking categories for reporting and connect a dedicated cost-control tool for the heavy lifting.
• While tracking categories can relate to projects in some ways (e.g. tagging data by project), they serve different core functions.

Keeping tracking simple, validated and optimized is key for usable financial insights. Take care when mapping columns to ensure tracking fields appear in the appropriate transaction interfaces within Xero for entering values. To access tracking categories in Xero, go to the Accounting menu and select Advanced, then click Tracking categories. This will open up the Tracking categories page where you can view, edit, add, and delete tracking categories. With thoughtful tracking setup, Xero can provide rich insights into the financial health of your business.

This gives greater visibility into performance and helps inform better financial decisions. The Advanced Tracking feature in Xero allows businesses to add custom tracking categories and columns to transactions. This enables more granular tracking of expenses by department, location, project, or other dimensions. Tracking categories are useful for gaining more financial insights from Xero without needing to run reports in external systems.

Discover how to hire a healthcare data analyst from LATAM, avoid common mistakes, and leverage offshore talent for your US healthcare company. Assign tracking categories consistently to enable dynamic reporting by category across your financial documents. Start here with Job costing with 3-way match — it’s how tracking categories roll up cleanly to projects. For example, tracking data may reveal an upcoming project requiring specific staff skills is likely to exceed its budget. Leadership can proactively reallocate staff from other projects to course correct.

The key is structuring Categories to suit your management and planning needs. Software-as-a-Service (SaaS) companies often offer different subscription plans, add-ons, or modules. Knowing how each product tier performs in terms of revenue, churn, and support costs helps guide roadmap decisions and marketing focus.

For example, a business can create tracking categories for each department – Sales, Marketing, Operations. When employees submit expense claims, they can tag each expense with the relevant department. By continually optimizing business accounting practices with Xero and tracking categories, companies can unlock even greater financial visibility and control. Double check that the transaction now shows under the right tracking category in reports.

With these insights, leadership teams can spot opportunities, address underperformance, and allocate resources to drive maximum ROI – all based on clear financial reporting. Using tracking categories allows you to gain insights into the performance of different segments of your Xero organization. They can be a very useful analysis tool for managers and business owners. Implementing tracking categories in Xero can seem daunting for businesses wanting more financial insights. Xero’s tracking dimensions are limited, and firms that need to monitor project + job + phase + location quickly run out of room.