Why should I use a tracking category?
Tracking categories in Xero allow you to create "tags" that can be applied to your bank reconciliation, bills and invoices. This means you can add a tracking category to a transaction but still continue to use the same account codes you normally would when reconciling or allocating sales.
An example of when this can be useful is for government grants where you need to show spend in particular areas - or if you have just started a new business unit that you would like to monitor progress of.
How do I set this up?
The first step is to click your organisation name in the top left of Xero then go to "Settings"
On the next page you get to ensure that you click the link at the bottom that says "Looking For Advanced Settings?"
Accessing the tracking category section of Xero
Now that you can see advanced settings you should also be able to click on "Tracking Categories" in the right hand menu
Setting up your categories
Xero allows you to have up to 4 top level categories and then 100 sub categories for each top level. Note though - that you can only have 2 top level categories active at any point in time
On the tracking category page to add a top level click on +Add Tracking Category
In the window that pops up you can specify your top level category and then any items below. In our example below we are adding the top level category called region, and then different regions below it.
Once you have added all the items you require you can then click on "Save"
Using the Category
Now you've got your category set up - in Xero it will be available on your bank reconciliation screen as a drop down box. If you'd like to apply tracking to a transaction simply use the drop down and apply the region first
Once you have picked your region you can then categorise the transaction as normal and click OK to reconcile. If you are using an external system like Dext you will be able to use your tracking category there before publishing to Xero as well.
Now remember - you can also add tracking on your purchases, invoices and other areas in Xero - just look for the tracking category name - an example of this is shown below
I've added tracking to things - now what?
Once you've used your tracking categories you can now use them in other reports in Xero!
For example if you had used your tracking category on sales invoices you can do a profit & loss filtered by your tracking category.
If you are using the new profit and loss all you need to do is click on "Filter" and select your region
Once you have selected it click on "update" for your profit and loss.
The transactions now showing will only be the transactions that you have allocated tracking to!
So now you can see which region (in this example) is performing better than the other, looking at a profit and loss that you are already familiar with!
Tracking can be used in other reports in Xero as well, so feel free to take a look around and see where else you might be able to use tracking with your reports!
I still need help!
If you need assistance with creating and using tracking categories remember you can email or phone us.
