Xero offers numerous ways for you to sort and analyze your financial accounts. Tracking categories provide one kind of insightful filtering.
Once you’ve spent some time working with Xero, you realize that your paper-and-Excel system was woefully inadequate. Instead of scribbling notes, hunting for documents, and constantly shuffling file folders around, you’re storing customer, vendor, and item data in neat, uniform records. Transaction forms like invoices and purchase orders are easy to fill out, process, and locate, and you can quickly see at a glance how your business is doing.
All of this order and organization really pay off when it’s time to create reports. Using Xero’s pre-defined templates for customizable “slices” of information by item, like aged payables, customer invoices, and sales, you can display and print exactly the data you need in order to make more informed business decisions.
Xero’s tracking categories can help make those reports even more illuminating and insightful. You can assign these specialized classifications to transactions, refining your reports’ results to see how various elements of your business, like departments and regions, are accomplishing their goals.
Creating the Framework
To get started, open the Settings menu and select General Settings, then Tracking.
Click on +Add Tracking Category. The content you enter in the box under Tracking category name will appear throughout Xero – on transactions and reports – so be sure it’s conceived well and spelled correctly.
If you entered Salesperson, for example, you’d enter all of the relevant names in the boxes under Category options. If you need more boxes than those displayed, click Add another item to include as many as you need. Then click Save.
When you’re creating your categories, keep in mind that only two can be active at one time. You’ll be able to archive categories and delete unused ones, but you don’t want to alter the names much unless it’s absolutely necessary. Transactions you’ve already saved will maintain their original assignments, but any activity going forward will contain the new category names.
For this reason, we suggest that you consult with us during that process to help determine the categories that would work best and understand the impact any changes will have on reports.
Using Your Categories
Once you’ve defined a set or two of categories, sales and purchase transactions that you create (invoices, purchase orders, bills, etc.) will contain a new column for each category. When you click on the down arrow at the top of each column, a drop-down list will display the options that you entered when you created the category.
Let’s say that management wants “Salespeople” to be called “Sales Reps” from now on. You can rename the category, which will update the transactions and reports that use that name (you can also add and remove the list options in your categories).
Go to Settings | General Settings | Tracking again. Click on the tab for the category that you want to rename to highlight it, then click Rename next to the Tracking category name. The Edit Tracking dialog box will open. Enter the new name and click Rename. Follow the same procedure for any Category options you need to rename. Click add another option to expand your list.
You can also click the X to delete an option. If you click the X next to the category name itself, though, that category will be archived if it’s been used in transactions and deleted if it hasn’t.
Using Categories in Reports
Tracking categories are totally optional, and you don’t have to fill in every column even if you use them. But the more you assign them to transactions, the more useful and comprehensive your reports will be.
Many reports are designed to use tracking categories as filters. The all-important Income Statement is one of them.
Open the Reports menu in Xero, and then All Reports | Tracking Summary to see sales comparisons (the report will read Sales Summary when you run it).
We encourage you to use as many of Xero’s tools as you can in your effort to create the most thorough, useful reports. You’ve already taken a big step toward smarter business workflow and wiser business decisions by starting to use Xero. Make certain to take advantage of everything it has to offer.