CFO Tech'Hack': Think outside the box to maximise Xero's tracking categories

Xero’s streamlined and user-friendly accounting software provides two active tracking categories that help businesses manage and report on different aspects of their operations. However, this limitation can pose challenges for businesses with more complex reporting needs.

To bypass this constraint and enhance your financial tracking capabilities, we've compiled several hacks and strategies that unleash more powerful organisational reporting within Xero.

Combine and conquer

One of the most innovative yet straightforward hacks to maximise your use of Xero’s tracking categories involves combining two related data points into a single category using a delimiter (e.g. a hyphen or pipe). Imagine you need to track three dimensions: Geography, Sales Team, and Department. By combining Geography and Sales Team into one category—like ‘UK - Team A’, ‘UK - Team B’, ‘USA - Team A’, and ‘USA - Team B’—you cleverly consolidate the information into a manageable format. Then, you can easily manipulate this through coding, scripts, Excel, or tools that let you group, filter, and report on these combined values through different lenses. Calxa's ‘Business Unit Combinations’ make this possible.

“I’d always encourage keeping your GL less complicated, so use this trick before segmenting your GL by too much detail” – Luke Streeter, COO and Co-founder at flinder

This approach is particularly useful for businesses that require nuanced insights without additional complexity, allowing you to capture two layers of information in one category that you can later split apart for reporting. Just be disciplined about formatting those combined values.

Detail matters: perfect your transaction descriptions

Never underestimate the power of detailed descriptions in transaction entries. By adopting stringent description protocols, every transaction becomes a data point.

Whether you're analysing client entertainment expenses by client or travel costs by traveller, establishing a team norm of maintaining consistent and detailed descriptions can create an effective, unofficial layer of tracking. This practice is invaluable for retrospective analyses and ensures that, even without tracking categories, the data remains ready for deep analytical dives.

The chart of accounts approach

Rather than relying solely on tracking categories for all of your dimensional analyses, you can expand your general ledger (GL) accounts. This might mean a longer chart of accounts but offers a more granular analysis when using a tool like Joiin. For instance, you can detail different expenses or revenue streams by department directly within your GL, and then consolidate this data in Joiin for reporting, thus sidestepping the tracking category limitations altogether.

“We have a very, very long chart of accounts with different departments there. We don’t worry too much about having that long list in Xero because we then have the flexibility to analyse it more granularly with a tool like Joiin” – Harriet Hope, VP of Finance at Arbolus

Regularly rethink data with 'Find and Recode'

The business landscape is always in flux, which means your internal practices need to be just as flexible. Xero's 'Find and Recode' feature is a game changer, letting you search for transactions based on specific criteria and then directly update details like account codes, tax rates, contact names, and tracking categories. This ability to restructure data on the fly is invaluable.

As your business changes—whether it’s how you manage data, allocate costs, or present information—don't hesitate to adjust your practices. With tools like Xero, making these adjustments is straightforward. Whether you're reallocating costs or modifying a process, don't stick with the original method just because changing seems daunting. Often, updating your approach is well worth the effort and key to continuous improvement.

This flexibility is critical for keeping pace with shifts in your business structure or focus, ensuring that your financial records remain accurate and relevant. Embrace the adaptability that Xero offers and be proactive about making periodic updates to ensure your accounting system aligns with your current business requirements.

By implementing these strategies, you can transform the way you use Xero, turning what might seem like limitations into opportunities for more refined, precise financial management. With a bit of ingenuity in organising your data and some capable reporting tools, you can blow the roof off Xero's tracking limits. Embrace these hacks and watch as your business's financial tracking becomes as sophisticated and comprehensive as the decisions you make.