Tracking Categories are a key feature of Xero and very powerful. They enable the accounting data to be segmented into branches, products, costs centres, geographies or any other segmentation required. They are a key part of a good data model.
Using Tracking Categories in Multi-Entity Businesses
For groups and multi-entity businesses Tracking Categories are both an opportunity and a problem: if the Tracking Categories are well aligned then the power they bring to a single entity can be applied across a group but, if they are misaligned, they will create errors in reporting. The issue is that - until now - there has been no easy way to monitor if the Tracking Categories are aligned.
Tracking Category Issues in Multi-Entity Businesses
Multi-entity businesses can encounter three types of issues with Tracking Categories:
- The Tracking Categories don’t match
- The Options within the Tracking Categories don’t match
- The Options are not applied consistently across the group
1. The Tracking Categories don’t match
For example: In entity 1 the Tracking Category is called “Project” and in entity 2 it’s called “Projects”.
This kind of issue is common but is easy to spot when the data is consolidated. Therefore it tends to be rarer in businesses that use consolidation software. It is easily solved by updating the name of the Tracking Category in the required Xero files.
2. The Options within the Tracking Categories don’t match
Example 1: In entity 1 there are 25 Options within Tracking Category A and in entity 2 there are 23 Options.
Example 2: In entity 1 the third Option within Tracking Category A is called “New York” and in entity 2 the third Option is called “new york”.
This issue is very, very common - the majority of groups using Tracking Categories have at least one problem in this area.
3. The Options are not applied consistently across the group
For example: Invoices from XX are applied to Option X in entity 1 but to Option Y in entity 2.
This issue is the most common - more than 90% of groups using Tracking Categories have problems in this area. It can also be very difficult to solve. Large misallocations usually show up in the Income Statement or other financial reports but smaller misallocations often persist.
The Tracking Category Audit
We’ve built the Tracking Category Audit tool to enable you to spot and solve these issues.
See all your Tracking Categories in one place
Tracking Category Audit enables you to review all your Tracking Categories, from all your entities, in one place:
See where Tracking Categories don’t match across your group
Tracking Category Audit shows you any inconsistency across your Tracking Category names:
See if the correct number of Options are present in each entity
Tracking Category Audit shows you where some Tracking Options might be missing:
See if your Tracking Options match across your group
Tracking Category Audit enables you to spot issues with your Tracking Options such as spelling errors, capitalisations and other issues that will affect your end reporting:
See how your Tracking Options are being applied across your group
Tracking Category Audit enables you to review how your Tracking Options are used by volume, by value and by percentage of transactions:
Increasing the number of Tracking Categories or Tracking Options
Xero enables 4 Tracking Categories but only 2 can be active at any one time. This means that a business effectively has 2 Tracking Categories with each limited to 100 Options.
To help those businesses that need more we have created our Data Dimensions tool that gives you 6 additional Tracking Categories each with up to 250 Options.
