The Xero Executive Summary report explained, line by line

Short answer: Xero’s Executive Summary is a one-page report with six sections: Cash (money in and out of the bank), Profitability (income, costs and profit from the Profit and Loss), Balance Sheet (debtors, creditors, net assets), Income (number and average value of invoices), Performance (gross and net margin, return on investment) and Position (debtor days, creditor days, a debtors-less-creditors “cash forecast” and two asset-to-liability ratios). The profit and cash lines often disagree, and that gap is usually the first thing worth explaining. Return on investment is annualised and creditor days breaks down when there is little cost of sales, so check those two before you send the report to anyone.

The Executive Summary is the closest thing Xero has to a one-page health check. It pulls headline figures from the Profit and Loss, Balance Sheet and bank accounts, and adds a handful of ratios. Xero Central describes it as an overview of key cash, profitability, balance sheet, income, performance and position items.

That makes it a good first page for a management pack, and a confusing one if the reader does not know where the numbers come from. This guide goes through it section by section.

A note on sources: the row names below match the Executive Summary returned by Xero’s accounting API, and the formulas follow Xero Central’s description at the time of writing. Xero updates its reports regularly, so if a figure looks different in your file, Xero Central’s Executive Summary article for your region is the authority.

Where to find it

The Executive Summary is in Xero’s reporting area alongside the other standard reports. In the current version of reporting it supports flexible date ranges, comparison periods, average and variance columns, and commentary text, and you can save your settings as a custom report. Clicking an amount in the Cash, Profitability or Balance Sheet sections takes you to the underlying report.

Cash

Line	What it shows
Cash received	Money received into bank accounts in the period
Cash spent	Money paid out of bank accounts in the period
Cash surplus (deficit)	Cash received less cash spent
Closing bank balance	Total bank balances at the end of the period

How to read it: this is the cash view, not the profit view. A business can show a profit and a cash deficit in the same month, for example when customers are paying slowly or stock is being bought ahead of a busy season. If the two disagree, that is usually the most interesting thing to explain to a director.

Watch for: transfers between your own accounts, and how credit cards and loan accounts are set up as bank accounts in Xero. Check Xero Central for which accounts are included before you rely on the cash lines.

Profitability

Line	What it shows
Income	Revenue for the period
Direct costs	Cost of sales
Gross profit (loss)	Income less direct costs
Other Income	Income outside normal trading, such as interest
Expenses	Operating expenses
Profit (loss)	The bottom line for the period

These come from the Profit and Loss, so they are only as good as the coding behind them. If cost of sales is coded to overheads in some months and not others, gross profit will jump around for reasons that have nothing to do with trading.

Balance Sheet

Line	What it shows
Debtors	What customers owe at the end of the period
Creditors	What the business owes suppliers
Net assets	Total assets less total liabilities

Net assets going down month after month is a signal worth raising, even when individual months look fine.

Income

Line	What it shows
Number of invoices issued	Sales invoices raised in the period
Average value of invoices	Invoiced value divided by the number of invoices

These are useful for businesses with many similar sales. A rise in revenue driven by more invoices tells a different story from one driven by bigger invoices.

Performance

Ratio	How Xero describes the calculation
Gross profit margin	Gross profit divided by revenue, as a percentage
Net profit margin	Profit divided by revenue, as a percentage
Return on investment (p.a.)	Profit divided by net assets, annualised for the length of the period

Gross profit margin is usually the most useful of the three to watch month by month; see gross profit margin in Xero for a worked example and the usual reasons it moves.

Watch for: return on investment is annualised. A strong month in a short date range can produce a very large percentage. For small companies with low net assets, the figure can look dramatic in either direction and is often best left out of commentary.

Position

Line	How Xero describes the calculation
Average debtors days	Receivables balance divided by sales, multiplied by the days in the period
Average creditors days	Payables balance divided by cost of sales, multiplied by the days in the period
Short term cash forecast	Debtors less creditors
Current assets to liabilities	Current assets divided by current liabilities
Term assets to liabilities	Fixed (non-current) assets divided by non-current liabilities

How to read them:

• Debtor days is roughly how many days of sales are sitting unpaid. If your payment terms are 30 days and debtor days is 55, customers are paying late on average. It moves with sales, so one big invoice raised on the last day of the month can push it up without anyone paying late. To work it out on your own figures, and see how many days late that is against your terms and how much cash it ties up, use the free debtor days calculator.
• Creditor days is the same idea for suppliers. If you have little or no cost of sales (many service businesses), this ratio can be meaningless or extreme, because the divisor is small. How to calculate creditor days shows how to work out the figure from your supplier bills instead.
• Short term cash forecast is a very simple figure: it assumes debtors are collected and creditors paid. It ignores wages, tax, loan repayments and the timing of either side. Treat it as a rough indicator, not a forecast.
• Current assets to liabilities is the current ratio. Above 1 means short-term assets exceed short-term liabilities. Very high figures can mean cash is sitting idle; below 1 can mean pressure on paying bills. The working capital calculator works it out from your Balance Sheet, along with the quick ratio, which leaves stock out.

There is no quick ratio (acid test) line in the Executive Summary at the time of writing. If a lender asks for one, work it out from the Balance Sheet.

Before sending it to a director

1. Check the date range. Monthly ratios behave differently from quarterly or year-to-date ones, especially annualised figures.
2. Check the books are closed. Unreconciled bank lines and missing bills flow straight into gross margin, debtor days and the cash lines.
3. Remove or explain ratios that do not fit the business. Creditor days for a business with no cost of sales confuses more than it informs.
4. Add a sentence or two of commentary. The Executive Summary says what happened. It does not say why. Our free management accounts commentary generator can draft the first pass from your headline figures. If the summary goes into a board pack, the board report template shows where it fits in the finance section.

Common questions

Why does the Executive Summary show a profit but a cash deficit? The Profitability lines come from the Profit and Loss, which counts sales when they are invoiced and costs when they are billed. The Cash lines count only money that actually moved through the bank. Slow-paying customers, stock bought ahead, loan repayments, tax payments and owner drawings all take cash without reducing profit. Profit but no cash walks through the usual causes.

Why is my return on investment so high? It is profit divided by net assets, scaled up to a full year. Say a month’s profit is $8,000 and net assets are $40,000: that is 20% for the month, and annualised it shows as roughly 240%. A small company with little in net assets can show huge or negative figures for this reason, so it is often better left out of the commentary.

How does Xero work out debtor days here? Receivables at the end of the period divided by sales for the period, times the days in the period. With $22,000 owed to you and $36,000 of sales in a 30-day month, that is 22,000 ÷ 36,000 × 30 = about 18 days. A single large invoice raised on the last day of the month can push it up without anyone paying late, so compare it with your payment terms over a few months rather than one.

Why is creditor days huge, or zero? The calculation divides by cost of sales. A service business with little or nothing coded to direct costs gets a very large figure or none at all. Work it out from your supplier bills instead (how to calculate creditor days).

Is the short term cash forecast a real forecast? No. It is debtors less creditors at the end of the period. It leaves out the bank balance, wages, tax, loan repayments and when anything is actually paid. For a forecast you can act on, see the 13-week cash flow forecast.

Can Xero email the Executive Summary every month? Not on a schedule. You can save it as a custom report with your preferred date range and columns, but someone still has to run it, export it and send it. The next section covers automating that.

Sending it every month

The Executive Summary works well as the first page of a monthly or quarterly pack, followed by the Profit and Loss and Balance Sheet for readers who want detail. See how to send a monthly management pack from Xero for what else to include.

ReportPilot can include the Executive Summary in a scheduled pack. It requests the report from Xero’s own Executive Summary endpoint as at the period end, so the figures and ratios are Xero’s calculations rather than a copy, and emails it with the rest of the pack as PDF, Excel or CSV. With approval mode on, the pack comes to you first so you can check the ratios make sense before a director reads them. It asks Xero for read-only access, and there is a 14-day free trial with no card.