Xero tracking category reports: a profit and loss by location or department

Short answer: in Xero, open Reporting › Profit and Loss (Accounting › Reports in the older menu), pick the month, and in the report settings choose to compare by tracking category (for example Location). Xero gives each option its own column, plus a column for lines with no tracking option. That last column is where most of the work is. Before you send the report to a client, make sure no income sits there and that every cost in it is a real shared overhead and not a missed tag. Then decide whether the client wants each location’s profit before or after its share of overheads, and say which one the pack shows.

Menu names move between Xero releases and differ slightly by region. If a label below does not match your screen, search Xero Central for the report name.

What Xero can and cannot do with tracking

• Two active tracking categories per organisation, each with its own list of options. Typical pairs are Location and Department, or Location and Job.
• Compare by one category in the Profit and Loss: one column per option, plus the untagged column. Options with no activity in the period are left out of the report.
• Filter by the second category. You can compare by Location and filter to one Department, but you cannot get every Location × Department pair as columns in one report.
• Tracking or periods, not both. At the time of writing Xero does not let you compare tracking categories and compare periods in the same Profit and Loss. For “each site, this month against last month”, run the report once per month, or once per site with periods compared and a tracking filter.
• Budgets by tracking option. Xero’s budget manager can hold a budget per tracking option, so the budget vs actual report can be run for one site.
• The Balance Sheet does not split by tracking. Bank, debtors and loans stay whole-business figures. Tracking is for profit, not cash.
• One organisation per company. Tracking splits one company. If the sites are separate companies, each has its own Xero organisation, and a group view means a consolidated profit and loss with the charges between them taken out.

The month-end tracking check (5 minutes per client)

Run the Profit and Loss compared by the category, then look only at the untagged column:

1. Income in the untagged column should be zero. Any sales there are invoices without a location. Fix the invoice lines before anything else, because untagged income makes every site look worse.
2. Direct costs in the untagged column are usually missed tags. Purchases, stock and direct wages belong to a site. Bank-fed supplier payments are the usual culprit: a bank rule that sets the tracking option for a regular supplier stops it happening again.
3. Overheads in the untagged column are fine. Accountancy, insurance, software and head-office wages are shared. Leave them untagged in the books.
4. Work out the tag rate: untagged direct costs ÷ total direct costs. Under 1% is clean. Above that, fix it before you write any commentary about one site’s margin.

A worked example: two cafés, one month

A café business in the UK has two sites, tracked with a Location category. September’s Profit and Loss compared by Location shows:

From Xero	Harbour St	Mill Rd	Unassigned	Total
Sales	£42,000	£31,000	£0	£73,000
Cost of sales	£13,000	£10,500	£1,200	£24,700
Gross profit	£29,000	£20,500	−£1,200	£48,300
Gross margin	69.0%	66.1%		66.2%
Site wages	£14,000	£12,500	£0	£26,500
Rent	£4,500	£3,000	£0	£7,500
Shared overheads	£0	£0	£7,300	£7,300
Net profit	£10,500	£5,000	−£8,500	£7,000

The check finds £1,200 of cost of sales with no location: 4.9% of all cost of sales, well above 1%. It is a coffee and milk supplier paid by direct debit, and the invoices show £400 for Harbour St and £800 for Mill Rd. After the bookkeeper tags those lines (and adds a bank rule for the supplier):

After fixing tags	Harbour St	Mill Rd	Total
Cost of sales	£13,400	£11,300	£24,700
Gross margin	68.1%	63.5%	66.2%
Site profit (before shared overheads)	£10,100 (24.0%)	£4,200 (13.5%)	£14,300

Total profit has not moved (£7,000), but Mill Rd’s margin fell 2.6 points and its site profit fell by 16%. A commentary written from the first report would have said Mill Rd’s margin was close to Harbour St’s. In fact it is 4.6 points lower, and that is the thing to ask the client about (wastage, pricing, or a different product mix).

Sharing the overheads. The £7,300 of shared overheads is 10% of sales. Shared by sales, Harbour St carries £4,200 and Mill Rd £3,100:

After shared overheads	Harbour St	Mill Rd	Total
Profit	£5,900 (14.0%)	£1,100 (3.5%)	£7,000

Do this in the pack, not in Xero’s books, and say how you split it (by sales here; by floor area or headcount if those fit the business better). An owner deciding whether a site is worth keeping needs the “before shared overheads” figure: closing Mill Rd would remove its £4,200 site profit, but most of the £3,100 of shared overheads would stay.

Putting it in the client pack

• Lead with the totals, then one line per location: sales, gross margin and site profit, with the change from last month.
• Show the tag rate or say it was clean. One sentence (“all September costs are tagged to a site”) makes the client trust the site figures.
• Explain the gap between sites, not just each site’s number. The variance commentary examples show the structure, and the free management accounts commentary tool turns this month’s and last month’s figures into a first draft.
• Name the overhead method if you show profit after shared costs.

The monthly management pack guide covers the rest of the pack, and profit by job in Xero covers the same setup when the category is Job, including the labour that payroll leaves untagged.

Common questions

How do I run a Profit and Loss by tracking category in Xero? Open the Profit and Loss, choose the dates, and in the report settings choose to compare by tracking category and pick the category. Each option gets a column, and lines with no option sit in their own column.

What is the Unassigned column in a Xero tracking report? It holds every line with no tracking option for that category. Shared overheads belong there. Income and direct costs usually do not, and they are a sign that a tag was missed.

Can I compare tracking categories and periods in the same Xero report? Not at the time of writing. Run the report once per period, or compare periods with a filter for one tracking option.

How many tracking categories can Xero have? Two active tracking categories per organisation, each with its own list of options. You can compare by one and filter by the other.

Should shared overheads be split across tracking options in Xero? Usually not in the books. Leave them untagged and share them in the management pack with a stated method, so the site figures before overheads stay visible.

Does the Balance Sheet split by tracking category? No. Bank, debtors, creditors and loans are whole-business figures, so a site-level report covers profit, not cash.

Sending it every month

ReportPilot sends each client a plain-English email about their whole business every Monday, under your practice’s name, plus scheduled report packs. It does not split figures by tracking category, so a location Profit and Loss still comes from Xero. What it does flag is the whole-business change a site problem shows up in first: gross margin moving by 3 points or more, and any cost line more than 25% above its 6-month average. It asks Xero for read-only access, and there is a 14-day free trial with no card.