Xero tracking categories: a P&L by location

Tracking categories are how Xero answers "which part of the business did this belong to". They are the mechanism behind a Profit & Loss per location, per department or per project — and the thing most people set up slightly wrong the first time, usually by creating too many of them.

This guide covers what they are, how to set them up so a location P&L works, and what to do about the one thing Xero cannot do with them.

What a tracking category actually is

A tracking category is a label you attach to a transaction line. You create the category once — Location, say — and give it an option for each place: Bristol, Leeds, Manchester. From then on, bills, sales invoices, bank transactions and manual journals can each carry one.

Two rules are worth knowing before you start:

• Xero allows two tracking categories at a time. Not two options — two categories. So you can run Location and Channel together and tag a transaction with both, but you cannot add a third.
• Tagging happens at line level. One bill can be split across two locations, and each line carries its own option. This matters more than it sounds: it is what makes a shared supplier invoice report correctly in two places.

Options can be archived when a site closes, which keeps historical reporting intact while taking the option out of the list people choose from.

Choose your category before you create it

The common mistake is creating a category per question rather than per dimension. Location is a dimension. Profitable sites is a question you answer with a report.

A good test: if you could tag one transaction with two of your proposed options at once, you have one category with several options. If you would need to tag it with options from two different lists, you have two categories — and you only get two.

For most multi-site businesses the right answer is a single category, named for whatever you already call the thing: Site, Location, Branch, Venue, Store, Department.

How to set up a location P&L in Xero

1. Create the category. In Xero, go to Accounting, then Advanced, then Tracking categories. Add one category and name it as you already speak about it. Add an option per location.
2. Tag your transactions. Code bills, sales invoices and bank transactions to the location they belong to. Xero can default a tracking option on repeating invoices and bills, which removes most of the ongoing effort.
3. Tag the payroll journal. This is the step people skip. Most multi-site operators post payroll as a manual journal, and if those lines are untagged then your largest controllable cost lands nowhere. Split the journal by location.
4. Clear the backlog, or draw a line. Decide whether you are retagging history or starting from a date. Starting from a date is usually right; a half-tagged prior year produces a report nobody trusts.
5. Run Xero's own Profit and Loss with the category. Xero's report can be filtered or compared by tracking category. Run it for a closed month and check the totals look like the business you recognise.
6. Look at what is untagged. The size of the untagged bucket is the honest measure of whether your coding is ready. If it is material, fix the coding before anyone outside finance sees a report.

At this point you have a Profit & Loss by location — for whoever can run it in Xero.

Where Xero stops

Xero's user roles — Read only, Invoice only, Standard and Adviser — all apply to the whole organisation. There is no role that means "this tracking option only". Users have asked for it on Xero's product ideas board since 2022, and at the time of writing it has not been delivered.

So the moment you want the Bristol manager to see Bristol, you are choosing between:

• A spreadsheet per site, rebuilt each month and out of date on arrival.
• A separate Xero organisation per site, which gives each manager a login and multiplies your subscriptions, bank feeds and year-end work.
• Trust, by handing out a read-only login to everything.

Giving each manager their own location

This is the part Vizii does. It reads your tracking categories from Xero and lets you invite somebody to a read-only view scoped to specific options.

1. Connect Xero and sync. Your categories and their options come through with the data.
2. Build the Profit & Loss layout once. Choose the sections and which account codes sit in each, and rename every label to match how you report. Leave out the costs a manager cannot change — rent, head-office recharges, interest, depreciation.
3. Reconcile it. Run it unfiltered for last month and tie the totals back to Xero's own Profit and Loss before anyone else sees it.
4. Preview as a manager. Look at exactly what one of them will open.
5. Invite each manager to their own option. The Profit & Loss is its own permission, so they can have the report without bills, invoices or anything else.

They verify their email with a one-time link and open the selected month and the year to date, with % of sales on every line. They never get a Xero login and use up no Xero seat.

FAQ

How many tracking categories can Xero have? Two active categories at a time, each with its own list of options. Options can be archived when they are no longer used, which preserves historical reporting.

Can I restrict a Xero user to one tracking category option? No. Every Xero user role applies to the whole organisation. Scoping the view rather than the login is the workaround, which is what Vizii does.

What happens to transactions with no tracking option? They group under an uncategorised bucket rather than disappearing. You can include or exclude it from somebody's scope, and its size is a good measure of how clean the coding is.

Should I use tracking categories or separate Xero organisations? Tracking categories, unless the sites are genuinely separate legal entities with their own statutory accounts. Separate organisations multiply subscriptions, bank feeds and year-end work, and they split the view you wanted in the first place.

Does renaming an option break anything? No. Access in Vizii follows the option itself rather than its name, so a rename does not change who can see what.