Tracking Codes in Xero are one of the platform’s most underrated yet powerful features. For finance teams seeking deeper insights without overcomplicating their chart of accounts, Tracking Codes offer an elegant and scalable solution. They enable rich, segmented reporting with minimal manual effort, eliminating the need for complex manual tracking.
What Are Xero Tracking Codes?
Tracking Codes in Xero are custom labels that can be applied to transactions to categorize them by dimensions such as department, project, salesperson, or product line. Xero supports two active Tracking Categories at a time, and each category can contain multiple options (e.g., “Sales” and “Marketing” under a “Department” category).
These codes can be applied to invoices, bills, bank transactions, and manual journals, making them essential for businesses that need to analyze financial data more deeply without creating a proliferation of general ledger accounts.
QuickBooks offers a similar feature known as Classes, which serves the same purpose: enabling transaction-level segmentation for more meaningful reporting. Both are included in their respective platforms’ subscriptions, allowing users to start immediately without additional cost.
Why Are Tracking Codes So Powerful?
The true strength of Tracking Codes lies in their flexibility. Rather than managing complex reporting through a web of GL codes, finance teams can use Tracking Codes or Classes to produce dynamic reports segmented by key business drivers. This simplifies accounting structures while delivering granular insight.
Tracking Codes help teams:
Monitor performance by department, region, product line, or individual
Track profitability by project, customer, or service
Analyze budget vs. actuals by segment
Produce segmented P&Ls without altering the chart of accounts
They are especially valuable for growing companies or businesses with multiple entities, locations, or product lines.
Common Use Cases
Here are some common ways businesses leverage Tracking Codes or Classes:
Track Revenue by Product Line or Business Unit
Segment income and expenses by product or service category e.g., SaaS subscriptions, consulting services, or hardware. This helps identify profitable business lines and opportunities for margin improvement.
Segment Customers for Deeper Insights
Apply tracking based on customer type or region, such as SME vs. enterprise or domestic vs. international. This makes it easy to analyze which segments drive growth or incur higher costs.
Monitor Sales Performance by Salesperson
Tag sales invoices with the responsible salesperson to assess performance, calculate commissions, and track contributions at the individual or team level.
Evaluate Marketing Campaign Effectiveness
Assign codes to marketing campaigns and related costs to calculate ROI. This allows teams to optimize future spend based on real performance.
How ScaleXP Makes This So Easy
While Tracking Codes and Classes are powerful, managing them manually can still be a challenge. That’s where ScaleXP steps in, supercharging the use of tracking dimensions within Xero or QuickBooks.
ScaleXP supports the most advanced use of Tracking Codes in its category, allowing users to instantly create dashboards, metrics, and even full P&Ls by tracking code, without any manual setup.
Key benefits include:
ARR and MRR by Tracking Code: Generate recurring revenue reports segmented by code in just one click.
Tracking Code Integration in Rev Rec Journals: All revenue recognition journals include tracking codes or classes as standard, no restating required.
Consolidated Reporting Across Codes: Whether working across departments, business units, or geographies, ScaleXP ensures data is segmented and visible in consolidated reports.
Custom Metrics by Code: Understand metrics like CAC or gross margin by sector, customer type, or channel.
The result? Clear, consistent visibility into every area of your business with less manual work and greater confidence in your numbers.
Final Thoughts
Tracking Codes in Xero (and Classes in QuickBooks) provide finance teams with a flexible, scalable way to unlock deeper insights without adding complexity. Whether you’re analyzing performance by department, customer segment, or campaign, they enable powerful reporting and data-driven decision-making.
When paired with ScaleXP, these capabilities become even more impactful, enabling full automation of reporting, KPI analysis, and financial visibility.
Ready to get more out of your tracking codes?
Explore how ScaleXP can streamline your Xero or QuickBooks reporting, book a demo today.
