How to use Xero Tracking to split your profit by e-commerce platform

A successful e-commerce business utilises multiple platforms to reach the largest possible customer base. For example, you may be selling your products and services on Amazon, Shopify, and eBay. The more platforms you use, the harder it can be to ascertain which are the most profitable. By using Xero Tracking you can break down your reports by platform, giving you the clear answers, you need to plan for your business’s future.

If your e-commerce business is thriving, you likely sell multiple product lines on multiple platforms. The more variables you introduce, the harder it becomes to find out which areas of the business are thriving. While your overall profits may be rising, you may be overlooking areas that are making a loss. By making the most of Xero and getting to grips with its tracking feature you will be able to see the detail, alongside the big picture of your online store.

What is Xero Tracking?

Xero Tracking is a categorising system that involves tagging data so you can single it out in your reports. This gives you a separation beyond account codes so you can manipulate the data to give you further information on profitability. This simple tool can make a big difference in  your business’s future.

By creating tags that will be useful time and time again you will create an efficient system of categories to isolate which platforms, and which countries, are profitable, and which need tending to. This will ensure 100 per cent transparency across your business and allow you to change your business framework to ensure all areas of the business are successful and profitable.

There is a limit of 100 tags in Xero Tracking, although for efficiency purposes you may wish to use a lot less. One-off projects are better categorised using Xero Projects or job costing to keep your menu clutter-free.

How to use Xero Tracking

The first step is to create a list of the separations you need to make. For e-commerce businesses, you will likely want to split your reports by e-commerce platform i.e. eBay, Amazon, Shopify etc. You may also wish to use splits such as payment platforms i.e. PayPal, Stripe etc. and country of sale if you trade outside of the UK. If you have multiple separate product lines you may also wish to split these into categories to compare costs and the effect on your bottom line.

How to set up Xero Tracking

Setting up Xero Tracking is very simple. First, open the Setting menu in Xero, then select General Settings followed by Tracking. In the top left will be the option +Add Tracking Category. The name you enter here will be used throughout Xero, including on any reports you run, so ensure you label them clearly and professionally with no typos.

If you need to change the name of a category, you can return here at any time to do so. You can also remove categories you no longer need from this menu. If it hasn’t been used, it will be deleted, but if you have attached it to transactions, it will be archived.

Once you have created your list of tracking categories you will notice a new column on your sales and purchase transactions. This column will give you a dropdown list to choose from. Simply select the appropriate option and it will be categorised.

Once Xero Tracking has been set up you will be able to see how different areas of your business are performing according to departments, cost centres, locations, and more. This helps to make proactive and informed business decisions.

Helpful hints

Xero Tracking will sort your tags alphabetically by default. This is unlikely to be the most convenient method for you and your staff. By beginning each tag with a number, you can ensure you see them in the order that makes the most sense for your business e.g. 100 Amazon, 200 Shopify etc.

Many reports have been designed with Xero Tracking in mind. You will be able to use them with your Income Statement, Profit and Loss and Sales Summary amongst others giving you in-depth financial data that is easy to use.

How will Xero Tracking help me?

If you set up Xero Tracking correctly, it will become a powerful ally as you look at profitability and the future of your business.

By looking at the revenue, cost of sales and overall profitability of each platform you can see where you need to bolster your marketing efforts. By splitting your reports into product lines, you can see which should be let go, and which are the most profitable. By splitting your reports by country, you may be able to see purchasing trends across the EU, which may impact which products you launch next.

By manipulating the data and spending some time analysing your reports, Xero Tracking is another tool which can help you decide exactly what your next move should be. It may involve an advertising push or a new product launch or it may simply be a case of repricing product lines that are not meeting expectations.

Next steps

Xero Tracking gives you deep advisory insights right at your fingertips, but all this information can be overwhelming. While you may have access to new insights you may still struggle to know what the right move is. If you need bespoke advice and guidance to help supercharge your business growth, we can help. If you need someone to help you see the potential of your business, get in touch today.

The best time to act is now.

hello@unicornaccounting.co.uk

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