How to split your Xero customer base with tracking categories for reporting

A Xero tracking category can tag every invoice with the partner, department or region it belongs to, and the Aged Receivables report can group by that tag. Set a default on each contact and the split maintains itself on every new invoice.

How Xero tracking categories work

Tracking categories are Xero's replacement for department codes and cost centres. You can have a maximum of four tracking categories in total, but only two can be active at any time. Each category holds a list of options, and a category needs at least one option before you can assign it to a transaction.

Xero recommends no more than 100 options per category so reports load quickly. That is a performance recommendation rather than a hard limit, which matters if your split is one option per customer segment across a large base. Xero's setup article carries both figures.

Why split your customer base at all

An aged receivables list sorted by customer name treats a £40,000 book and a £400 account the same way. Splitting the base by owner turns one long list into a set of short ones, each with a person attached to it.

The splits that earn their setup time share one property: the segment changes who acts on the debt. A regional manager owns their branch's debtors. A director with a client portfolio chases their own accounts. A subscription arm and a project arm read their ageing differently. If nobody different acts on the segment, you do not need the category.

How to set up the split in Xero

1. Create the category. In the Accounting menu, select Accounting settings, click Tracking categories, then Add Tracking Category. Name it after the axis, such as "Partner" or "Branch", and add one option per segment.
2. Set the default on each contact. Open the contact, edit the Sales defaults, and assign the tracking option. Xero's contact fields article confirms the assigned category then populates when you create a new transaction for that contact.
3. Retag the invoices that already exist. The contact default applies to new transactions only. Use Find and recode, which needs the adviser role, to assign the option across your open invoices in bulk.
4. Group the report. Open the Aged Receivables Summary or Detail report, group or summarise by your category, then save the layout as a custom report.

What the grouped report gives you, and where it stops

Grouped by category, the Aged Receivables report shows each segment's outstanding and overdue balance in its ageing buckets, one section per option. Each partner or manager reads their own section instead of scanning the whole ledger.

The pattern in the bottom half of that table is that Xero reports on the split but does not act on it. The report is a picture of one date, pulled by whoever remembers to pull it. Invoice reminders in particular never read tracking categories: one organisation-level schedule applies to every invoice marked as sent, which is a separate problem with its own workarounds.

Where the limits stand with Xero

The idea "Tracking Categories - Increase maximum number of active tracking categories and tracking options" was posted on 27 September 2025 and holds 245 votes at "In discovery", as at 8 September 2026. Xero community manager Kelly Munro replied on 1 September 2026 that the team are "exploring how we might tackle the needs in this idea" but "can't commit to developments at this stage".

So plan within two active categories. If both are already spent on department and location, the customer-owner split has no slot, and the practical route is to carry the segment somewhere else, such as contact groups, which connected apps can read.

How Paidnice reports on the customers inside each segment

The grouped Xero report tells you which segment holds the overdue money. Paidnice answers the next question, which customer inside the segment is the problem, and what has been done about it.

Every contact carries outstanding and overdue balances, oldest overdue age, average days to pay and a payment-history score from 1 to 100 that moves with behaviour. Contacts sit in groups that show combined payer data, so a group per partner or branch reads as that owner's book. Saved views on the invoice and contact lists keep each owner's cut one click away, and everything exports to CSV.

Paidnice connects to Xero in a few minutes and starts at £49 a month for 150 invoices, with unlimited users on Pro, so every partner or manager can hold their own login without a Xero seat.

Other views of the same debtors

The wider reporting stack sits in credit control reporting in Xero. For the export habit this split usually replaces, see keeping a debtors report current without Excel, and for the alerting gap, seeing who is slipping and setting an alert. If the split is about who chases rather than who reads, that is running different collection automations by tracking category.

Common questions

What are tracking categories in Xero and how do they work?
They are labels you assign to transactions so reports can slice by part of the business, such as department, location or partner. You create a category with options, assign options to transactions, and group reports by the category.

Is there a limit to tracking categories in Xero?
Yes. Four categories in total, two active at any time. Xero also recommends keeping each category under 100 options so reports load quickly, though that figure is a recommendation rather than a cap.

How do I set up tracking categories in Xero?
In the Accounting menu, select Accounting settings, click Tracking categories, then Add Tracking Category. Name the category, add its options and save. Assign options on transactions, or set a default per contact in their sales defaults.

What is the difference between tracking categories and projects in Xero?
Tracking categories label transactions for reporting across the whole business. Projects collect time and costs against a piece of work for job-level profitability. Xero's own guidance is that tracking is not designed for job costing.

Can I report aged receivables by tracking category?
Yes. Both the Aged Receivables Summary and Detail reports can group or summarise by tracking category once your invoices carry the options, and the grouped layout can be saved as a custom report.

Do tracking categories change who gets invoice reminders?
No. Xero's invoice reminders are one organisation-level schedule that never reads tracking categories. Splitting the chasing itself needs a connected app that can run a sequence per segment.

Written by

Denym Bird

Co-founder & CEO of Paidnice

Denym is a software entrepreneur and writes about accounts receivables management for small business.

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