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I am looking to introduce Xero to a client where tracking of expenditure against budgets is very important. To only have 2 levels of tracking categories is too few and may mean seeking another software product.
I would ask Xero to review its current offering re tracking categories in light of the comments below and provide an update to their message from Mar 2023.

The tracking categories feature is too limited. As other users have commented, even one more would make a huge difference.
As our small company grows, the level of analysis needed increases. Not just cost centres, but projects, sales analysis etc etc.
We could find a "fix" for some of this using account codes and the existing tracking categories but that is not an ideal solution.
We will get to the point where we will have to look at alternatives to Xero if the number of tracking categories are not expanded.
Message to Xero: the last response on this thread from Xero seems to be Kelly Munro's response on 5th March 2023 - 18 months ago. Please provide an update - is this being planned now?

This feature should be expanded.

We have just started using tracing categories for projects, and will quickly (eg: within months) surpass the ~100# of options. Without this, we need to build alternative infrastructure to track profit & loss on a per-project basis.

Pretty frustrating limitation and very frustrating responses from Xero support.

So many comments about this over the last few years I'm surprised Xero have not done anything about it yet. We need more tracking categories too for the accounts we prepare in here.

Hi Michelle Owsnett.

Please drop me an email so we can discuss options, but I just need to understand the number of jobs etc. peter.miles@tcdgroup.com.au.

regards
Peter

We are a commercial plumbing company who does not rely heavily on reporting. There are no departments in our company. Every time we begin a new project/job, I have added a tracking category for materials purchased for that job etc for invoicing purposes. This has worked well for 4 years and now all of a sudden I can not add any new tracking categories. Even if I archive jobs that are complete, it still wont allow me to add a new tracking category.
We pay $145 per month and Xero have no plans to develop this. They are trying to push Xero Projects - which does not suit our small business. Does anyone know of a Xero App that will help with tracking categories???? Feeling quite desperate right now and not getting any assistance from Xero at all...

A charity I am working with using XERO, has unlimited FUND and ACTIVITY tracking facility.
What has happened to this on current releases of Xero?

Very disappointing ! It is not so much finite jobs, but broader analysis, job, market segment, state, salesman etc etc

YES PLEASE! Driving me crazy having only 2. Very limiting!

Unbelievable that you can only have two header categories and two archived!!! Why? there are 4 states with 4 shops per state. How would this benefit the business - by having accurate sub category profit/loss and better reporting - for "beautiful accounting". This is a no brainer.

Yes please. We already use two categories in Xero accounts so cannot now set up Employee Groups in Payroll........! We wanted to get Payroll back in house, Sage Cloud doesn't allow you to payroll benefits (!!) so thought we'd use Xero as we are now using Xero for our accounts system. It's unbelievable that we cannot use more than two tracking categories when four are available. I think Payroll should be a standalone program

Yes please, this is an important feature to support complex reporting for growing companies.

Yes please this is an important feature.

Hello Xero Communities manager, Appreciate last year you commented that increasing the number of tracking categories is not in your plans. As you can see, there is a lot of interest in this. Is Xero planning to revisit this at some point in the short or medium term? As a non profit, we have a number of different obligations to track and this would transform the use of Xero within the sector.

Surely it is a simple request to add more tracking categories, at the VERY least, one more. I honestly believe this is one small area where XERO could take it the next level. Why not add another two? The benefit to customers is huge in terms of keeping track of multiple project costs.

Hello,
Having the option to add more tracking categories is such a simple request, and i can see by all the comments below that we are not the only ones affected by the lack of features.

While we can work with 2 active tracking categories, we have an issue with the limit Xero imposes for archived tracking categories. We are a not-for-profit and every few years we get a massive grant that has to be broken down into different projects (tracking category one), some of which are complex and need further breaking down (tracking category two). But once that funding period is over we need to archive these two categories and start two more.

Agree with all of the sentiment below about the need for this. We have been waiting since 2014 for a third tracking category to be added, which would allow us to accomplish something closer to true fund accounting for our nonprofit clients. I'd love to see Xero reconsider their decision to stick with only two. Even one more would be hugely helpful to us.

Hi,

We really need more than 2 tracking categories. These are not "projects" and are simply additional ways to classify expenses, typically for tax purposes that fall outside of or in addition to the chart of accounts.

In addition to Xero's premium price relative to competitors, this motivates us to consider moving to cheaper accounting software that doesn't have such onerous restrictions.

Please reconsider.