Xero for Nonprofits: 7 features every nonprofit finance team should use

ARTICLE ⋅ 4 MIN READ

If you’re a nonprofit finance leader using Xero, this article is for you. We explain some of the key features that nonprofits often miss in Xero. So often, when you use software all the time, the way you use it becomes business as usual. You don’t even realise the features that are hiding in plain sight that could make your work 10x easier.

When Xero is used to its full potential, it can save hours each week, simplify reporting, and give you real-time insight into your organisation’s financial health.

At XP, we work with nonprofits across Australia, New Zealand and Canada and often see powerful features in Xero going unused. With the right setup, you can make funder reporting easier, improve oversight, and reduce admin time.

Not sure whether you’re getting the most from Xero? Download our Xero Setup Checklist for Nonprofits.

Here are seven features that can help your nonprofit run more efficiently.

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1. Tracking Categories

Tracking categories help you break down income and expenses by fund and region.

Tracking categories in Xero are crucial for nonprofits because they enable precise segmentation of financial data, supporting transparency, accountability, and compliance with reporting requirements for grants and funders.

To set up tracking categories, go to Settings > Advanced Accounting > Tracking Categories, then apply them to your transactions.

Impact for Nonprofits:

Tracking categories allow nonprofits to tag every transaction (whether income or expense) with labels such as funds, projects, or departments. This ensures that income and spending from different grants or programmes are kept separate, making it easier to comply with external funder requirements and report on restricted vs. unrestricted funds.

Reporting and Compliance

By using tracking categories, nonprofits can generate detailed profit and loss reports for each fund or project, offering clear visibility to donors and Grantmakers. This supports audits, donor relations, and compliance with grant terms, reducing reliance on manual spreadsheets and minimising errors.

Strategic and Operational Benefits

Tracking categories streamlines budgeting and analysis, helping nonprofits allocate resources more effectively and monitor the performance of each program or initiative. They facilitate automated and custom reports, enabling real-time access to financial insights for better strategic planning.

Need help with this? We work with nonprofits to define and structure categories clearly, making future reporting far simpler.

🔗 Explore our Xero services for nonprofits.

2. Repeating Invoices

Repeating invoices in Xero are important for nonprofits because they automate the process of billing recurring donations, sponsorships, memberships, or service fees, resulting in improved cash flow management.

If you invoice the same funder monthly (e.g., for grants, room hire, or retained services), repeating invoices can save you hours and improve consistency.

To set up repeating invoices in Xero, create a new invoice, select the "Repeat this invoice" option, specify the recurrence schedule, and save it for automatic future generation.

Impact for Nonprofits

Automation: Repeating invoices handle the generation and delivery of bills for recurring transactions automatically, saving valuable administrative time and freeing up staff for more mission-driven tasks.

Consistency: This feature ensures invoices go out on schedule, boosting accuracy and reliability and maintaining the trust of donors and partners through predictable billing practices.

Error reduction: Automated invoicing reduces the likelihood of missed or duplicated invoices, which helps maintain professional relationships and accurate records.

Cash flow and reporting

Timely invoicing supports consistent and predictable cash flow, allowing nonprofits to better plan expenditures and allocate resources. Recurring donation invoices can be tagged and tracked for enhanced reporting, streamlining compliance and financial transparency to donors and grantmakers.

Strategic and operational benefits

Repeating invoices enable nonprofit teams to focus less on routine billing and more on scaling their impact, enhancing service delivery or fundraising efforts.

Overall, repeating invoices in Xero are a key tool for nonprofits to automate, organise, and strengthen financial processes, directly supporting sustainability and operational effectiveness.

3. CRM + Xero Integration

4. Xero Budgeting Tools

5. Automated Bank Reconciliation

6. Business Snapshot Dashboard

7. Xero Projects for nonprofits

Bonus features we often set up

Summary

Tracking Categories
Repeating Invoices
CRM + Xero Integration
Xero Budgeting Tools
Automated Bank Reconciliation
Business Snapshot Dashboard
Xero Projects