When Fergus and Xero are set up and used correctly, they help trade businesses understand job margins, overheads, and cashflow - so you can make better decisions with less stress.
This article outlines recommended best practices based on common patterns seen across trade businesses using Fergus and Xero.
⚠️ Please Note: None of the steps in this article are mandatory, these are best-practice guidelines designed to help provide clearer visibility into your business. Fergus does not provide financial advice. For advice specific to your business, we recommend speaking with your accountant or financial advisor.
1. The Key Numbers to Watch
While there are many reports available, most trade businesses benefit from focusing on just a few key numbers:
Gross profit – what’s left after labour and materials
Overheads – costs you can’t directly charge to jobs
Net profit – gross profit minus overheads
Days to get paid – how long customers take to pay invoices
If any of these numbers are off, cashflow pressure usually follows
2. Cost of Sales vs Overheads (Getting the Split Right)
To understand margins correctly, costs need to be categorised properly in Xero.
Cost of sales include:
Labour
Materials
Field Costs
Overheads include:
Office and admin costs
Vehicles
Software
Rent, insurance, accounting, etc.
If these are mixed together, margins in both Fergus and Xero can appear misleading.
3. Set up Xero and Fergus Account Codes Correctly
How your accounts are set up directly affects reporting.
Recommended best practice:
Use clear sales account codes in Fergus to understand how revenue is generated
Make sure these sales account codes are linked to the correct chart of accounts in Xero
Separate cost of sales from overheads to help you understand where your profit is actually coming from
This ensures job costs and invoices land in the right place and reports reflect reality.
4. Use Xero Long Enough to See the Full Picture
Margin and overhead trends become much clearer over time.
Recommendation:
Be on Xero for at least 12 months to get reliable insights
Expect early reports to improve as more data is captured
New businesses or new Xero users may see less accurate numbers at first.
5. Keep Monthly Reporting Consistent
Large spikes in costs from month to month can make reports harder to interpret.
Common best practice:
Have annual or irregular costs spread evenly across the year
This helps keep Profit & Loss reports stable and easier to understand
Your accountant or bookkeeper can help with this.
6. Use the Right Reports
In Fergus:
Business Performance Dashboard - high-level margin and cashflow visibility
Staff Overview Report - check charge-out rates and labour efficiency
WIP (work in progress) Report - a customisable report to keep track of current jobs
In Xero:
Profit & Loss – review gross profit, overheads, and net result
This report often benefits from customisation (percentages, subtotals, seeing data at a month-by-month view)
Aged Receivables – understand invoices owed and how long they've been outstanding
This report can be used as an indicator of your "Days to Get Paid"
Short-Term Cash Flow – see expected cash coming in and going out over the next few weeks
Please note: Xero no longer offers an Executive Summary report. These reports, along with the Xero Dashboard, now provide the same high-level visibility.
7. Cashflow: Days to Get Paid & Work in Progress
Cashflow pressure is common in trade businesses, especially where there is a delay between doing the work and getting paid.
Uninvoiced work is best tracked in Fergus where job costs, labour and progress are recorded. Once the work has been invoiced, it appears in Xero as accounts receivable.
General guidelines many businesses use:
Around 30 days to get paid
Roughly one month’s turnover sitting across:
Work in progress
Invoiced but unpaid work
This helps cover wages, suppliers, and tax while waiting for customer payments.
8. Fix the Most Common Margin Leaks
If margins are lower than expected, check these first:
Are all labour hours being logged to jobs?
Are all materials being charged out?
Are charge-out rates being reviewed regularly?
These issues are the most common causes of poor margins and are often quick wins to fix.
9. Why Fergus + Xero Work Well Together
Fergus was built to give trade businesses visibility into:
Job-level gross profit
Labour and material costs
Cashflow pressure points
Xero provides the accounting foundation, while Fergus connects the numbers back to what’s happening on-site and in the office.
Final Reminder
Fergus provides tools and reporting to help improve visibility and decision-making. For financial or tax advice specific to your business, always consult a qualified accountant or financial advisor.