Xero Sli MCP

Xero + SLI MSP Financial Analysis

Query Xero Accounting data through the Service Leadership Index (SLI) benchmark framework. Produce actionable management accounts, not just reports.

Architecture

This skill works with the xero-accounting-mcp npm package — a full-passthrough MCP server for the Xero Accounting API. The MCP server provides 23 tools (3 schema discovery + 1 generic passthrough + 19 convenience). This skill tells you how to use those tools to produce MSP-specific financial analysis.

If the MCP server isn't configured, guide the user through setup:

Set up the Xero Accounting MCP server. The npm package is xero-accounting-mcp.
1. Ask whether they want Claude Code, Claude Desktop, or Claude Cowork.
2. Help them get Xero credentials from https://developer.xero.com/app/manage
3. Add the MCP config to the appropriate settings file.

Quick Start — Xero MCP Tools

Schema Discovery (always available)

• xero_get_schema_overview — 138 endpoints, API version, categories
• xero_get_endpoint_details — drill into specific endpoints by regex
• xero_search_endpoints — keyword search

Key Reports

• xero_get_reports_profit_and_loss — with periods, tracking, date ranges
• xero_get_reports_balance_sheet — as-at date, comparative periods
• xero_get_reports_budget_summary — budget vs actuals
• xero_get_reports_executive_summary — key metrics at a glance
• xero_get_reports_trial_balance — TB as-at date
• xero_get_reports_bank_summary — all bank balances
• xero_get_reports_aged_payables / xero_get_reports_aged_receivables — by contact

Data Endpoints

• xero_get_organisation — legal name, currency, year end
• xero_get_accounts — chart of accounts
• xero_get_invoices — paginated, filterable
• xero_get_contacts — paginated, filterable
• xero_get_journals — general ledger (offset-based pagination)
• xero_get_tracking_categories — tracking categories + options
• xero_get_budgets — list or single budget detail

Generic Passthrough

• xero_api_call — hit ANY Xero endpoint: method, path, body, queryParams

Xero Report Parsing

All Xero reports return { Reports: [{ Rows: [...] }] }:

• RowType: "Header" — column headers
• RowType: "Section" — group with Title and nested Rows
• RowType: "Row" — data row, Cells: [{Value: "Name"}, {Value: "1234.56"}]
• RowType: "SummaryRow" — totals

SLI Framework — MSP Financial Benchmarks

The Service Leadership Index is the gold standard for MSP financial benchmarking. This skill maps Xero data to SLI categories and benchmarks every number against best-in-class targets.

Core Principle

Gross Margin − Expenses = Profit — the only formula that matters.

Revenue Categories (map Xero accounts to these)

8 Best-in-Class Financial Principles

1. Revenue Ratio (per $1 managed service revenue): 40¢ cloud recurring, 35¢ physical product, 15¢ project labour
2. GM Growth Rate must match or exceed revenue growth rate
3. Profit %: Best-in-class MSPs target 18%+ profit (top 25th percentile)
4. Gross Margin %: BIC target varies by model; MSP target ~42%
5. Service Multiple: GM / Service delivery cost — target ≥1.4x
6. Sales Multiple: Revenue / Sales expense — target ≥6x
7. G&A %: Keep below 12% of revenue
8. Revenue per employee: BIC target varies; MSP ~$150K–$200K

Key SLI Ratios to Calculate

Management Accounts Workflow

This is NOT a bland accountant report. Every number gets context, every trend gets an explanation, every section ends with actions.

Data Collection

1. Xero: P&L (month + YTD + prior year), Balance Sheet, Executive Summary, Aged Receivables
2. Adjusted P&L (subtract owner drawings from profit — Xero doesn't track this automatically)
3. Xero: Chart of Accounts + Tracking Categories for SLI mapping
4. Optional: CRM pipeline (HubSpot/ConnectWise), PPC data, forecast model

Report Structure

Critical Rules

• Always show Adjusted profit (after owner drawings) — raw P&L is misleading
• Never report a number without context — "Revenue down 5%" is useless. "Revenue down 5% because Client X left, offset by £2K new business from PPC" is useful
• Compare to SLI benchmarks not just prior periods — "GM% is 46% (BIC target 42%)" tells you more than "GM% up 1%"
• Flag anomalies — any client billing >50% variance from their 3-month average gets called out
• End with actions — every report must answer "so what do I DO?"

Mapping Xero Accounts to SLI

Xero accounts map to SLI categories by account type and name patterns. See references/xero-sli-mapping.md for the full mapping guide.

Common mappings:

• REVENUE + managed service contracts → I14–I26
• REVENUE + break/fix/time → I1–I6
• REVENUE + product resale → PR1–PR9
• DIRECTCOSTS → COGS (cost of goods sold)
• EXPENSE + sales staff → Sales expense (for Sales Multiple)
• EXPENSE + admin staff → G&A (for G&A %)

Rate Limits

Xero enforces: 60 calls/min, 5,000/day, 5 concurrent. On 429, respect Retry-After.

Context Log Pattern

When producing recurring management accounts, maintain a running context log (datestamped entries) that captures:

• Client gains/losses and revenue impact
• Staff changes and salary adjustments
• Cost changes (new subscriptions, cancellations, renegotiated contracts)
• One-off events affecting that month's numbers
• Owner drawing patterns

This context log is THE key differentiator between a report and a management tool. Without it, you're just reading numbers. With it, you're providing insight.

QBRB Analysis — Quarterly Business Review Benchmarking

When a user provides a QBRB report or asks to "analyse this SLI report" or "read my QBRB", work through the 8 QBRB analysis areas in order. Each area has a specific question to answer and a diagnostic purpose.

Analysis Framework

Work through these 8 areas sequentially. For each area:

1. State the key metric and its trend
2. Compare against BIC targets
3. Explain WHY the number is what it is (not just what it is)
4. Identify the specific action needed

1. Balance Sheet Health

Question: Is the balance sheet strong enough to fund growth?

• Look at: cash position, current assets vs current liabilities, debt levels
• Red flags: negative equity, current ratio < 1.5, high debt-to-equity
• BIC: current ratio ≥ 2.0, minimal long-term debt

2. Revenue Income

Question: Is revenue growing, and is it the right kind of revenue?

• Look at: total revenue trend (quarter over quarter, year over year)
• Break down by SLI category: managed services vs product vs project
• Growing managed services revenue is the goal — product and project are less predictable
• Red flags: declining revenue, over-reliance on one revenue type

3. Revenue Mix

Question: Is the revenue mix shifting toward higher-value services?

• Calculate: each SLI category as a percentage of total revenue
• BIC revenue ratio (per $1 managed services): 40¢ cloud recurring, 35¢ physical product, 15¢ project labour
• Track quarterly shifts — is managed services % increasing? Is product resale declining?
• Red flags: managed services < 60% of total revenue, product resale > 40%

4. Gross Margin Income

Question: Are gross margin pounds growing, and growing faster than revenue?

• Look at: GM £ trend — must grow in absolute terms AND as a percentage
• If revenue grows 10% but GM only grows 5%, the business is moving backwards
• BIC: GM growth rate must match or exceed revenue growth rate
• Red flags: flat or declining GM £, GM growing slower than revenue

5. Gross Margin Percentage

Question: Is the business controlling cost of delivery and pricing for value?

• GM% = (Revenue − Direct Costs) / Revenue × 100
• For service revenue specifically, low GM% often means quality problems — more free re-work eating margin
• BIC: MSP target ≥ 42%
• Red flags: GM% declining over time, service GM% < 40%

6. Operating Expenses

Question: Are we spending on the right things and is spend proportional to the business we're running?

• Break into: Sales & Marketing, Admin & Management Payroll, Total OpEx
• Lower OpEx £ is NOT always better — under-investing in sales kills growth
• It is not possible to simply cut your way to prosperity: there must be growth as well
• BIC: Sales expense ≤ 15% of revenue, G&A ≤ 12% of revenue

7. Operating Expenses as a Percentage of GM

Question: Is the business growing GM faster than OpEx — or are expenses eating all the margin?

• OpEx % of GM = Total OpEx / Gross Margin × 100
• This is the key efficiency ratio: it tells you whether every £ of GM is being consumed by overhead
• BIC: OpEx ≤ 70% of GM (leaving ≥ 30% for EBITDA)
• Trend must be improving (decreasing) or stable — rising OpEx/GM ratio is a red flag even if absolute GM is growing

8. EBITDA and Adjusted EBITDA Percentage

Question: Is the business generating real shareholder value?

• EBITDA = GM − Total OpEx (essentially bottom-line profit)
• Adjusted EBITDA = EBITDA with owner compensation normalised to market rate
• EBITDA £ = ability to scale (absolute size of the profit pile)
• EBITDA % = ability to operate efficiently (profit as a percentage of revenue)
• Adjusted EBITDA % deserves as much or more attention than raw EBITDA % — it shows true operational efficiency
• BIC: EBITDA ≥ 18%, Adjusted EBITDA ≥ 15%
• Red flags: declining EBITDA trend, EBITDA % < 10%, large gap between EBITDA and Adjusted EBITDA

QBRB Output Structure

After analysing all 8 areas, produce:

1. Executive Summary — 3 bullets: what happened, what's changing, what to do
2. 8-Area Scorecard — each area with: metric, trend, BIC comparison, status (🟢 on track / 🟡 watch / 🔴 action needed)
3. Company Strengths — what's working well
4. Questions — what you need to dig into (things the numbers don't explain)
5. Actions — numbered, specific, with owners and deadlines
6. Buy, Sell or Hold — overall assessment: is this business worth investing more in, selling, or maintaining?

QBRB vs Monthly Management Accounts