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QuickBooks Tips Blog

Video QuickBooks Tip: Tracking Sources Of Income In QuickBooks

Posted by Matt Roberge on Sep 12, 2012 7:30:00 AM

Tracking your sources of income in QuickBooks is not a feature that is built into the software.  You have to do a little thinking and customization but the results provide very powerful information for your business.  In this video I will show you what QuickBooks has built in, how to customize QuickBooks to track income sources and how to run a powerful report on your income sources.  

What are sources of income?

I feel that I should start by defining what I consider sources of income.  When I say sources of income I mean quite simply how did this money come into your business?  Did someone make a referral that resulted in income coming into your business?  Did the business come from some advertising you did on Google?  Did you do some networking that resulted in income for your business?  Did you make a cold call?  Look at every cent that has come into your business and try to remember what the source of the income was.  

What QuickBooks has built in

The only thing I have found that even resembles this income source function is the customer type.  When you open the customer center and then double click on any customer and click on the additional info tab you will see the first drop down is called 'Type.'  This works for tracking income sources, but not nearly as well as customizing QuickBooks in a particular way.  This function has many shortfalls so I won't go too far into it.  If you are interested in exploring this function you can find the customer type list by going to Lists/Customer & Vendor Profile Lists/Customer Type List.  Here you can add new types and report on your various customer types. 

How to customize QuickBooks to track sources of income

Now I will show you how to customize a certain function of QuickBooks which will allow you to track your sources of income and pump out a powerful and meaningful report.  In order to do this we are going to use class tracking so the first thing you need to do is turn on class tracking in QuickBooks.  To turn on class tracking select Edit/Preferences/Accounting/Company Preferences Tab and make sure 'Use class tracking' has a check mark next to it.  We are going to classes to track sources of income.  Therefore, each class will be the various sources of income for your business.  You can also use sub-classes to break the data down further.  One example I have found of a good use of sub-classes is referrals.  I make referrals into a main class and then I make sub-classes for each individual person or business that has referred us business that resulted in income.

In order for this to work properly you must assign a class (represented by a particular income source) to EVERY piece of income that has ever come into your business.  If you use invoicing you will find a place where you can assign the invoice a class.  If you just make deposits you will find a place to assign the deposit a class.  If your deposit consists of payments from multiple customers you can break it down into different line items and assign a class to each line item.  It is important to assign an income source to each piece of income so that your reporting works properly.   

How to report on QuickBooks sources of income

If you have done your income source assigning correctly you will be able to run a very powerful report on your business.  Even if you may have missed a few pieces of income I will show you how to identify and fix this problem very easily.  The report you want to run is called a Profit & Loss by Class report.  You can run this by going to Reports/Company & Financial/Profit & Loss by Class.  Now put in whatever date range you want to look at and feast your eyes on a report that should make you both psyched and intrigued.  Along the top you should see all of your classes, which are your income sources.  You should also see your total sales at the far right.  For further analysis click on 'Modify Report' in the upper left hand side and select the option % of Row (it is 4 boxes over).  Now you can see what percentage each source of income makes up of your total sales.  Now we are really getting into it!  Do you see how much this method of tracking your income sources can help your business?

I'm going to leave you with one final tip on this report.  One of the classes you see should be 'Unclassified.'  Anything that appears in this column means you did not assign a class (income source in this case) to the transactions that appear in that column.  You can drill into that number and each individual transaction that is unclassified to get them all assigned a class.  This way you know where every penny you have ever made has come from.

With a little customization in QuickBooks you can easily track the source of income for all the money your business has ever made.  The information that you get from following this method is invaluable.  How you use it is up to you.

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