QuickBooks Tips Blog

Using QuickBooks to Track Your Sources of Income

Written by Matt Roberge | Apr 7, 2011 7:24:00 PM

I think that using QuickBooks to track the sources of income for a business is a feature that many users overlook.  The feature is not very apparent and takes a little forward thinking to realize how to set it up.  I will talk about the why and then the how of tracking income sources in QuickBooks.

Why is tracking sources of income important? 

I really can't think of a business where tracking sources of income would not be important.  I feel that if you don't have this information you are running your business blind.  Doesn't every business want to know how they are making money?  Doesn't every business analyze how and why they are making money or not making money?  Don't we all continue to try and grow sales?  Would it be valuable to a business owner and a marketing/sales manager to know where every dollar that the business ever earned came from? 

I can't explain how valuable knowing the source of every dollar we have ever made has been to us and our long term business plan.  We are constantly analyzing sales numbers and income sources to make sure it is in line with our long term growth and sales plan.  It is also interesting to note that our largest percentage of overall sales is no longer a marketing strategy.  Why?  We no longer believe in it.  Our numbers are skewed by "old school" marketing tactics; we have shifted the marketing and sales plan and goals.

How do you track sources of income in QuickBooks?

Like I said earlier this is not a built in function of QuickBooks and you have to think a little to figure this out on your own.  I will save you the trouble though; turn on the class feature in QuickBooks.  You can read all about the class feature here.  Turn on the class feature in QuickBooks by going to Edit/Preferences/Accounting Company Preferences Tab; there you will see the box "Use Class Tracking."  You may also select the option "Prompt to assign classes" so you never forget. 

Now how do you apply this to tracking your sources of income?  Every time you create an invoice or statement charge to a customer just assign a class to it; your various classes should be your sources of income.  The level of detail is really up to you, but we get pretty detailed and also like the use of subclasses.  For example it is not good enough to just have referral as a class/income source.  We have referral as a class and then several subclasses under referral with the name of the individual or business that referred us the business.  That makes scheduling your "thank you lunches" pretty easy.   

Once you have your classes set up as your income sources you can now run a report that will bring it all together for you.  Run a Profit and Loss by Class by going to Reports/Company & Financial.  Now select your date range and enjoy knowing where every dollar you have ever made came from.  Get the percentage of total income by clicking on Modify Report (in the upper left hand corner) and selecting the box % of Row.  

Do you know the source of every dollar your business every made?  Do you track your income with a more efficient method?  Is tracking your sources of income important to you, your boss, your investors or your sales manager?

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