In this video QuickBooks tip we will show you how to use classes in QuickBooks. Classes are a feature that many QuickBooks users don't understand how to use properly. Classes allow you to track your QuickBooks data in some sort of meaningful manner that is specific to your business. Examples of possible classes are department, location, or source of income. Since there is not cut and dry way to use classes it often causes confusion. Our QuickBooks video tip on class tracking will hopefully shed some light on this topic.
Turn on the class tracking preference in QuickBooks
To turn on class tracking in QuickBooks go to Edit/Preferences/Accounting then select the company preferences tab. You can check or uncheck the box 'Use class tracking' to turn class tracking on and off in QuickBooks.
What is class tracking and how can it work for my business?
Class tracking is some sort of way to categorize transactions in QuickBooks. This is totally different from account coding. A big mistake is thinking that class tracking must be used; that is totally false. With some businesses class tracking just doesn't make sense and isn't necessary. However, if you find an applicable way to use class tracking it can be a valuable tool.
A real life example of class tracking
I have seen class tracking used in several different ways and work out great for reporting purposes. I have seen a restaurant with several locations use class tracking to determine profitability of each location. I have seen a real estate investor use class tracking in a similar manner by using classes of the various rental properties that he owns to again track profitability of each real estate unit.
One example of class tracking in QuickBooks that I really like is sources of income. What I mean by this is that I set up various classes that relate to how the income came into your business or lead source. Maybe it was a referral, an online lead, a Google advertisement pay per click, a lead from a networking event you attended etc. By applying this method of class tracking you could literally know where every penny your business has ever made came from. How powerful would that report be to your business?
Does your business use class tracking in QuickBooks? If so how have you found an applicable way to use class tracking in your business?