Many small businesses have chosen to use QuickBooks as their bookkeeping solution because of its ease of use, comprehensive application, and user friendly management tools. QuickBooks class tracking is one of the tools that small businesses find most beneficial to their financial success. Utilizing classes is also an excellent method for grouping transactions together by a defined, shared relationship.
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.
QuickBooks class tracking can be established to track:
- service types
- types of clients
- individual divisions of a single business
- different partners that work together in a single service firm
- sources of income
- activity at separate office locations
Once you establish QuickBooks class tracking you'll want to:
- analyze your business' individual needs before creating and establishing any classes
- consistently use class tracking for all transactions to produce reliable and accurate reports
- generate Profit & Loss statements for each class by assigning classes for both expenses and income
- consider using "other" if the transaction doesn't easily fit into a defined class
- establish a class of "unclassified" for transactions that have not yet been categorized
Since QuickBooks is a comprehensive program for your small business' bookkeeping needs, there are many features that are highly useful but may be overlooked. When you consider your business' current bookkeeping status, how would using class tracking improve the information you're receiving from QuickBooks?
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:
Steps to Turn on the Class Tracking
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.
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?