QBO Monday Minute - Using QBO Class Preferences for Items

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General Ledger

As a consultant, most often my job is to find how small businesses can gain more. More insight, more profit, more streamlined processes. And of course, I love it when my advice truly impacts my clients' lives and operations.

Last Spring, QBO inventory added several features to aid in a more robust internal system. But it really hits home when these new features take you from ‘good enough’ to ‘amazing’ in the eyes of those whom we serve; the small business.

The feature which I am referring to is Class Tracking Preferences for QBO Items. Because Classes are used to identify related data when used in a transaction, they can show correlations which help establish links in data. For example, if goods or services are sold using Classes, insight can be gained as to which department, location or type of business to which the transaction corresponds. Granular insights empower management decisions.

Examples of Useful Class Tracking

  • A plumber who offers both new installation and repairs and would like to track profitability for both services
  • A business who performs light manufacturing and needs to track transaction items by line for locations or phase of a job
  • A non-profit who needs to track grants or projects
  • A retail shop who tracks income and expenses by departments like clothing, snacks and gifts   

How I 'Wowed' Two Completely Different Businesses with Class Tracking for Items

Example 1:

In Example 1 (above), the business performs light manufacturing, they previously used 'tags' in QuickBooks Enterprise, but wanted to switch to QuickBooks Online. Instead of Tags, we used Class Tracking by Line Item. Each item starts as 'Raw Materials,' so we set the preferred Class Item to Phase 1. As the Item progresses through the work order, it changes phases. Each phase for the business allows any user in the system to see the current progress for each line item in the transaction. Because Classes can be updated in a transaction as the item progresses, the item is updated to show the current phase status. When all line Items are finished, the customer is called and all Items are released.

Example 2:

In Example 2 (above), a plumbing business wanted to track income and expenses by Class. The two main branches of services were new construction and repair/maintenance of existing plumbing. Items were duplicated in QBO for all services and materials which allowed the business to be consistent in the use of Class tracking. In their case, we were even able to use Class tracking preferences for QBO Payroll because plumbers were assigned to each department. Throughout the month they were able to pull a Profit and Loss Report to track each department’s profitability.

How to Create Classes in QBO

  1. Turn on Classes by clicking the Gear Icon
  2. Accounts and Settings
  3. Advanced
  4. Select Track Classes
  5. Enable Class one to each row in the transaction

Create Class Lists

  1. Gear Icon
  2. All Lists
  3. Classes
  4. Define your Class List: add each class using the 'New' button as needed.

Create Item Class Preferences  

  1. Navigation Bar
  2. Customer Center
  3. Products and Services
  4. New Item or Edit Existing Item
  5. Add Class Preference

Tips for Using Classes

  • Be consistent - by using Class preferences for Items. Each transaction line can be used for report tracking
  • Balance Sheet by Class are inconstant and often need to be verified
  • Be clear how you are using Classes and do not duplicate the Chart of Accounts

Reports using Classes

Now is the perfect time to take advantage of Class tracking preferences per Item in QBO. Classes can be used for any transaction in QuickBooks. The best way to gain insights into the company’s past, present and future is to be consistent when setting up and using Classes.  

  1. Navigation Bar
  2. Reports
  3. Profit and Loss (like the one shown below)
  4. Display columns by Classes

Obviously, this is one way to get a lot out of QBO that you might not have previously considered. You might give it a try in a test company in order to get thoroughly familiar with the variety of options in using this approach before you option up this methodology to your clients. Still the same, it's a pretty great way to make yourself into a 'QBO Super Hero.'

And see this article for more about Class tracking preferences for QBO Payroll.