Class tracking is a capability in QuickBooks that allows you to monitor your income and/or expenses by categories. Although this is a feature available with the desktop version automatically, to have this capability in the online version, you must upgrade to the plus version.
This feature can be used in a variety of ways. For instance, I use it to track how prospects found out about my company. We ask those who call how they heard about us and categories such as Yelp, Google, the names of organizations to which I belong, and others are used to track this information. I can then review a report that shows me which methods have been the most lucrative. I can then see if my time and/or dollars might be better invested in another form of advertisement.
I have a client with a medical practice in which two doctors are partners. They use class to track the income and expenses by doctor. This is taken into consideration when they take out draws from the business so one isn’t compensated more than the other.
Another customer owns 5 franchises and tracks income and expenses by location (the corporation owns all five, so one bookkeeping file must be used for accounting purposes). By using class, my client can see which stores are more profitable, and which has expenses higher than average. This capability is a great management tool.
One client is a not-for-profit organization and they use class tracking to monitor how their funds are received. There are multiple events each year, and gross receipts and expenses can be viewed to see how much money was brought in with each type of donation. For instance, they have the different events as a category as well as corporate donations, private donations, ticket sales, and more.
You may have a business where you want to track costs by segments of the business such as management, support staff, and production. Perhaps you have more than one location, or you need to track income/costs for multiple owners. There are quite a number of reasons you might want to use this feature.
Class tracking makes it easy to view your expenses by categories without having to add sub-accounts on your chart of accounts keeping this list simplified. Many feel they must track categories on the chart of accounts making it long and tedious to use. For instance, a restaurant owner may want to know the cost of utilities by location and may have set up each store under the utility expense. But if they want to track most of the chart of accounts items by store, this list would become quite long. By assigning a class to each transaction, there only needs to be one expense account, yet the cost per store can still be viewed.
To set up class tracking on the desktop version, go to Edit>Preferences>Accounting and check the box that says use class tracking for transactions. As you post each entry in your QuickbBooks file, add the class and you’ll be able to run your profit and loss report by class.
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