Every business has a multitude of products and services that they offer. In most cases, these products and services can be divided into groups, depending on the nature of the business. For some it could be product/service line, for others, location; or it could be both of these. It’s intuitive (and necessary) that you would account for your income and expenses on the business as a whole, but how do you measure the operating results of any one product line or location? Whether you call them departments, cost centers, or classes, these groups can tell you a great deal about your business and help you make the right decisions along the way. We’ve seen businesses attempt to accomplish this using just the chart of accounts, but the end result is multiple occurrences of the same account with no way to easily extract information on any one specific group. That’s where classes in QuickBooks save the day.
To get started with classes, you must first turn on this feature in your Preferences. In the menu bar, click on Edit; Preferences. Choose Accounting and click the Company Preferences tab. Check the boxes for both Use Class Tracking and Prompt to Assign Classes. Selecting the prompt feature will remind you each time any transaction is not assigned to a class.
Next, begin to create your classes. This takes a little planning beforehand to decide the best groupings to measure performance within your own business. Once you have your groups (and sub-groups, if necessary), click on Lists in the menu bar, then Class List. Click the Class button in the bottom left of the dialog box, and select New Class. Here you will enter the name of the class (department, cost center) and the sub-class, if applicable. Then click OK. Continue this process until all information has been entered. Now you are ready to begin accounting for your business activity through classes.
Of course, it’s great to set this up from the beginning, but if you’ve been operating for a while, don’t stress about it — you can implement this at any time. “Well, what about all those prior transactions that were not classified?” We can help with that. Depending on the version of software, those prior transactions can sometimes be easily classified. Call any one of our four locations and we’ll put you in contact with our experts who can evaluate your situation and help you with a plan tailored to your business. We’re here to help.