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QuickBooks Classes
QuickBooks classes enable you to essentially break your business down into a number of smaller businesses and look at complete profit & loss statements for each business. For example, you could break your business down by industry, location, product or service, or anything else that is meaningful for your particular business. This is a powerful feature of QuickBooks and one that I often recommend clients use.
An Example of a Good Use of QuickBooks Classes
A business with multiple locations could set up a separate class for each location, enabling the business to evaluate each location as a separate business. This is a great use of QuickBooks classes because revenue and most expenses would probably be fairly easy to associate with a specific location, meaning that the numbers would be very meaningful. Expenses that aren't associated with a specific location, such as management salaries and benefits, could either be split out between the different locations or left unassigned.
An Example of a Bad Use of QuickBooks Classes
A restaurant owner curious to compare profits resulting from appetizers vs. dinners could create classes for each. While they might be able to develop a simple system to track revenue from each, it would probably be very hard to break out expenses (ingredients, rent, employee time) between the two, and therefore to obtain a meaningful profit & loss for each class.
Choosing what to Use QuickBooks Classes for It is not easy to change your classes, so I recommend thinking carefully about how you would like to break down your business before beginning to use QuickBooks classes. The first thing to think about is how you would like to break your business down. Ask yourself what you get from breaking your business down in this way and make sure it is something you will use. Second, think about whether or not revenue and expense transactions can easily be broken down in this way.
How to Set Up and Use QuickBooks Classes:
Select "Use class tracking" in the Accounting Preferences window to add a class field to invoices, bills and other transactions. Go to the Lists menu, choose Class List and then New to add classes. Then simply fill out the class field when entering transactions in QuickBooks.
Conclusion
I consider classes to be one of the greatest features of QuickBooks. However, they don't apply to every business and should not be used haphazardly. Finally, if you can't think of what to use them for, then you probably don't need to use them. And truly finally, if you don't need the Class feature to break your business down along certain lines, then there are some other cool things you can do it. A topic for another blog.
