Would you like the ability to create a profit and loss account by location, department, customer type or line of business? The little-known "class" feature in QuickBooks lets you classify your invoices, bills, checks and other data against a customizable set of business divisions or functionalities for more versatile profit and loss reporting. A class can be any way of segregating your business; for example, you could categorize your data by physical location (the Austin location versus the Atlanta location) or job type (new construction versus remodels). Take care to tag, filter and sort your transactions before you create the P&L by Class report.
- Turn on the class feature. By default, the class feature is not on, so you'll have to do this manually. Click on the "Edit" button and select the "Preferences" option. Select the "Accounting" preference and open up the "Company Preferences" box. From there, you'll need to zero in on the boxes "Use Class Tracking" and "Prompt to Assign Classes." Check both boxes to turn on the class feature, and then click "OK." The class tracking option is now available on your business profile.
- Set up class codes for your business. Click "List" in the toolbar and select "Class List" from the drop-down option. Click the "Class" button at the bottom of the page; then click "New" to create a new class. Enter the class name at the prompt and click "OK." If you want the class to be a class within a class (for example, commercial remodel as a subcategory of remodel), put a check in the "Subclass" box and select the primary class in the text field.
- Assign a class to each specific invoice or expense by hitting the down arrow on the "Class" button at the top of the input form and selecting the class where you want the item assigned.
- Run the profit and loss report by class. Go to "Reports" and click on the "Company and Financial" tab. From the drop-down list, select the "Profit and Loss by Class" option, or type this phrase into the search bar. QuickBooks will create your profit and loss report in a column format by the various classes you have created for your business.
- If you forget to assign a class to a transaction, QuickBooks will remind you by listing the income or expense in an " unclassified" column. Double click on the entry to recall the unclassified item. Locate the "Class" box at the top of the screen and click on the class where you wish to assign the transaction. Save and close the item. When you return to the Profit and Loss by Class report, refresh and you'll see that the previously unclassified item has been moved to its designated class. It's a good idea to clean up all your unclassified transactions at the end of the month.
The class feature takes a little time to set up but it gives more detailed insights into the profitability of your business. It allows you to see the income and expenses in each business class or combined into one P&L, so you get an excellent understanding of where your sales and costs are segregated to enhance your decision making.