How to track profitability by location or product division in QuickBooks Online...Location vs Class Tracking

Class and location tracking in QuickBooks Online.

Class and Location Tracking

Are you a business with multiple locations or storefronts?  Or perhaps your company has different divisions or product lines?  Wouldn’t it be nice to see which store is most profitable?  Or which product line is generating the most sales?
 
In this article, we will discuss how to track profitability using locations and classes using QuickBooks Online.

Why would you want to use location or class tracking?

QuickBooks Online lets you track the income, expenses, and net profit of different segments of your company such as storefronts, product lines, departments, geographic locations, or projects.  Class tracking and location tracking are two QuickBooks features that allow you to do this.
 
For example, if you are a construction company, class tracking can allow you to track both residential and commercial operations.  Or track each job individually.

QuickBooks Online class tracking

Or if you own multiple retail stores or restaurants, location tracking can help you track the profitability of each.

QuickBooks Online class and location tracking

Which QuickBooks Online subscription will you need to track classes or locations?

Not all QuickBooks subscriptions support class and location tracking.
 
Class and location tracking are only available with QuickBooks Online Plus and Advanced subscriptions.  You may need to upgrade your plan if you are currently using Simple Start or Essentials.

How to enable and setup class tracking

To enable class tracking:
 

1. Select the Gear icon and then Account and settings.
2. Select the Advanced tab on the left.
3. In the Categories section, use the Track classes slider to enable class tracking.
4. Turning on Class tracking brings up an option to activate a Warn me when a transaction isn’t assigned a class feature. When there are unclassified transactions, you may not know if that represents a mistake or if it means the transaction needs to be split among multiple classes at a later date.  So it’s best to turn this feature on.
5. Now choose whether you want to assign the class to the entire transaction or each row in the transaction. I recommend  selecting “One to each row in transaction” as it gives you more flexible to breakdown your transactions by line item.  Clicking “entire transaction” will not allow you to break out transactions by line item.  
6. ​Next, select Save and then Done.

Class tracking "one to each row in transaction"

Class tracking "entire transaction"

Once enabled, to add classes:

1. Click the Gear icon and All Lists.
2. Select Classes. ( You can also add locations by selecting Locations.)
3. Click the New button.
4. Add the name of the class or location and click Save.

How to enable and setup location tracking

To turn on locations:

1. Click the Gear icon  then select Account and settings.
2. Select Advanced.
3. In the Categories section, select the Edit  icon.
4. Select the checkbox to track locations.
5. Select Save, then Done.

 
To add a location:

1. Click the Gear icon  then select All lists.
2. Select Locations.
3. Select New, then add the Name of the location you want to track.
4. Select Save and close.

 
Once class tracking and location tracking are turned on and set up, you will be able to assign them to transactions such as invoices and expenses.

When to use location vs class tracking?

If you are having trouble deciding between location and class tracking, consider the following:
 
If you need to put more than one category on a transaction, use class tracking.  Location tracking only allows you to assign one location per transaction, whereas class tracking allows you to assign a different class for each line item.

QuickBooks Online location and class tracking

The ability to add classes to each line item is especially important if you are creating expenses that need to be broken out.  For example, let’s say you own two retail stores, but purchase supplies for both stores on one expense transaction.  Location tracking won’t let you assign each line item a location, but class tracking will. 
 
If you need to run a balance sheet by category report, use location tracking.
 
If you want to be reminded to categorize a transaction, use class tracking.  Location reminders are not available.
 
You may decide that using both locations and classes is the sweet spot.  For example, if you have two retail stores, you can assign each storefront a location, then setup up classes for your different product lines.  This would allow you to run a profit and loss report by location to see the profitability of each store.  It would also allow you to run profit and loss by class report to see how each product line is performing from both locations.

Running Reports with classes and locations

• Profit and loss by class 

Profit and loss by class report

• Profit and loss by location

Profit and loss by location report

There are two ways to run these reports.  You can either run them directly from the reports page, or click display columns by “class” or “location” on a standard profit and loss report.

Run profit and loss by class directly from the reports page

Filter by "display columns by"

• Custom balance sheet by class or location. Unlike Profit and Loss, there are no default Balance Sheet by Location or Class Reports. However, you can customize a Balance Sheet to show locations or classes by choosing from the Display columns by dropdown.

Balance sheet by class and location report

Transactions that can be used with class tracking

Remember that you can assign classes to each line item of a transaction.  QuickBooks allows you to assign a class to the following transactions:

• Invoice
• Sales receipt
• Estimate
• Sales order
• Statement Charges
• Refunds and credits
• Check
• Credit card charges
• Bill
• Purchase order
• Paycheck

Transactions that don’t support location fields

On the other hand, location related transactions have some limitations.
 
The following transaction types don’t support a Location field:
 

• Transfers (instead, use a Deposit or an Expense transaction to indicate the funds being transferred from the “from account” to the “to account”)
• Receiving payments
• Prepayments from customers entered in the Receive Payment window
• Sales tax payments and sales tax

• Journal entries with unbalanced locations
• Invoices with billable expenses with no location or different locations
• Paychecks allocated to multiple locations
• Payroll liability payments
• Pay bills with Bill Credit with a different location
• Paying bills
• Pay bills where bills entered for the same vendor have different locations
• Payments for invoices for the same customer where the invoices have different locations
• Transferred funds between locations
• Discounts entered in the Receive Payment window
• Discounts entered in the Pay Bills window
• Inventory quantity on hand adjustments

Conclusion

In summary, class and location tracking are great ways to gain better financial insights into how your business is performing.  
 
If you have any further questions or are having trouble which feature to use,  please contact us here.