Classes provide a "third dimension" for analyzing your
records; another way to "slice 'n dice" your records so
that they produce management information instead of just financial
information.
In farm accounting, tagging your transactions with Classes lets
you identify income and expenses with specific profit
centers and cost centers in your operation.
The Quicken and QuickBooks Help systems do a decent job of
describing the basics of setting up Classes. (Especially see the
QuickBooks industry-specific information for Farming and Ranching.)
We'll identify some key considerations for setting up Classes, and
will show some examples to further explain the concepts laid out in
the Quicken and QuickBooks documentation.
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There are no right or wrong methods for setting up your
Classes, only different methods. However, some methods are
rather inflexible--they don't lend themselves to easily producing
a wide variety of profit and cost reports. Expect to at least
partly scrap your Class setup for the first year or two of using
Quicken or QuickBooks.
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Each Class will (usually) represent a cost
center or profit center--or will be a "parent"
Class for a group of cost centers or profit centers.
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Unless your Class list is very simple, you'll normally need
at least two "levels" of Classes (i.e., Classes and
subclasses). The reason? Some incomes and expenses cannot be
assigned to a specific Class, but you can get them
"closer" to where they should be by assigning them to a
parent-level Class that represents a broader part of your
operation.
For example, given this (partial) Class list:
Repairs to a planter you use for planting both Corn and
Soybeans aren't specifically costs of either enterprise. Rather,
they're an overhead expense of Grains (which encompasses both Corn
and Soybeans.)
If you rotate hay and grain crops on some of the same fields,
the soil testing fees are a general overhead expense most
reasonably assigned to the Crops Class, because it's a cost that
must be borne by all crop enterprises.
What do you do with costs you've accumulated for the Crops and
Grains Classes? When you prepare P&L reports for Corn,
Soybeans, and Hay, you allocate those costs as appropriate. This
can be done on any reasonable basis, such as crop acreage, crop
value, machine hours, etc.
- It's usually best not to mix different
kinds of Class qualifiers in Class names. Instead, establish
more different Class levels (Classes and subclasses). That will
make it easier to get a wide variety of reports concerning your
enterprises.
Example: Crop & Crop Year Classes
Here's an example of using two different Class qualifiers (both
the crop name and crop year) in some Class names:
- Corn '96
- Soybeans '96
- Wheat '96
Assuming multiple crop years of information are kept, here's
what the Class list would look like after two more years:
- Corn '96
- Corn '97
- Corn '98
- Soybeans '96
- Soybeans '97
- Soybeans '98
- Wheat '96
- Wheat '97
- Wheat '98
While there's nothing terribly wrong with this setup, there are
two minor problems:
Having so many Classes that begin with the same characters at
the same class level renders the "QuickFill" feature of
Quicken & Quickbooks useless for typing in Classes while
entering transactions. You'd have to type an entire Class
name to make the program fill it in correctly.
In case you're unfamiliar with it, the "QuickFill"
feature attempts to complete a data entry for you as you begin to
type it in. Typing "so" might fill in
"Soybean" in the Class entry field (assuming there's a
Class named "soybean" in your Class list).
The problem with the Class list shown above is that too many
Class names begin with exactly the same letters. Based on this
list, typing "so" will always try to fill in
"Soybeans '96". But if you want to enter "Soybeans
'98" instead, you'll either have to type the whole thing
(the first unique character is the "8"), or more
likely, you'll click the drop-down arrow on the Class field and
select "Soybeans '98" from the Class list.
Getting a report for all three crops for any particular crop
year requires choosing three different names from the Class list.
Here's the same basic list, arranged with only one Class
qualifier per Class level:
This arrangement takes care of both problems:
You'd only have to type "1998:S" to have Quickbooks
fill in the class name with "1998:Soybeans".
Getting a report for all three crops for any particular crop
year requires choosing only one class (such as "1997"
for the 1997 crop year).
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The Class levels you use determine the ease of getting
specific types of reports. So arrange your Class list in a
hierarchy according to the types of information that are most
important to you--with the most important items toward the top of
the hierarchy. Below are examples of Class/Subclass arrangements
for various information goals.
GOAL: Easy reporting by crop year.
GOAL: Easy reporting of long-run costs & incomes across
crop years.
GOAL: Easy reporting by farm location.
