Home   .   Products   .   News   .   Articles   .   Downloads   .   Forums   .   Info Directory   .
    Articles Home   .   Contact   .   E-mail Us!    

Revised: 2011.09.01


Setting Up Classes that Meet Your Information Goals

by Mark Wilsdorf
Flagship Technologies, Inc.
QuickBooks™ Add-Ons and Solutions You Can Use
http://www.goflagship.com

Classes provide a "third dimension" for analyzing your records; another way to "slice 'n dice" your Quicken or QuickBooks transaction records so that they can produce management information instead of just financial information.

You can use classes for any purpose you want--any activity for which you want to be able to get income and expense totals independent of the chart of accounts (or categories if you use Quicken). For example, you could set up a class called Storm Damage to track all of your bills for repairing storm damage over a couple months' time, to help you accumulate a total for turning into your insurance company.

The most common use of classes however, is for gathering management information. You can set up classes to represent the different parts of your business you've identified as profit centers and cost centers. Tagging transactions with these classes then, helps you accumulate income and expense totals for the different parts of the business, to help you value a which parts are the most profitable.

[Here's a related article about classes as profit centers and cost centers.]

The Quicken and QuickBooks' Help systems do a decent job of describing the basics of setting up classes, and you can find a lot of information online at Intuit's product sites (www.QuickBooks.com, www.Quicken.com) and in many other places throughout the Web. 

Many articles fail to mention some of the subtle ideas involved in setting up the Classes list. My purpose here is to bring together in one article, a few of the important things you need to know...along with some others that are rarely mentioned.

Oh, and I hope you don't mind a mix of farm/ranch (and possibly other) business examples. This company began serving agriculture exclusively, and many of those examples are still appropriate to illustrate important points.

 

 


Key Points About Setting Up Classes:

  • The first thing to know: you must turn on class tracking before the Classes feature is available anywhere in QuickBooks. This trips up a lot of new users. They look for the Classes list or Class columns in their QuickBooks forms and don't see either one, and wonder what's wrong. In the QuickBooks main menu select Edit > Preferences > Accounting > Company Preferences, then check mark the Use class tracking option.

  • There are no right or wrong ways to set up classes, only different ways. However, some ways can lead to a Classes list structure that doesn't produce the kinds of class-based reports you want. It takes some learning and experimentation to figure out what's right for you, so expect to at least partly scrap and remake your Classes list setup during the first year or two of using Quicken or QuickBooks.

  • Changing your Classes list is easy. Following from the point above, it's important to know that both Quicken and QuickBooks make it easy to change your Classes list--regardless of how many transactions you may have entered already. You can rename classes, move them to different positions with the class list's structure, merge classes, and so on.
     
    So as you're getting started using classes, don't spend a lot of time designing the "perfect" class list. First of all, your first attempt won't be perfect, and second, reshaping your class list along the way, as you learn more about how you need it to look, is easy.

  • Each class will (usually) represent a single cost center or profit center, or will be a "parent" class for a group of other cost centers or profit centers (known as subclasses or "child" classes).

  • Unless your class list is extremely simple, it should normally have at least two class levels (i.e., classes and subclasses). The reason? Some incomes and expenses cannot be assigned to a specific class, but you can assign them "closer" to where they ultimately need to be, by assigning them to a parent-level class that represents a broader part of your business.

    For example, given this (partial) Class list:

    • Crops
      • Grains
        • Corn
        • Soybeans
      • Hay

    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.) On the other hand, soil testing fees may apply to all crops and could more reasonably be assigned to the Crops class rather than to any of its subclasses.

    What do you do with costs you've accumulated at the Crops and Grains levels? Normally you would allocate costs accumulated at those levels to their perspective subclasses, so that the Corn, Soybeans, and Hay classes are charged with the full costs related to their production. But I digress; allocating costs among classes is a cost accounting (sometimes called managerial accounting) topic, better dealt with in another article.

    The main point is that it's best to set up your Classes list with at least a couple different levels, representing categories and subcategories of your various profit centers and cost centers.

    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 a crop name and crop year) in a list of classes:

    • Corn '09
    • Soybeans '09
    • Wheat '09

    Assuming multiple years of information are kept, here's what the Classes list would look like after two more years:

    • Corn '09
    • Corn '10
    • Corn '11
    • Soybeans '09
    • Soybeans '10
    • Soybeans '11
    • Wheat '09
    • Wheat '10
    • Wheat '11

    While there's nothing terribly wrong with this setup, there are two minor problems:

    1. Having so many Classes that begin with the same characters at the same class level renders the QuickFill feature of Quicken and 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. If you typed "so", then Soybeans '09 would appear in the Class field of your transaction entry.

      The problem with the class list shown above is that multiple class names begin with exactly the same letters. Based on this list, typing "so" will always fill in Soybeans '09. But if you wanted to enter Soybeans '11 instead? You'd either have to type the whole thing, or more likely, you'd click the drop-down arrow on the Class field and select Soybeans '11 from the form's class list.

    2. 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 qualifier per class level:

    • 2009
      • Corn
      • Soybeans
      • Wheat
    • 2010
      • Corn
      • Soybeans
      • Wheat
    • 2011
      • Corn
      • Soybeans
      • Wheat

    This arrangement takes care of both problems:

    1. You'd only have to type "2011:s" to have Quickbooks fill the Class name field with 2011:Soybeans.

    2. Getting a report for all three crops for any particular crop year requires choosing only one class (such as 2010 for the 2010 crop year).

  • How your Classes list is arranged determines how easy it is to get the reports you want. Structure your Classes list so that the types of information most important to you are closest to the top (at the highest levels of the hierarchy). Here are some examples for different information goals, to clarify this concept.

    GOAL: Easy reporting by crop year.

    • 2010
      • Corn
        • Jones Farm
        • Smith Farm
      • Soybeans
        • Jones Farm
        • Smith Farm
    • 2011
      • Corn
        • Jones Farm
        • Smith Farm
      • Soybeans
        • Jones Farm
        • Smith Farm

    GOAL: Easy reporting of long-run costs & incomes across crop years.

    • Corn
      • 2010
        • Jones Farm
        • Smith Farm
      • 2011
        • Jones Farm
        • Smith Farm
    • Soybeans
      • 2010
        • Jones Farm
        • Smith Farm
      • 2011
        • Jones Farm
        • Smith Farm

    GOAL: Easy reporting by farm location.

    • Jones Farm
      • Corn
        • 2010
        • 2011
      • Soybeans
        • 2010
        • 2011
    • Smith Farm
      • Corn
        • 2010
        • 2011
      • Soybeans
        • 2010
        • 2011

Or maybe not...

Things are always changing, so this idea about arranging class levels with "the most important ones" at the top may not always be important.

The arrangement of your Classes list does limit how QuickBooks reports are arranged, but some add-on reporting tools can "rearrange" class levels for report purposes. (Our company's ManagePLUS for QuickBooks software is one of these.)

This means two things:

  1. It may be possible to prepare reports for any of the class arrangements shown above, regardless of how the Classes list is structured.
     

  2. The structure of your Classes list is much less important when you have that kind of extended reporting capability.

  • You can still set up classes for ad hoc purposes even if most of the Classes list is devoted to profit centers and cost centers. For example, you could still set up and use the Storm Damage class mentioned at the beginning of this article, without interfering with how the rest of your Classes list works.


Permitted uses of this copyrighted material:  This article may be copied and distributed for educational or commercial purposes so long as all of these requirements are met:  (1) This article may not be distributed in whole or in part in a machine- readable form (for example, as a computer file or over a network or Internet connection). (2) The article must be distributed in its entirety and not condensed or abridged. (3) The copyright notice which appears at the bottom of this page must be included on every distributed copy of the article and must be clearly readable. (4) No fee of any kind may ever be charged for this article or for any larger volume of which it is a part. However, this article may be distributed as handout material at a meeting or conference for which attendees have paid a fee, so long as no separate fee is charged for this article or any larger volume of which it is a part. (5) All other uses require express written permission from Flagship Technologies, Inc.

Essentially, these requirements mean you may distribute printed copies of  this article, so long as each copy clearly bears our copyright notice and no fee is ever charged for such copies.

 Top 
 Home 


Trademarks & Copyright © 1995-2013 Flagship Technologies, Inc.
Email: info@goflagship.com  ·  Privacy policy