Legacy Field Notes: Class and Location Tracking Is Where Insight Appears

Once company settings, banking behavior, and the chart of accounts are in place, the next layer that shapes clarity is classification.

This is where reporting stops being generic and starts becoming useful.

In 2018, I was seeing files where totals looked fine, but leadership still could not tell which parts of the business were performing well.

This post came out of noticing that gap.

It reflects early thinking around segmentation, internal visibility, and how structure affects decision-making before those ideas were formalized into a named diagnostic framework.

Original Context

Originally written: December 11, 2018
Platform: Facebook

The original blog site was lost during a hosting migration.
The Facebook post below remains the contemporaneous public record.

Cleaning the Bookkeeping Mess: Class & Location Tracking

So far, we have gone over the What, Why and How for Company Settings, Bank Feeds and Reconciliations, and the Chart of Accounts. Below I will go over the What, Why and How for Classes & Locations within QBO. Having this setup correctly and utilizing this feature will be the reason you are able to have accurate information at your fingertips. Let’s Dive in:

The WHAT:

Class & Location Tracking: There are a ton of ways to use Class & Location tracking within QuickBooks Online (QBO). I have seen it used for departments, store locations, state locations, and many different scenarios. You can use them together or separate, it is up to you on how you utilize this feature, or not utilize it at all.

Locations: When entering transactions in QuickBooks, this will be for the entire transaction

Classes: When entering transactions, this will be for each line item in your transaction

Examples below:

Retail Stores:

• Location: Use if you have multiple locations
• Classes: Use if you want to see sales by department (I.e. Men’s wear, Kids wear, Shoes)

Construction:

• Location: Use this if you want to differentiate between Residential & Commercial work
• Classes: Use this for different services provided

Property Management

• Location: Use this if you have residential and retail properties
• Classes: Use this if you have different departments/divisions you want to track

Organizing your books in a way where you can easily and efficiently run reports by certain criteria’s can be beneficial to you and your team. The real beauty of utilizing classes and/or locations comes through when you start running your reports.

For example, when running a P&L as a consolidated statement for your entire company to see the total amounts is great. But what if you wanted to break that P&L by revenue & expenses for a specific location and/or class to see where your revenue stream is coming from?

Note: When using classes make sure you have an account for things that don’t necessarily need to be classified to a specific location and/or class. This account can be called; Corporate, Overhead, or something along those lines as you will have expenses that is coming in for the “above-store-level” expenses like a bookkeeper or administrative.

Note: Be careful that you DON’T duplicate the classes and/or locations with your Chart of Accounts. Your classes should be DIFFERENT to your chart of accounts

The WHY:

Really, this part is quite simple to answer as using the Locations and Classes features within QuickBooks Online lets you capture the information and analyze which parts of your business runs efficiently and which areas need improvements. Need I say more?

The HOW:

Setup Classes/Locations within QBO:

Login to QBO and go to Gear Icon>All Lists>Locations OR Classes

You can add, edit or delete all classes and/or locations here.

Cleaning up the mess and what to look for?

Login to QBO and go to reports>profit & Loss

• Are classes or locations setup in the file?
• When running the P&L for the year/month/quarter are there any unassigned classes that need to be looked at and/or reclassified?
• Do the classes mimic the chart of accounts? If so, why?
• Are ALL transactions being classified to something?
• If not, is there an overhead or general account to push to?
• Is the naming convention neat and legible?

This is just a short list of questions I ask myself when I am doing the cleanup for a new client. Always consult with a professional who knows what they are doing and really knows the questions to ask to get your classes and/or locations setup correctly the first time.

I pride myself in being that person who helps struggling business owners construct a better business, form a better team, and create a better process.

Until next time,

Candice Thompson
For The Love of Bookkeepers