QUICKBOOKS ONLINE ADVANCED CERTIFICATION COURSE

Supplemental Guide
Module 1: Advanced Categorization
Copyright

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Supplemental Guide About the Author

Table of Contents
About the Author ............................................................................................................................................. 4

About the Team ............................................................................................................................................... 5

Supplemental Guide Overview ..................................................................................................................... 8

Purpose of this Guide ...................................................................................................................................... 8
Google Chrome ............................................................................................................................................... 8
Learning Objectives ......................................................................................................................................... 8
Training at a Glance ......................................................................................................................................... 9
QuickBooks Online Accountant Test Drive ................................................................................................. 10

Lesson 1: Advanced Categorization ...........................................................................................................11

Introduction to Categories ............................................................................................................................ 11
Accounts and Sub-accounts ......................................................................................................................... 12
Advanced Categorization ............................................................................................................................. 14

Lesson 2: Class Tracking ...............................................................................................................................18

Class Tracking – Reporting ............................................................................................................................ 20

Lesson 3: Location Tracking .........................................................................................................................24

Location Tracking – Reporting ...................................................................................................................... 27
Location Tracking – Additional Information ................................................................................................ 29

Lesson 4: Job Tracking..................................................................................................................................33

Job Tracking – Reporting .............................................................................................................................. 39

Lesson 5: Project Tracking ............................................................................................................................44

Differences Between Projects and Sub-customers .................................................................................... 44
Convert Sub-customers to Projects.............................................................................................................. 48
Projects Center and Project Profitability...................................................................................................... 50
Project Overview and Project Profitability ................................................................................................... 59
Labor Costs and Time Tracking .................................................................................................................... 64
Frequently Asked Questions ........................................................................................................................ 67

Conclusion ......................................................................................................................................................69

Module 1: Advanced Categorization 3

Supplemental Guide About the Author

About the Author

MB Raimondi, CPA.CITP
mb@mbraimondicpa.com
Visit MB on Facebook

MB (Mary Beth) Raimondi, CPA, CITP, MS Taxation is an Advanced QuickBooks Certified ProAdvisor
in both QuickBooks Desktop and QuickBooks Online as well as being certified in Enterprise and
Point of Sale.

She has been teaching QuickBooks nationally to both end users and accountants/consultants for
over 15 years. She is a charter member of the Intuit Trainer/Writer Network.

The focus of her practice in CT is mainly QuickBooks consulting and training, specializing in
strategizing, researching and installing third-party add-ons and conversions to QuickBooks from
other accounting software.

She’s part of the QuickBooks Solution Provider program, getting great deals on Intuit products and
services.

MB was named the 2019 ProAdvisor of the Year by Insightful Accountant and has been in the Top
100 ProAdvisors for 2014-2019.

Module 1: Advanced Categorization 4

Supplemental Guide About the Team

About the Team

It does take a village to complete a project of this magnitude. My heartfelt thanks go out to the
following team members and fellow ProAdvisors as well as Intuit employees for all their long hours
and dedication.

Esther Friedberg Karp, MBA

President, EFK CompuBooks Inc.

esther@e-compubooks.com

Esther Friedberg Karp is an internationally-renowned trainer, writer, business consultant and speaker
who has been repeatedly listed as one of Insightful Accountant’s Top 100 QuickBooks ProAdvisors in
the world. She has also been named to their Top 10 list on two occasions: as Top International
ProAdvisor and Top Trainer/Writer ProAdvisor.

Based in Toronto, Canada, Esther has the unique distinction of holding ProAdvisor certifications in
the United States, Canada and the United Kingdom. She has authored materials and delivered
educational and certification courses for Intuit in all those countries, as well as Australia where she
conducted live QuickBooks Online training. She has spoken at Scaling New Heights, QuickBooks
Connect and other conferences, and has written countless articles for Intuit Global.

Esther’s clients include companies worldwide and accounting professionals who ask her advice on
behalf of their own clients. She is sought out for her expertise in various countries’ editions of
QuickBooks Desktop and Online, and for her talent in customizing QuickBooks usage for different
industries. She also teaches QuickBooks Core and Advanced certification classes to accounting
professionals in Canada.

Esther holds a BSc from the University of Toronto in Actuarial Science and Mathematics, and an MBA
in Marketing and Finance from York University’s Schulich School of Business.

She can be reached at esther@e-compubooks.com or 416-410-0750.

Module 1: Advanced Categorization 5

Supplemental Guide About the Team

Ash Beetson
www.ashbeetson.com
@ashbeetson

Ash has accumulated nearly 30 years of bookkeeping and accountancy experience, working within
the legal sector, industry and accountancy practice. Ash was introduced to QuickBooks Desktop in
2006, which became his preferred software choice when starting his own bookkeeping and
accountancy business in 2008.

In 2014 Ash was invited to join Intuit’s UK Trainer Writer Network to help train UK Accountants using
QuickBooks Online. Discovering at the same time all the major benefits and time savings that could
be gained, he became a 100% cloud accountant specializing in QuickBooks Online.

Since 2017, Ash’s main focus has been QuickBooks training and consultancy, making sure that
accountants and small businesses get the most out of QuickBooks Online.

Module 1: Advanced Categorization 6

Supplemental Guide About the Team

Leanne Davis
Owner, Sort It Out–Office Assist

leanne@sortitoutoffice.com.au

Leanne Davis is the owner/operator of Sort It Out – Office Assist, established in early 2013. With 12.5
years’ experience as Operations Manager in the corporate world, Leanne has a lot more to teach
than just balancing the books, with strong administration and process improvement skills helping
small businesses get their backend functioning and ready for the growth to come.

In 2013 she completed her Cert IV in Training & Assessment and is teaching business owners and
their staff best practice business skills. As a member of the Trainer/Writer team with Intuit in
Australia, Leanne is also training bookkeepers and accountants to become Certified ProAdvisors in
QuickBooks Online.

Module 1: Advanced Categorization 7

Supplemental Guide Overview

Supplemental Guide Overview

PURPOSE OF THIS GUIDE
Many of our small business clients have specialized procedures that require customized workflows to
perform day-to-day activities and provide the business owner with relevant information. Each of the
subjects presented in this guide is intended to help you understand the advanced customizations
and workflows available in QuickBooks Online.

Product Update Notification!

QuickBooks Online and QuickBooks Online Accountant are constantly being improved:

• When you log in to qbo.intuit.com, it may look different from the screenshots originally taken for
this supplemental guide

• Where to go to learn about the latest product updates:

 https://www.firmofthefuture.com/product-industry-news/product-updates//

 http://quickbooks.intuit.com/blog

GOOGLE CHROME
NOTE: Screenshots and instructions included in this guide use Google Chrome as the browser.

LEARNING OBJECTIVES

• QuickBooks
Recognize how categorization using sub-accounts can be used to optimize reports in
Online

• Recognize how to optimize class tracking and related reports in QuickBooks Online
• Recognize when and how to use the location tracking features and reports in QuickBooks Online
• Recognize
Online
how to optimize job tracking using sub-customers and related reports in QuickBooks

• Recognize how Projects functionality can be used to track job profitability

• Identify how to set up projects and utilize QuickBooks Online Projects functionality with current
sub-customers

• Recognize key considerations when working with Projects’ functionality

Module 1: Advanced Categorization 8
Supplemental Guide Overview

TRAINING AT A GLANCE
Use this as a guide to select specific workflows you want to cover.

TOPICS STEP-BY-STEP LEARNING OBJECTIVES

WORKFLOWS

1. ADVANCED • Recognize how categorization using sub-

accounts can be used to optimize reports in
CATEGORIZATION QuickBooks Online

2. CLASS • Recognize how to optimize class tracking and

related reports in QuickBooks Online
TRACKING

3. LOCATION • Recognize when and how to use the location

tracking features and reports in QuickBooks
TRACKING Online

4. JOB TRACKING • Recognize how to optimize job tracking using

sub-customers and related reports in
QuickBooks Online

5. PROJECT • Project setup • Recognize how Projects’ functionality can be

• Convert Sub- used to track job profitability
TRACKING
customers to • Identify how to set up projects and utilize
Projects QuickBooks Online Projects’ functionality with
current sub-customers
• Recognize key considerations when working
with Projects’ functionality

Module 1: Advanced Categorization 9

Supplemental Guide Overview

QUICKBOOKS ONLINE ACCOUNTANT TEST DRIVE

Exercises contained inside this guide can be completed using the QuickBooks Online Sample
Company, Craig’s Design and Landscaping Services. It simulates your client having a QuickBooks
Online Plus subscription.

• Open the Sample Company by logging into your QuickBooks Online Account  Gear icon 
Your Company section  Sample Company

• While you are working in the sample company, your work will be saved
• Upon closing the sample company file, QuickBooks Online automatically restores its settings and
data. If you log out and log in again, the Sample Company will reset (your work is not saved).

• By default, the sample company will sign out if inactive for one hour. You will lose any data and
settings, since this sample company resets each time you log in. Give yourself enough time to
complete the assignment.

• To increase the maximum hours of inactivity allowed before timing out, in the Sample Company
 Gear icon  Your Company section  Account and Settings  Advanced  Other
preferences  Sign me out if inactive for (select two hours or three hours)  Save.

NOTE: The QuickBooks Online Accountant test drive company contains some features that are not
available in QuickBooks Online Simple Start, Essentials, Plus or Advanced. (You may wish to share the
QuickBooks Online test drive file with your clients for them to practice in a QuickBooks Online Plus
environment without seeing Accountant-only features: https://qbo.intuit.com/redir/testdrive.) In
addition, some features (such as in-product Help) are not enabled in this test drive file. This is subject
to change.

Module 1: Advanced Categorization 10

Supplemental Guide Lesson 1: Advanced Categorization

Lesson 1: Advanced Categorization

INTRODUCTION TO CATEGORIES
This module explores advanced concepts regarding the categorization options and workflows
available to optimize QuickBooks Online for your clients. It is important to be familiar with them to
know what is appropriate for your client. There are lots of options, but not all may be appropriate.
Just because you can do something doesn’t mean you should. Also, these advanced procedures will
only be as successful as the data that is entered. You always want to make sure your client is trained
on using QuickBooks Online. For best results, make sure your clients and their staff who are entering
the data understand the entire procedure and commit to it. If they are not committed to doing the
work required of an advanced process, then perhaps a simpler workflow is best.

QuickBooks Online is a database. You must set up the database structure to provide the results and
information the client is seeking. In this module we look at advanced optimizations of QuickBooks
Online for your clients by using the categories available.

Module 1: Advanced Categorization 11

Supplemental Guide Lesson 1: Advanced Categorization

ACCOUNTS AND SUB-ACCOUNTS

The Chart of Accounts is the hub of our accounting system. This list must be set up. Let’s look at how
sub-accounts can help our clients. You can have five hierarchical levels of accounts, including the
parent. Under each level, you can have as many sub-accounts as you want (provided the total
number of active accounts and sub-accounts does not exceed 250 if you are using QuickBooks
Online Simple Start, Essentials or Plus. If you are using QuickBooks Online Advanced, there is no
limit to the number of accounts and sub-accounts). Typically, you would not go more than a couple
of levels in. If your client is using all the levels, it’s a good indication that advanced categorization will
help them.

In QuickBooks, sub-account data appears indented under the parent account on any reports that
show accounts, such as the Profit & Loss report.

Module 1: Advanced Categorization 12

Supplemental Guide Lesson 1: Advanced Categorization

As you look at any report that has subs (whether it’s sub-accounts, sub-customers, sub-classes, etc.),
you have the option to roll up all the subs into the parents to get a very streamlined report. This
gives you the big picture. Look for a Collapse button at the top of the report.

Alternately, when you see a down arrow ( ) on a report, you can collapse and expand individual
groups of accounts to see more or fewer details. Once you collapse the group, it turns into a
sideways arrow, pointing right (to expand that group again). Using accounts is a basic categorization
method many clients will use to get detail. For example, they may set up a Utilities parent account
and types of utilities as sub-accounts.

The downside is that this is often not the best option and QuickBooks has the flexibility to do more.
As you’ve probably seen many times, adding more and more accounts and sub-accounts and many
levels of sub-accounts can mean the Chart of Accounts and the Balance Sheet and P&L get longer
and more unwieldy. Additionally, clients may have many accounts that are similar that would make it
easy to make errors. For example, insurance might be set up as a sub-account under auto and then a
separate insurance account set up as a sub-account under office.

Many clients could benefit from one of the QuickBooks Online advanced categorization methods
and keep their Chart of Accounts more streamlined but still get the information they really need for
the way their business or organization operates. You are spreading the information across the page
rather than up and down the page.

Module 1: Advanced Categorization 13

Supplemental Guide Lesson 1: Advanced Categorization

ADVANCED CATEGORIZATION
In addition to accounts and sub-accounts, QuickBooks Online offers other ways to categorize
financial transactions. Additional ways you can categorize are by class, location, customer and
projects. They allow you to track the income, expense and net profit of different segments of a
business, such as departments, product lines, stores, regions and projects. Here are a few examples
of how these categories are used:

• Nonprofits raise funds for specific programs and must associate all dollars coming in and out to a
specific fund

• Real estate brokers track sales and expense by agent

• Designers track sales and purchases related to their customers’ projects
• Restaurant owners track sales and purchases by location
You can use one of these mechanisms or all of them.

To understand how financial activity is organized, we’ll explore the components of a transaction —
source and targets. QuickBooks Online uses this concept of source and targets to build transactions
and reports. Understanding the concept will help you set up the accounting workflow appropriately
for a particular company.

The source of a transaction is the summary information about the transaction and includes the
transaction date, transaction type, reference number, name, memo, account, location, and the total
amount of the entire transaction. Each element of source data occurs only once in the transaction.
The source account is always a balance sheet account such as bank, undeposited funds, A/R, A/P or
credit card type of accounts. On an invoice, the source data is found in the header section of the
screen and the source account for an invoice is accounts receivable.

Module 1: Advanced Categorization 14

Supplemental Guide Lesson 1: Advanced Categorization

The targets of a transaction provide the information about how the transaction is distributed in the
general ledger and include memos, accounts, amounts, location, class and job. The target data is
found on the line item grid in the middle of the screen and if products/services are used in the
transaction, the setup of the product/service determines the target account. The target accounts can
be balance sheet or P&L accounts.

Module 1: Advanced Categorization 15

Supplemental Guide Lesson 1: Advanced Categorization

You can determine the source and target information of an existing transaction by viewing a
Transaction Journal report. Every posting transaction has a Transaction Journal report. Open a
Transaction Journal report from an existing transaction in QuickBooks Online by clicking More on
the bottom menu then selecting Transaction Journal.

The transaction journal shows the debits and credits of the transaction. It may include accounts that
were not visible on the transaction screen itself. For example, if a client sells inventory, you will only
see one line on the invoice, but the transaction journal will show not only the increase in income, but
also the decrease in inventory and increase of COGS.

This report also shows the source and target information of the transaction.

The information contained in the first line of the report is the source data. See the Accounts
Receivable category and the total amount of the invoice? This is considered the source of the
transaction.

The rest of the lines are target data. They show how the transaction was distributed to the general
ledger. In the case of this invoice, the transaction was distributed to income, cost of goods sold,
inventory and sales tax payable accounts.

Some of the source data is copied to the target fields. This Transaction Journal report doesn’t show
it, and you can see that the target lines do not show a transaction date, type, reference number or
name.

Module 1: Advanced Categorization 16

Supplemental Guide Lesson 1: Advanced Categorization

From a P&L you can drill down on an income account to view a detail transaction report. Here you’ll
see transaction targets distributed to this income account. We can see that source data was copied
to the target lines, such as transaction date, transaction type, reference number and name, even
though the Transaction Journal didn’t show it on the target lines.

Now with a better understanding of source and targets, we can explore how transactions are
categorized as classes, locations, jobs and projects.

Module 1: Advanced Categorization 17

Supplemental Guide Lesson 2: Class Tracking

Lesson 2: Class Tracking

Class tracking is used to categorize income and expense transactions from different sectors. Classes
are available in QuickBooks Online Plus and Advanced. Classes are often used to track departments,
enterprises, properties, product lines, service lines, manufacturers and partners. For example, a
construction company might create a class for each service line: General, Site Work, Concrete and
Masonry. A farmer might create a class for each enterprise: Corn, Hogs and Soybeans. At the end of
an accounting period, the business could create income statements for each class.

Classes can be hierarchical by creating sub-classes, letting you group and report on logically-related
classes together. You can have up to five hierarchical levels of sub-class, including the top level.
Within each level, there is no limit to how many sub-classes are on the list. However, keep in mind
that there is a limit of 40 to the number of classes and locations combined in QuickBooks Online Plus
and this includes sub-classes. Be mindful of your class structure, as too many classes or levels of
classes can be difficult to read on a report and can be counter-productive to your desired results.

Classes affect only the targets of the transaction. When you set up classes to assign to each row in a
transaction, you can write one check for office supplies and split it among multiple classes. Each line
item represents a target associated to the office supplies expense account and a different class. The
source is associated to the checking account but not to a class.

When you set up classes to assign one class to the entire transaction, all target lines are assigned to
the specified class. This is confusing because you enter the one class in the header area — but
remember, class is never associated to a source, only targets, even when you assign one class to the
entire transaction.

Module 1: Advanced Categorization 18

Supplemental Guide Lesson 2: Class Tracking

Class tracking is activated in the Advanced section of Account and Settings.

To turn on Classes go to Gear  Accounts and Settings  Advanced.

There are two options for assigning classes: assign one class to the entire transaction or assign one
class to each row in a transaction. There is also a setting to warn the user when a transaction isn’t
assigned to a class. It’s best practice to select this. Unclassified posting transactions could represent
a mistake or could represent financial activity shared between more than one class. Hopefully, with
the warning turned on, there will be no unclassified transactions.

Class is always called “class” in QuickBooks Online. You cannot change its label.

Once class tracking is turned on in the QuickBooks Online company, you add/manage classes from
the gear icon by selecting List  All Lists  Classes.

Here you can set up, edit, delete and run reports for classes and/or sub-classes.

Module 1: Advanced Categorization 19

Supplemental Guide Lesson 2: Class Tracking

You can also assign Classes to items, making it easier to fill out forms. It will be the default class on
the form when that class is used but can be changed if needed.

CLASS TRACKING – REPORTING

There is a default report for Profit and Loss by Class. Or you can easily customize a Profit & Loss
report to display columns by class. This can tell you if one class is more profitable than another.

For example, you have a business that offers consulting and installation services. Class tracking is
ideal for you if it is typical to have purchases and sales that include both types of work. By specifying
the appropriate class on each detail line, you can run a Profit and Loss by Class report that would tell
you if your consulting business is more profitable than the installation business.

Module 1: Advanced Categorization 20

Supplemental Guide Lesson 2: Class Tracking

When using class tracking, you can specify a class or leave it unspecified. Unspecified transactions
will appear on a Profit & Loss by Class report under the Not Specified column. Unspecified
transactions could represent a mistake or could represent financial activity shared between more
than one class. Businesses that require all transactions be classified can create a class to collect
shared transactions (such as overhead costs). They then review the Not Specified class column
regularly to catch and reclassify transactions that were mistakenly posted with no class. Shared costs
can be allocated among classes at the end of the period. This is covered in Module 3.

If you were to run a Balance Sheet report and customize it to show columns by class, most balances
will be reported under the Not Specified class column since sources are typically recorded to cash,
bank, credit card, A/R and A/P accounts and do not contain the class field. Targets recorded to
balance sheet accounts, such as inventory, fixed asset purchases or loan repayments, will show in
their class column on the Balance Sheet by Class report if the class was specified. However, it is
important to keep in mind that, with sources posted to the unspecified class column and targets
posted to specified class columns, the balance sheet will not balance per class.

Module 1: Advanced Categorization 21

Supplemental Guide Lesson 2: Class Tracking

Module 1: Advanced Categorization 22

Supplemental Guide Lesson 2: Class Tracking

All lines on a journal entry transaction are treated as targets. There’s no source line on a journal
entry. Adding an adjusting journal entry specifying the class could adjust Balance Sheet account
balances for each class column, but this would require a good bit of manual work to adjust and may
not be the best way to proceed.

QuickBooks Online Accountant provides a tool to reclassify transactions in batch. On transaction

targets, you can reclassify the account and class; if the transaction is using products and services,
you can only reclassify the class.

Module 1: Advanced Categorization 23

Supplemental Guide Lesson 3: Location Tracking

Lesson 3: Location Tracking

When properly set up, clients can use location tracking to categorize entire financial transactions
from different sectors of their business. Locations are available in QBO Plus and Advanced. From this
data they can spot opportunities for greater efficiency and see where performance can be improved.

Location tracking is a lot like tracking by class, but there are some key differences and
considerations. A key difference is that only one location can be assigned to a transaction, unlike
classes where a class can be assigned to each line. Remember that in QBO Plus, there is a limit of 40
Classes and Locations combined. In QBO Advanced, there are unlimited Classes and Locations

Businesses will often use classes and locations together to complement each other and create
reporting that can be filtered by class and location to show how a particular class performs across
locations.

Location tracking is activated in the Advanced section of Account and Settings. When you turn on
location tracking you can select the nomenclature used for the location tracking category in your
QuickBooks Online company by selecting from several labels: business, department, division,
location, property, store and territory.

Module 1: Advanced Categorization 24

Supplemental Guide Lesson 3: Location Tracking

Once location tracking is turned on in the QuickBooks Online company, you add/manage locations
from the gear icon by selecting List  All Lists  Locations (or whatever nomenclature you chose).

When you set up or edit locations, a pop-up screen gives you options to specify unique settings on
sales forms for that location: form title, company name, address, email and phone number. If you
specify these settings for a location, it will override whatever is set up in the company tab of Account
and Settings.

You can specify sub-locations for hierarchical categorization, letting you group and report on
logically-related locations together. For example, you can group city locations under a regional
parent location, which then might be grouped under a state. You can have only five hierarchical
levels of sub-locations, including the top level. A location can have only one parent; you may not
assign a sub-location to multiple parent locations. Instead, if you wanted several locations to have a
specific sub-location, you would have to create a sub-location under each parent location.

Module 1: Advanced Categorization 25

Supplemental Guide Lesson 3: Location Tracking

Location tracking affords you the ability to view informational reports by location and manage
groups of transactions by location. For example, you can limit the Deposits page to show only
customer payments for each location. This lets you see all the payments received for one location
and deposit them as a group, perhaps to the local bank branch.

Locations are assigned in the header of the transaction. That said, location tracking affects both the
source and target lines of a transaction. Remember, you can only assign one location per
transaction.

The exception transaction is the journal entry. There is no source to a journal entry, only targets.
Therefore, you can apply multiple locations to a single journal entry.

TIP: Since all lines on a journal entry transaction are treated as targets, it is important to
remember that all lines on a journal entry that adjust a specific location should balance for
the balance sheet to remain in balance. Therefore, you must debit and credit the same total
amount to each location on a journal entry.

Module 1: Advanced Categorization 26

Supplemental Guide Lesson 3: Location Tracking

LOCATION TRACKING – REPORTING

Because locations affect the source of the transaction, you can run a Balance Sheet by Location
report and get correct results.

The Profit & Loss by Location report will tell you how each location performed compared to others,
and the same goes for a Cash Flow Statement by Location, Sales by Location and so on.

Furthermore, you can create custom detail reports that group by location, such as:

• Sales by Customer Detail

• Sales by Product/Service Detail
• Transaction List by Customer
• Transaction List by Vendor
• Transaction Detail by Account
• Transaction List by Date
• Recent Transactions

Module 1: Advanced Categorization 27

Supplemental Guide Lesson 3: Location Tracking

From the Location list, click the Run Report button for a location to see all transactions assigned to
that location. By contrast, click the Run Report button at the top of the screen to run a report with a
list of locations.

Module 1: Advanced Categorization 28

Supplemental Guide Lesson 3: Location Tracking

LOCATION TRACKING – ADDITIONAL INFORMATION

When using location tracking, generally all transactions should be specified with a location — do not
leave any transactions with an unspecified location. There is no setting to warn the user when a
transaction isn’t assigned a location.

The last location used on a transaction is often the default location on the next new transaction
screen. The QuickBooks Online Accountant tool allows you to batch reclassify transactions between
accounts and classes, but does not allow reclassification of location. Be sure to verify the location
category on every transaction and do not depend on the ability to reclassify in batch. Run your
Balance Sheet and Profit & Loss reports by location to look for Not Specified transactions and click
through to assign a location to each.

The location category is commonly found in the header section of the transaction screen. However,
some transaction screens do not show a location field. In many cases, QuickBooks Online assigns
the location based on the original transaction in the workflow. To avoid unexpected results, use
standard workflows in QuickBooks Online.

Standard workflow for sales is to record activity using sales receipts or invoices with received
payments, grouped into deposits. You should not enter sales directly to an income account on a
deposit. On the Receive Payment screen, the location is determined by the invoice to which the
payment is applied. If a single payment is applied to multiple invoices that are coded to different
locations, only one location will be assigned to the payment, which could give you unexpected
results on reports. Also, if the location is assigned to the invoice after the payment has been
received, QuickBooks does not go back and assign the location to the payment. Again, unexpected
results.

Module 1: Advanced Categorization 29

Supplemental Guide Lesson 3: Location Tracking

When you follow to the next step of the sales workflow and make a deposit, you can specify which
location to show Undeposited Funds for.

Standard workflow for accounts payable is to record activity using bills and bill payments. The
location is assigned on the bill. This allows you to filter the Pay Bills screen to show only bills due for
a location. You will get unexpected results if the bill payment is applied to multiple bills that have
different locations, or if the location is assigned to the bill after the payment has been made.

If there are billable expenses added to the invoice that do not have a location assigned or have a
different location than the invoice, the payment will not show a location. Billable charges allocated to
a location will show in the customer’s invoice drawer. You must open each charge to see which
location it was for to determine whether to pull it into the invoice you are creating for this location.
Alternately, you can run an Unbilled Charges report where location is a default column.

Module 1: Advanced Categorization 30

Supplemental Guide Lesson 3: Location Tracking

Additional unsupported transactions are as follows:

• Journal entries with unbalanced locations

• Paychecks allocated to multiple locations
• Payroll liability payments
• Sales tax payments and adjustments
• Prepayments from customers entered in Receive Payments window
• Discounts entered in Receive Payments window
• Discounts entered in Pay Bills window
• Pay bills with bill credit with different location
• Transfer funds between locations
• Inventory quantity on hand adjustments
If you have a situation where location tracking sounds like a solution, run some tests first to make
sure it will work in your scenario. For financial transactions where the location field is not available,
such as transfers, statement charges, sales tax payments and adjustments, use journal entries.
Familiarize yourself with where to find the location field on different types of transactions. To help
determine whether to use classes or locations, ask the following questions:

• Does your client need to run a balance sheet by category?

• Does your client need to put more than one category on a transaction?
• Does your client need a reminder to add a category?
If you are using any third-party apps that sync data to QuickBooks Online, explore whether they sync
data to/from the location category. This category is called the DepartmentRef field by the
QuickBooks Online API (application programming interface), which is the platform upon which third-
party apps integrate.

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Supplemental Guide Lesson 3: Location Tracking

In some multi-location environments, one location pays for a purchase made by another location.
For example, you may have a credit card owned by Location #1 that is used for purchases by other
locations. In these cases, the transactions should be recorded to a receivable from Location #2 asset
account, with the offsetting entry to the credit card liability account. Location #1 must be specified in
the location field for each transaction recorded — for the balance sheet to balance — even if Location
#2 was the one which incurred the expense. Then, at some regular interval, an intercompany
adjustment must be made to record the expenses for Location #2 and Location #2’s payable to
Location #1. Location #2 must be specified in the location field on every line of this journal entry.

When transactions are assigned a location, you can produce financial statements for each location.
Not all reports include a filter for the location field, such as the Trial Balance report.

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Supplemental Guide Lesson 4: Job Tracking

Lesson 4: Job Tracking

Where classes and locations are likely more permanent categorizations related to business activity
year after year (as is the Chart of Accounts), jobs may be numerous and temporary in nature. If you
work on more than one job for a client, use sub-customers to keep track of the details related to
each job. Sub-customers create a hierarchical relationship between customers, useful for tracking
multiple jobs per customer. Sub-customers can represent many things — from subsets of customers
such as multiple customer locations or sub-groups within a larger organization, to continuously
growing numbers of jobs associated to a customer. For example:

• Law firms may track clients as customers and their cases as sub-customers
• Designers may track their clients as customers and their projects as sub-customers
• Nonprofits may track their donors as customers and their grants as sub-customers
• Contractors may track their customer addresses as customers and projects for that address as
sub-customers

• Wholesalers
customers
may track the Bill To addresses as customers and Ship To locations as sub-

You can have an unlimited number of sub-customers, but you can only create hierarchical sub-
customers nested to five levels deep, including the top-level parent customer. A customer can have
only one parent; you may not assign a sub-customer to multiple parent customers. Instead, if you
wanted several customers to have a specific sub-customer, you would have to create a sub-customer
under each parent customer.

Once you’ve established how you will employ the use of sub-customers to organize your jobs, you
can assign financial activity to the jobs and measure their financial performance, referred to as job
costing. Job costing tracks any direct expenses incurred on a project against the revenue produced.
This will tell you the profitability of each job. Knowing which jobs are profitable and which are not
allows you to explore what factors affected these outcomes and take action to engage in the jobs
you want in the future.

There is no special setup to track sales by customers/sub-customers. However, there are some
settings you should check.

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Supplemental Guide Lesson 4: Job Tracking

You can change the customer nomenclature by going to the Advanced tab of Account and Settings.
In the Other Preferences section, look at the drop-down list next to Customer label and choose the
appropriate label.

To set up a new job, go to the Customers tab in the Sales Center and select New Customer.

Check the box to indicate that it’s a sub-customer and select the appropriate customer to which the
job is associated.

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Supplemental Guide Lesson 4: Job Tracking

If you configure a sub-customer to Bill this customer, you will not see this sub-customer’s invoice on
the Receive Payment screen for the parent customer. If you want to see all invoices related to parents
and subs, configure the sub-customer to Bill with parent. That way, if the parent pays for a sub-
customer invoice as well as a parent invoice, both invoices will appear on the Receive Payment
screen.

In the Customer Center, customer balances due include the balances of their sub-customers.

When a sale is recorded using an invoice or sales receipt, the income is automatically associated to
the customer job. You can invoice either the customer or the sub-customer.

How about on the expense side? How do you assign purchases to customers? You need to set the
proper settings in Account and Settings prior to entering transactions.

Go to Account and Settings  Expenses tab and check the following choices.

• Show Items table on expense and purchase forms

• Track expenses and items by customer

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Supplemental Guide Lesson 4: Job Tracking

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Supplemental Guide Lesson 4: Job Tracking

The first will add an items grid to purchase forms. It’s generally best practice to use items on
purchase transactions when doing job tracking. This will give you better reporting. If using items,
you need to make sure they are set up as double-sided items, meaning you want to use them on a
purchase transaction as well as a sales transaction. Check the box next to I purchase this
product/service from a vendor. Double-sided items are available only in QuickBooks Online Plus
and Advanced subscriptions.

The second option will add a customer column to purchase transactions.

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Supplemental Guide Lesson 4: Job Tracking

When an expenditure is incurred, you can associate it to the related customer job by entering that
name in the Customer column of the Account or Item details. You can split the expenditure into
multiple lines associated to different customer jobs. You can assign a customer either in the Account
Details section or the Item Details section. You can assign a customer/job to checks, bills and
expenses. You cannot allocate the cost of payroll to a job. The built-in payroll services do not allow
for job costing (at least at this time). There are workarounds and third-party apps that can help with
job costing labor. You might use a zero dollar check to allocate payroll labor. Zero dollar checks will
be covered in Module 3.

That said, you can assign a purchase to an account and a customer even if it’s not associated to a
product or service for purchases such as postage or meals that are just pass through expenses.

If you are using the Inventory feature in QuickBooks Online (available only in QuickBooks Online
Plus and Advanced), the invoice that records the sale of product will record the cost of goods sold
related to that specific job (sub-customer) for you.

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Supplemental Guide Lesson 4: Job Tracking

JOB TRACKING – REPORTING

With income and expenses posted to the general ledger and associated to specific customer/jobs,
you can run informational reports that give you greater control over your business.

You can run a Profit and Loss report several different ways.

One way is to change the Rows/Columns to show the columns by Customer.

This will show each customer in its own column and you can see the net income for each job. The
last column before the Total column may say Unspecified for the customer. This reflects transactions
that have not been assigned a customer. If you want to use job costing, you may want to set up a job
to capture expenses that are not associated with a specific job, such as an Overhead customer. That
way, when you look at this report, if there is something in the Not Specified column, you know it’s a
mistake. There is no reminder to always assign a job.

NOTE: There is a default report named Profit and Loss by Customer.

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Supplemental Guide Lesson 4: Job Tracking

Because this report can get very wide, you might want to filter for a specific job or jobs. That will
create a much more manageable report.

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If you are choosing multiple jobs, make sure to also show Columns by Customer as in the last
example. You might also want to run the report using All Dates, to show the total profitability for the
job.

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You can also customize a P&L report to show columns by items to track the profitability of products
and services. By using product/service items mapped to the correct account in the general ledger,
your coding will be more consistent for your financial statements. Run a Profit & Loss by
Product/Service to track your margins.

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You can filter this report for a specific job to see item profitability for the job.

Other reports you can run that may be helpful for analysis are:

• Expenses by Vendor Summary with Columns totaling by Customer (and possibly filtered for a
particular customer)

• Purchases by Vendor Detail with a Customer column added

• Purchases by Product/Service Detail with a Customer column added

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Supplemental Guide Lesson 5: Project Tracking

Lesson 5: Project Tracking

Many types of businesses get paid by the project or job and need (or want) to track all their costs
and revenue in one place. You can help your clients with this organization by using the Projects
feature in QuickBooks Online. Projects offers features similar to using sub-customers for job costing,
but Projects enables clients to organize all the activity in one place – the Projects Dashboard (also
referred to as the Project Center). From the dashboard, you can see a list of all projects with a line
graph of income costs, profit margin and associated time. You can get more detail about a project
by clicking on the project name and getting to the Project Overview screen. The Projects feature is
available in Plus and Advanced.

DIFFERENCES BETWEEN PROJECTS AND SUB-CUSTOMERS

The first question that comes up is, “What is the difference between using projects vs. using sub-
customers?” Both can be used to track costs, revenue, billable and non-billable expenses for a client
who wants to see profitability per project or job. For a client new to QuickBooks Online, Projects may
be more intuitive and easier to navigate because everything can be entered, and all important
related reports can be found in the Projects Center. Even for clients currently using sub-customers, it
may be easier for them to use Projects. So, what are the differences?

• Time – Projects gives your clients one-click access to Time Cost by Employee or Vendor
reporting for a project. If you were using sub-customers, you’d have to run a Time Activities by
Customer Detail report, change the dates to all dates, then filter the report for a particular sub-
customer and alter the title to reflect the name of the sub-customer. On this report you would not
see estimated cost of the time, only the billing rate if entered on the item. Then you’d want to
save the customization. If you wanted to run this customized report for another sub-customer,
you’d need to change that filter and re-title the report.

• Project profitability reporting – With Projects activated, clients get one-click access to a Project
Profitability report, which doesn’t exist in the Report Center. If you were using sub-customers,
you’d have to run a Profit & Loss by Customer report, change the dates to all dates and filter it for
the individual sub-customer. You’d also want to re-title the report and save the customization. If
you want to run this customized report for another sub-customer, you’d need to change that filter
and re-title the report.

• You can only have one hierarchical level for projects. When you set up a project, you assign it to
a customer. You cannot set up a sub-project.

• Neither the project name nor the sub-customer name appears on a sales form. If you need it to
do so, use a custom field on the sales form template to add it.

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Supplemental Guide Lesson 5: Project Tracking

• Projects requires you to bill the project with the customer. If you need to bill for a project
separately from the customer, you would use a sub-customer and choose to Bill this customer
(rather than Bill with parent).

• what
When setting up a sub-customer, you can have different billing and shipping addresses from
is assigned to the customer. The address for a project is the same as the address of the
customer. If you want to use Projects, you could set up a sub-customer with a different address
then add a project to the sub-customer.

You need to discuss the differences with your client and determine, according to their workflow,
which method of advanced categorization will work best for them.

TIP: Beware when sending out statements because neither the sub-customer nor the project
shows up on statements.

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Supplemental Guide Lesson 5: Project Tracking

Step-by-Step: Project Setup

Project tracking is activated in the Advanced section of Account and Settings.

1. Turn on Projects by going to Account and Settings Advanced.

2. Under Projects, select the checkbox Organize all job-related activity in one place. Note, if you
are turning Projects on for your client from QuickBooks Online Accountant, it says Use project
financial tracking. No matter what it says, you are turning on Projects.

3. Select Save  Done.

If your client wants to turn off Projects, they could uncheck the box from within their own QuickBooks
Online company. Note that at this time there is no option to turn Projects off for clients accessed
from QuickBooks Online Accountant or for your firm’s books.

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Supplemental Guide Lesson 5: Project Tracking

When enabling Projects, there are some additional options in Account and Settings that should be
checked.

In the Expenses tab, make sure to check:

• Show items table on expense and purchase forms – You get better reports if you use items
rather than accounts on purchase transactions

• Track expenses and items by customer – This adds a customer column on purchase
transactions and projects will be included in the drop-down list

• Make expenses and items billable (optional) – If your client is doing a time and materials job,
you’ll want to see the billable column on the purchase forms to invoice the project easily

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Supplemental Guide Lesson 5: Project Tracking

CONVERT SUB-CUSTOMERS TO PROJECTS

If a client is currently using sub-customers and wants to start using projects, sub-customers can be
converted to projects. The transactions assigned to the sub-customer will be assigned to the project.

It is important to note the following sub-customer information will not transfer over:

• Addresses
• Contacts
• Phone numbers
• Tax codes
• Terms
• Payment and billing information
• Attachments
The following will revert to the parent customer settings:

• Addresses
• Tax codes
• Terms
NOTE: It is not possible for accountants to convert sub-customers to projects for their firm's books.

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Supplemental Guide Lesson 5: Project Tracking

Step by Step: Convert Sub-customers to Projects

1. Select Sales from the left navigation bar.

2. Select Customers.

3. Below the money bar, look for and select the option Do you organize sub-customers as
projects? You can convert the first level of sub-customers into their own project. Convert now.

You will only see this option if:

 Projects is turned on

 You have sub-customers with the setting Bill with Parent

 The sub-customers are active and not sub-sub-customers (only one level deep)

 The sub-customers do not have any active or inactive sub-sub-customers

4. Click Convert Now. When you do, you will see a list of sub-customers available for conversion. If
you hover over the sub-customers, you can see the number and types of transactions that will be
moved.

5. Select the sub-customers you want to convert.

6. Click Convert. This will move the sub-customers you’ve chosen and QuickBooks Online will
create new projects for them.

7. Accept the pop-up warning. Note, this is a one-time conversion; it can’t be converted back.

When you click on Projects from the left navigation bar, you will see the sub-customers you
converted show up in the Projects dashboard.

If you already created a project with the same name as the sub-customer, you’ll get a message that
says: There’s already another project with this name. Rename this sub-customer and try again.

To resolve this, either change the name of the sub-customer and try to convert again or edit the sub-
customer and change the name of the sub-customer to the existing project name. When you save,
QuickBooks will ask if you want to merge them. Select Yes and the sub-customer will merge into the
project.

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Supplemental Guide Lesson 5: Project Tracking

PROJECTS CENTER AND PROJECT PROFITABILITY

When you click Projects from the left navigation bar, you see a list of projects that were either added
from the Projects Center or converted from a sub-customer.

Project profitability tracking is a feature integrated into the Projects Center which shows income and
expenses for each project as well as the number of hours that have accrued against each project.
This is a snapshot which not only gives the dollars but also a line graph for income and costs. You
can also see the profit margin to date.

You can filter the Projects Center by status or customer. This is also where you initiate a new project.

IMPORTANT: The income and cost graphs reflect the numbers based on the setting for cash or accrual in
Account and Settings  Advanced. It does not take into account the setting in Report Tools.

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Supplemental Guide Lesson 5: Project Tracking

Add a Project

The only required fields when adding a project are the name and the related customer or sub-
customer. You can also add notes.

Delete a Project

If you delete a project any transactions linked to the deleted project cannot be modified or deleted.
Also, you’ll get an error message if there are any unbilled charges related to the project.

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Undelete a Project

If you want to undelete a project, click on the mini-gear on the right side of Projects. Select the Show
deleted projects checkbox. Also make sure the Actions box is checked so the Actions column will
show. The screen will now show any deleted projects. Under the Options dropdown in the Actions
column, the following choices now appear:

• Undelete and mark as in progress

• Undelete and mark as completed
• Undelete and mark as cancelled

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Options

The Options drop-down list in the far-right Actions column next to a project allows you to edit the
project, mark as completed, mark as canceled or delete. You cannot make a project inactive, though
you could mark it as canceled or completed. This will take the project off the Projects Center
Dashboard unless you change the status filter. Best practice is to mark the project as completed so
you still have access to all the transactions.

Projects that have had their status set to Complete or Canceled will not appear in the customer
drop-down list for new transactions.

There are some exceptions: If you have the setting on to Prefill forms with previously entered
content, then the completed or canceled project will be prefilled.

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Supplemental Guide Lesson 5: Project Tracking

Hourly Costs

Labor costs are often the biggest component of overall costs for those who want to do job costing.
By using Projects you can specify cost rates against team members, associate those costs against
time activities, and see that time flows over to time cost reports. If you are using QuickBooks Payroll,
Projects and Time Tracking, you will learn that QuickBooks will allocate the wages and associated
taxes to the job. Use the hourly costs if you are not using QuickBooks Payroll but still want to see the
effect of the labor costs for a job.

To add the cost rates, click the Hourly cost rate button on the top of the Projects dashboard.

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Supplemental Guide Lesson 5: Project Tracking

Clicking on the button opens a list of all employees. Click Add next to the employee name to add
the hourly cost. If you have already added an hourly cost, click on the Pencil icon to change the rate.
When determining the cost, you might want to take into consideration not only wages and taxes, but
other overhead costs such as Workers Comp and benefits.

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QuickBooks can help you determine the cost by clicking on the calculator next to the cost rate and
entering the actual wage per hour. QuickBooks will calculate the Social Security/Medicare portion,
then you can add in amounts for unemployment taxes, Workers Comp and other overhead costs.

After filling in the amounts, click Add then click on Save. When entering time for this employee,
QuickBooks will use that rate to give you labor costing reports in the Projects Center.

NOTE: This is not the same as the billable rate for either employees or vendors.

Again, this is assuming that you are not using QuickBooks Payroll. If a client is utilizing QuickBooks
Payroll and time tracking, they'll be able to see a breakdown of their actual payroll costs by project.
Projects will clearly display the wages and employer taxes from payroll that count toward costs
against the project. This will show up on the Project Profitability report.

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Supplemental Guide Lesson 5: Project Tracking

For vendor costs, you need to decide if you are going to enter time for the vendor and use the cost
rate per hour or break out the vendor’s bills by project. If you are not using QuickBooks Payroll, the
time costs show in the Project Overview, but not on the company P&L or the Project Profitability
report. So, if you use time costs and split the vendor bill by project, there will be a duplication of
costs on the Project Overview page.

IMPORTANT: If you have ever had payroll turned on, you will not see Hourly Time Cost on the Project
Overview screen.

If you are running payroll, the time costs don’t show on the Project Overview, so there’s no
duplication. If you enter time costs, they will show on the Time Cost by Employee/Vendor report and
in the Time Activities tab.

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Supplemental Guide Lesson 5: Project Tracking

Add the cost rate per hour for vendors in the Vendor record.

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PROJECT OVERVIEW AND PROJECT PROFITABILITY

When you click on the name of the project, it opens the Project Overview. Here you will find four
tabs — Overview, Transactions, Time Activity and Project reports. You can also add transactions to
the project directly from this screen, by clicking Add to project.

Overview

The Overview tab is the screen that opens when you click on an individual project. It shows the same
line graphs that you see on the Projects Dashboard, including the profit margin.

In the bottom portion of the screen, you can see the income and costs broken out by account. By
selecting the links on the accounts themselves, you can run a Transaction Detail report for the
account(s).

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Transactions

This tab shows all transactions assigned to the project. It includes both sales and purchase
transactions, whether billable or non-billable, as well as non-posting transactions such as time
charges, billable expenses, delayed charges or delayed credits. It can be filtered by transaction type
as well as by time period.

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Time Activity
The next tab, Time Activity, details time spent on the project. You can drill down to see who did the
work, what was done and how much it’s costing, based on using the Hourly Cost Rate feature.
The layout can be changed to view by week, month or service, and grouped by employee or service.

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Project Reports

There are three project reports accessed from this tab.

Project profitability
This brings up a report of project profitability by account. It’s basically the same information you see
in the Project Overview, but in report format that can easily be emailed or exported to Microsoft
Excel.

IMPORTANT: This report is based on the setting in Account and Settings  Advanced. However, unlike
the Projects Dashboard, the setting in Report Tools will overwrite the setting in Account and Settings. For
example, if the setting in Account and Settings is Accrual and the setting in Report Tools is Cash, this
report will be run on a cash basis. This means that you, as the accountant user, might see something
different from what a regular company user might see.

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Time cost by employee or vendor

This report breaks down all costs associated with every employee or contractor who has worked on
the project. This report will have data on it only if you are using time tracking and the Hourly Cost
Rates feature.

Unbilled time and expenses

This report lists all time and expenses that were marked billable and haven’t yet been invoiced. It
also includes delayed charges and credits, which are billable by default.

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LABOR COSTS AND TIME TRACKING

The ability to get labor costs linked to the project is a function of two factors. One, as learned before,
is to either use QuickBooks Payroll or the Hourly Cost Rate feature for an employee or vendor. The
other is to use time tracking, either in QuickBooks or TSheets.

Record Time in QuickBooks

If you record employee or contractor time in QuickBooks, you can assign a service item on the single
or weekly timesheets inside QuickBooks. The service item field will appear only if you’ve turned it on
in Account and Settings Advanced section. If you haven’t turned it on, QuickBooks will assign a
generic service item to all time entries.

You can enter time either as a single activity or a weekly timesheet. Assign a customer and a service
item, mark it billable (optional), if appropriate, and enter the time.

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If you have defined the hourly cost for the employee or vendor, it will carry through to the project
reports learned about earlier. This is assuming you are not using QuickBooks Payroll.

TIP: Remember you can add unlimited time-tracking only users.

Integration with QuickBooks Payroll

If you are using QuickBooks Payroll and want to pay your employees based on time, the first thing
you need to do is to make sure the payroll preference is set to copy hours from employee time
sheets.

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Run payroll as usual. When the paychecks are created, QuickBooks allocates the wages and tax costs
to each project as entered on the time sheet, and you will see the wages and tax expenses reflected
on the Project Overview page as well as on the Project Profitability report.

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TSheets and Projects

TSheets, powered by QuickBooks, is a time tracking add on. You can sign up for TSheets from
apps.com and link it to your QuickBooks. It allows individuals or crews to enter their own time in the
TSheets app that will then flow from TSheets into QuickBooks. It also has a scheduling component.

When you enter time in TSheets and want to do job costing, you still assign the time to a project and
select a service item, just as if you were entering time in QuickBooks.

When the time comes into QuickBooks, it now works the same as if you entered the time directly into
QuickBooks.

If you are not using payroll, use the hourly cost rate and see those reports in the Projects Center.

If you are using QuickBooks payroll, approve the time, create the paychecks and then wages and
taxes costs will be shown on the Project Overview and the Project Profitability report.

FREQUENTLY ASKED QUESTIONS

Can I move Transactions to Projects?

You may have a client who has sub-customers who can't be converted to a project (perhaps because
of having sub-sub-customers) but who still wants the benefits of Projects for a particular job.

If you want to move individual purchase transactions to a project, you need to open each of those
transactions and, in the Customer column, change the customer to the project name manually.

If you want to change invoices to the project name, you need to change each one manually.
However, you can only change the name of the invoice to the project if the following conditions are
met:

• The invoice wasn’t created from an estimate

• It doesn’t have any billable expenses or time attached
• The invoice has not yet been paid
Any links will stay with the old customer, i.e., payments, estimates, billable expenses or time. You
would need to move each transaction to the new project manually. Realistically, if there are a lot of
those types of transactions, and you can’t convert the sub-customer, you may want to leave it as a
sub-customer.

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Do all transactions appear on the Transaction List tab in the Projects Center?
Yes, posting and non-posting transactions as well as billable and non-billable transactions.

Can I add projects to bank feeds?

Yes, when adding or matching a downloaded transaction, choose the project name from the Select
Customer (optional) drop-down. If you want to allocate an expense to multiple projects,
select Split and divide the expense to the different projects.

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Conclusion

As you can see, there are many choices for advanced categorization. Which you choose depends on
your client’s needs. Make sure you understand sources and targets and how that relates to classes
and locations. There are a lot of similarities. You can create budgets for any of the four advanced
categorizations. You can create five hierarchical levels for classes, locations and customers but not
projects. You have easy access to filtered project reports.

It is best practice to try out the choice of advanced categorization in the sample company or in a test
company before you institute it with your client.

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