Classes in QuickBooks Online - When to use them, their benefits, and how to effectively report by Class

Classes in QuickBooks Online is a compelling feature that can help you or your clients categorize transactions in a way that allows you to track and analyze specific business segments or locations without setting up separate companies (or files). This feature is particularly useful for businesses that operate in different geographic areas, have multiple departments, or need to track different revenue streams. It is also impactful because you can generate P&Ls and Balance Sheets by Class. So, unless you need statutory financials for tax or legal entity purposes, using Classes can be a great way to save on QBO subscription fees. That said, you need to be on the Plus version to use Classes.

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Typical use cases for Classes are:

• Property management industry – having a Class per property.
• Product line reporting – each product line to have its Class.
• Segmental or divisional reporting – these can either be a grouping of classes, or each segment could be its own class.

Some examples of essential analysis for each type of (business) use cases include:

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Property Management:?

• Operating Expense Ratio (OER): Shows what portion of the income is being spent on operating the property. It is calculated by dividing operating expenses by total revenue.
• Cash on Cash Return: Measures the cash income earned on the cash invested in a property. It gives investors an insight into the profitability of their property relative to other investments.
• Return on Investments (ROI). This indicates the percentage return on the investment in the property.

?Product line Reporting

• Calculating and comparing gross margin % returns
• Calculating and comparing net margin % returns

Segmental / Divisional Reporting

• Comparison of kpi’s amongst similar business units within a division.
• Comparison of kpi’s amongst different geographic areas.

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How does Flash Reports from Finatical Software help with Class Reporting? These (business) use cases want to structure their P&Ls differently, as each has different income and expense accounts (or groupings of accounts) that are more important drivers to analyze, indicating success or failure. The issue in QBO is that the chart of accounts is aligned to a fairly rigid P&L format, which does not easily allow for different forms of analysis and comparison. Using Flash Reports, you can easily import the existing P&L, make the changes for your specific industry, add additional calculations and ratios, and then refresh the data for different date ranges with all calculations updating with formatting remaining intact. Flash Reports can also report on budget data by Class stored in QuickBooks Online.?

For a quick demo to see how Flash Reports can help you report on the various business use cases watch this youtube video https://youtu.be/x9suUbZwHMI?si=wlBwGezZ0E_Gzxpb or visit finaticalsoftware.com

Do you have any other uses cases for Classes besides those mentioned above? Any other important KPI's that you use for reporting by Class? Look forward to hearing your feedback.

Chris