Classes are honestly my favorite functionality in QuickBooks. The simple ability to assign a class to a transaction opens up a world of capabilities for analyzing a business. I use classes primarily to enable detailed Profit & Loss reporting. Classes provide the ability to segregate transactions by different areas of a business. By segregating a business by business area, product, or service, a business owner can easily see results at a more granular level. There is great value in being able to analyze the profitability of specific products that are sold or services provided. It provides fast insight into what is driving the overall financial results.
Lately it seems like I add P&L by Class reporting to every QuickBooks project. All of our new clients have the need to get to a lower level of analysis in their business, they just don’t know how. Once they have better reporting, it is as if there is sudden enlightenment.
I had a client recently tell me that she feels a sense of relief because she can clearly see where her business is now and she has better control over where it is headed. This project in particular consisted of a lot of cleanup work and some systems integration, but the end result is an accurate and very telling P&L by Class report that she can rely on. To get to that point, I taught her how to assign classes to revenue and direct costs and how to allocate overhead to the two areas of her business. As a result, she can clearly see that one area is doing great and one is doing poorly. Now, we can focus on the poorly performing area and start making improvements. Before we made these changes, she only knew there was less cash in her bank account, but couldn’t see why.
P&L by Class is a great starting point to better business analysis. It provides focus and direction on where to drill down in order to understand the numbers better. I’ve seen business owners who never took the time to analyze their numbers, suddenly become inspired to dig deeper once they have this report. Small business owners in control of their numbers – I can’t ask for better than that!