How to Set Up a Budget by Class in QuickBooks Online (and Report on It)

If you budget by product line, department or property, a single company budget is not enough. QuickBooks Online can subdivide a budget by class. Here are the steps, the catches that show up in Intuit's own support threads, and the check that keeps the class numbers honest.

A budget by class lets you ask "how is each product line doing against its own plan" instead of only "how is the company doing." QuickBooks Online supports it, but there are a few places where it trips people up: the plan, the settings, how the report is run, and transactions that never got a class in the first place.

Before you start: classes need to be on

Class tracking is part of QuickBooks Online Plus and Advanced, not the lower plans, so check your plan if you do not see it. Then turn it on:

1. Click the gear icon and open Account and settings.
2. Choose Advanced and find the Categories section.
3. Turn on Track classes. Choose whether a class applies to each row of a transaction or to the whole transaction.
4. Consider turning on Warn me when a transaction isn't assigned a class, so new entries are not left blank.

Classes only count from the moment transactions carry them. Last year's transactions will not be sorted into classes unless someone goes back and assigns them.

Create the budget

1. Click the gear icon and open Budgeting, then Create new.
2. Choose the fiscal year.
3. Set the budget to be subdivided, and under Subdivide by choose Class.
4. Select the classes to add a budget for, then enter the amounts for each account. You can start from last year's actuals if you ran Profit and Loss by Class for that year.

Run Budget vs. Actuals for a class

Open the gear menu and click Budgeting. Next to the class budget, click the small arrow beside Edit and choose Run Budgets vs. Actuals report. You can also run Budget vs. Actuals from the Reports page and pick the budget there.

Check that nothing is outside the classes

A class budget only compares against transactions that carry that class. A bill posted with no class is in the books and in the company P&L, but it belongs to no class, so every class budget looks better than it should.

1. Run Profit and Loss by Class for the same period.
2. Look at the Not specified column. Anything there is spend or revenue that no class budget can see.
3. Compare the class columns plus Not specified with the total P&L. They should add up.
4. Open each Not specified item, assign the right class, and keep the "warn me" setting on.

Class or location?

Classes and locations are separate tags. Many businesses use classes for what (a product line or department) and locations for where (a store or region). You can budget by one at a time in the subdivided budget, so pick the dimension your board reviews.

Doing this without rebuilding it each month

DrillFi reads your classes and locations from QuickBooks and lets you filter the whole P&L, and every drill-down under it, by class, location, owner or vendor, so you can see actuals for one class down to the transaction. DrillFi does not create or compare separate budgets for each class: the budget side stays at the company level, so build the class budget in QuickBooks as described above. Its Missing Class/Location check flags transactions that were posted without a class, which is exactly the gap described above, before the class numbers go to anyone. See the check on the sample file.

DrillFi is an advisory and reporting tool. It is not an audit, review or compilation, and it is not tax preparation or legal advice. QuickBooks menus and plan features change, so check the labels in your own file.