Turn on class tracking first: Settings, then Account and Settings, then Advanced, then switch on Track classes under Categories. Once that's on, go to Settings, then All Lists, then Classes, then New to add one. Classes let you tag transactions by department, location, or business line so you can report on each separately, even though they all run through one QuickBooks company.
1. Turn on class tracking. Go to Settings (gear icon), then Account and Settings, then the Advanced tab. Under Categories, switch on Track classes. This option doesn't exist in the menus until it's enabled.
2. Decide what a class should represent, before you start adding them. Classes typically map to departments, locations, business lines, or distinct revenue streams. The structure matters more than the number of classes; a handful of clear categories reports better than a dozen overlapping ones.
3. Go to Settings, then All Lists, then Classes. This is the dedicated list for every class in the company.
4. Click New. Name the class, and if it's a sub-category of a broader one, check Is sub-class and choose the parent.
5. Save, and repeat for each class you need. There's no hard limit on how many classes a company can have, though QuickBooks works better with a clean, deliberate structure than a long sprawling list.
6. Assign a class on each transaction going forward. Invoices, expenses, and most other transaction types get a Class field once tracking is turned on; assign it the same way you'd assign a category or customer.
7. Turn on the warning for unclassified transactions, if you want a safety net. Under the same Advanced settings, Warn me when a transaction isn't assigned a class flags anything that slips through without one.
Turning on classes is a five-minute setting. Actually getting value out of them means someone remembers to tag every single transaction correctly, on every invoice, bill, and expense, forever, which is a much bigger ask than the setup step suggests.
It breaks down fastest with transactions that don't originate in QuickBooks: a bank feed item imported automatically, an invoice created by an integration, a bill pulled in from somewhere else. None of those know about your class structure unless something explicitly tells them, so they land unclassified unless a person catches and fixes each one.
At that point, the report that was supposed to show profitability by department or location is only as accurate as the weakest link in a chain of manual tagging, which for most businesses is wherever the volume is highest.
Transactions coming in from a POS, a connected bank feed, or another system get the right class assigned automatically, based on rules like location, product line, or source system, instead of landing unclassified.
Instead of QuickBooks' built-in warning getting ignored, unclassified transactions get routed to the right person on a schedule, so a sloppy class report gets caught the same week, not the same quarter.
Tell us which transactions keep landing unclassified, and we'll tell you whether that source can be fixed at the point it enters QuickBooks.
Tell us where classes keep slipping through, which transaction type, which source system, and we'll tell you if that gap can close automatically. Class tracking is one example of a report that's only as good as manual discipline; the same fix applies to whatever else in the business depends on someone remembering every time.
Let's talk →A way to tag transactions with a category that cuts across your chart of accounts, usually a department, location, or business line, so you can run a Profit and Loss by Class and see which part of the business is actually making money, not just the company total.
Both let you split reporting below the company level, but they're meant for different structures. Classes typically track something like a department or product line that can apply anywhere, while Locations tracks a physical place, a store, an office, a job site. Some businesses use both at once for different dimensions of the same report.
Go to Settings > Account and Settings > Advanced, then switch on Track classes under the Categories section. The Classes list and the Class field on transactions don't appear until this is turned on.
Run Profit and Loss by Class from Reports, or open a standard Profit and Loss and use Display columns by > Class to split one report into a column per class instead of a single total.