Is your QuickBooks account becoming unmanageable? With cloud-based accounting software, it's easy to handle multiple accounts and clients, but it can also be challenging to sift through endless reports to find the information you need. That's where tags come in.
Tags are a powerful tool that can help you track and report on the information that matters most to you without impacting your books. By using tags, you can easily organize your transactions and generate reports that provide valuable insights into how you're making and spending money.
In this post, we'll cover the best practices for using tags in QuickBooks, including how to create tag groups and add tags to money-in and money-out transactions like invoices and expenses. We'll also provide examples of how to apply tags on a small business account to boost productivity and gain valuable insights into their financials.
So, if you're ready to take control of your QuickBooks reports and streamline your accounting processes, read on!
What is QuickBooks?
As accountants, we need tools that not only simplify our everyday lives but also ensure accuracy and compliance. Now, automation in this field has been around for years with accounting software like Quickbooks, firms’ favorite, which has integrated intelligence to reveal insight and shortcuts on regular everyday tasks.
But we can take even more advantage of these tools, by adding other tools that can improve:
Assurance: Automated data entry and error checking to save hours of manual work.
Accuracy: AI minimizes human errors, offering precise calculations and projections.
Real-time Insights: AI-driven analysis provides instant financial insights, allowing for proactive decision-making.
Remote Accessibility: Cloud-based AI tools can be accessed anytime, anywhere, making remote work smoother.
What Are Tags in QuickBooks?
Essentially, they are the hashtags of cloud-based software, a way to organize information according to your needs. Tags are customizable labels that you can assign to transactions such as invoices and expenses.
Let's say you're working with a client on a marketing campaign. By creating a dedicated tag for all the campaign expenses, you can keep them separate from other expenses, allowing for easier analysis. This approach enables you to track and monitor how much money your client is investing in the campaign and whether it's delivering the anticipated results.
By adding tags to your transactions, you can easily group them together and run reports to see how much money your client is making and spending in specific areas of their business.
How to Create Tag Groups and Add Tags to Transactions
The first step is to create tag groups to organize your tags and run reports on specific areas of your business. To create a tag group, follow these steps:
- Select Settings and Tags.
- Select New and Tag Group.
- Name your group and select a color.
- Add tags to your group by selecting New and Tag.
- Once you have created your tag groups, you can start adding tags to transactions.
In any transaction or task you create on QuickBooks, you’ll find the tag area where you can add the one you have already created, or create a new one on the go.
Customizing Tags to Track What Matters Most to Your Business
Before you start tagging, ask yourself which parts of your business are important to track. For example, you can track how much you're making and spending on different types of jobs, or you can tag things like ad campaigns, sales reps, or who managed a project. The tags are completely customizable, so you can track and report on whatever you like.
- Keep it simple: Don't create too many tags or tag groups. The more tags you have, the more difficult it will be to keep track of them.
- Be consistent: Make sure everyone on your team is using the same tags and tag groups. This will make it easier to run reports and compare data.
- Review and update regularly: Make sure you're still getting the information you need from your tags. If not, it may be time to update your tags or tag groups.
- Don’t go crazy: While the ability to create new categories on the go is a useful feature, it's also easy to get carried away and create new tags for every single new transaction.
How To Properly Use Tags: The Example
Let's say you are running the finance for a small e-commerce business selling jewelry. You have a variety of expenses and income streams, including materials, online advertising, and sales on different platforms like Amazon. Using tags can help you keep track of where the money is going and where it's coming from.
To get started, you can create tag groups based on different aspects of the business such as "materials" to track expenses related to purchasing supplies like beads, wire, and clasps. You could also create a "platforms" tag group to track income and expenses on different e-commerce platforms.
Within each tag group, you can create specific tags to track individual transactions. For the "materials" tag group, you could create tags for each type of supply you purchase, like "beads", "wire", and "clasps". For the "platforms" tag group, you could create tags for each platform you sell on, like "Amazon", and "Shopify".
When there is a purchase or sale, you can add tags to the transaction to track it. For example, when purchasing supplies, you can tag the transaction with the appropriate "materials" tag so you can easily see how much the business is spending on each type of supply. When you make a sale on a particular platform, you can tag the transaction with the appropriate "platforms" tag so you can easily see how much income each platform is generating.
By using tags, you can quickly generate reports to analyze income and expenses. You can generate a report that shows how much you've spent on each type of material over a specific period. You can also generate a report that shows how much income has been generated on each platform over a specific period. These reports can help you identify areas where the account might be overspending or areas where it could be generating more income.
Why Tagging is Essential for QuickBooks Reports
Incorporating tags in your QuickBooks reports is a straightforward but powerful approach to monitoring and analyzing critical business information. It simplifies the process of organizing transactions and generating reports, allowing accountants to save time and concentrate on providing valuable insights to their clients. This, in turn, offers a higher level of analysis and valuable insights into their financials.
By utilizing tags, accountants can gain greater control over their QuickBooks reports, making their accounting processes more streamlined and efficient. Therefore, if you want to enhance your accounting workflows and make the most of QuickBooks, incorporating tags is a wise step.
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Kevin Mitchell, CPA
Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.
References:
What are tags and why should I use them? (2023, January 12). What Are Tags and Why Should I Use Them? https://quickbooks.intuit.com/learn-support/en-us/help-article/accounting-bookkeeping/tags-use/L2JPGqChX_US_en_US
