In this video, you’re going to learn how to categorize your transactions using QuickBooks Online and reconcile your books as quickly as possible. Let’s dive in. Sign into QBO and make sure the options on the left side look like mine. If they don’t, check that you’re in business view by clicking on the gear icon in the top right and switching into business view if you need to. We’re here to categorize some transactions. So, let’s exit out of this, hover over the transactions menu and then click on bank transactions. Now, if you’ve already connected your bank and credit card, so you’ve got the transactions flowing in, skip to the next chapter. Otherwise, stick with me and I’ll show you exactly how to do that. First, click on connect account. Next, type in the name of your bank and then if you see it in the search results, click it. If you don’t see it, chances are your bank supports some sort of transaction level export. I’ll show you how to import that file in just a moment. Let’s keep going. Click continue and then type in your username and password associated with your bank account. And don’t worry, your password is not shared with QuickBooks Online. Once you click login and go through a couple of bank specific steps, your transactions will start showing up in QBO. For this demo though, let’s go back and add some transactions manually. Exit out of this window, then click on the X in the top right. We’re back on the main transactions page. Click on upload transactions. Now you can use these steps to get your transactions from your bank or credit card, or you can follow along with me and use the files linked in the description below. Let’s check out the bank transactions file first. This is a pretty simple format adapted from a real bank’s export file. You could even make this by hand if you needed to. All you need are four columns. You need a description column. You need to know when the transaction was posted and you need a credit and a debit column. You could even collapse these two columns into one and just use a negative sign for the debits. Okay, we’re back in QuickBooks, so let’s upload these transactions. Drag and drop the bank transactions file into the file upload area and then click continue. QuickBooks needs to know which account to associate these transactions with. But this is a new account. Now if there’s no other way for you to get transactions in and you have to do this manually, I’d name the account the name of the bank plus the last four of the account number. Then click on the add button. Change this to a checking account and then click on save and close. Then click continue. QuickBooks needs your help to interpret the data. So, let’s go line by line and make sure that these options are correct. Okay, is the first row in your file a header? Yes. How many columns show amounts? Well, we have the credit and the debit column, so that’s two columns. Okay, what’s the date format? Well, I’m in the United States, so it’s this first one. Next, let’s sort out the column mapping. These all look correct. Posted date, description, money received as credit, money spent as debit. So, let’s click continue. Let’s select all the transactions to import and then click continue. Click yes to confirm. The import is done, so let’s look at what we got. Okay, I know you want to look at these transactions, but real quick, I’m just going to get the credit card transactions in. You can repeat the same process by clicking on the drop-down arrow and then clicking on upload from file. Make sure when you’re uploading that you select account type equals credit card instead of bank. Your transaction page should now look like this. Let’s go through these one by one. Let’s start with transaction number one. Click anywhere on the line item to open it up. What do you say we make all of these options as easy to understand as possible? QuickBooks says it’s a match, which is cool, but not like Tinder match cool. What this means is QuickBooks already has a record of this $500 coming into the system. This could be because you manually recorded a deposit or in this case because there’s an open invoice for the same amount. Now, if there are multiple open invoices with the same amount, you have to make sure you’re matching the right one. But this one’s simple, so click match and we’re done with it. Next is number two. If you use QuickBooks for invoicing, you got to pay into it their cut. Notice that we’re in categorize view here, which means at the very least we need a category and I strongly recommend you add a vendor. That’s so you can run reports at the end of the month or the year on how much you’re paying each vendor. QuickBooks makes it easy and suggests that you add into it. Now, QuickBooks allows you to add a lot of information about a vendor, but unless you need any of it for your records, I recommend you just stick with the default. So, we’ll click save. Now let’s find the right category for this expense. Click on the category dropdown. We’re looking for something like payment processing fees. Now this can be really painful because all these expense categories have so many nuances associated with them. Now you and I might think of this as a payment processing fee, but when you type that into search, you can’t find a category with that description. So let me show you a little life hack so you hopefully never end up on the IRS website trying to decode all these categories. First, clear out the search field so you see all the categories again. Next, select all the categories in the list and then press Ctrl C to copy them. Open a new tab and go to chatgpt.com. ChatGPT will help us categorize this expense with the following prompt. I’ll break this down very quickly for you. Because ChatGPT doesn’t have all the context, we’re asking for its top three recommendations. And then for each recommendation, we’re asking for a confidence percentage and a list of pros and cons. And this is the key point. We’re going to constrain its options to the expense categories that we just copied. So, I’ll add that list in by holding Shift and pressing Enter twice, pasting it in, and let’s watch the magic happen. Scrolling down, let’s see the recommendation. Let’s go up to the table view to make it easy to compare and contrast. And here’s what we’ve got. Looks like commissions and fees was the highest confidence, but it doesn’t capture all nuances of payment processing like merchant account fees does. So, let’s go back and in the category list, we can type merchant account fees, select it, and then press confirm. All right, onto the next one. This is for a landscaping service that takes care of the grounds. Repairs and maintenance is a good default category. You could also use contract labor, but we’ll stick with the default. Let’s start just like before and add Joe’s Landscaping as a vendor. We’ll add their company name just like last time. And say you need to issue a 1099 at the end of the year to Joe’s Landscaping. You’ll scroll down all the way to additional info and check the box that says track payments for 1099. Then click save. Joe’s Landscaping comes to the property pretty often, so let’s tell QuickBooks to automatically categorize any transaction we see from Joe’s. Click on the create rule link below. Let’s come back to the rule name after we cover the rule itself, because I’ve got a trick for you. Rules are in the format of if I see a transaction like this, then do this. So, in this case, if we’ve got a bank account transaction with a description contains Joe’s Landscaping, then we’ll automatically assign it to repairs and maintenance and assign the vendor to Joe’s Landscaping. Note that you can also add tags and change the bank memo line if you like. Now let’s go back up to the name. Here’s the trick. You should know what a rule does by its name, so here’s my format. I’ll type D for description and then type in Joe’s Landscaping. This represents the if part of the rule. Then I’ll type a little arrow. Then I’ll type a V because we’re setting the vendor and then a C because we’re setting the category to repairs and maintenance. One last thing before we close out this rule. Scroll down and look at the auto confirm toggle switch. If you leave this on any transaction which matches this rule will be auto categorized and you won’t see it in the transaction view here. And if you turn it off, the rule will still be applied, but you’ll have to confirm it from this view. Let’s leave it off and click save. See how this rule icon showed up on both of these transactions. Now you get a chance to confirm them both. We’ll check that everything looks good on the other one and then click confirm here too. All right, one more on this page. Now QuickBooks thinks this is a credit card payment because we uploaded a transaction for the credit card account which had the same amount. So, when QuickBooks does this, just make sure you’re selecting the right credit card here. Then click confirm and we’re all done here. Let’s move on to the credit card transactions. First, I’ve got a little exercise for those of you following along. You’ll notice we have a weekly order of flour from Hope Mills. Do you remember how to create a rule so that all these transactions get categorized at once? Pause the video and give it a shot. Or if you just want to enjoy the show, let’s keep trucking along. Click on the first transaction and then click on create rule. Remember our naming convention description is Hope and then we’re going to set the vendor and set the category. But the category here isn’t contributions to charities. Since we’re a donut shop, this should be something like cost of goods sold. Supplies and materials is a good subcategory to choose. We’ll also add a vendor name. Like before, we’ll click add new. Type in Hope Mills here and then click save. Then let’s go back to the name and type in the category supplies and materials COGS. This time we’ll let QuickBooks handle this one automatically. So, click the auto confirm switch and click save. Notice how those four transactions just went away. This next transaction is a subscription to ChatGPT. One thing I haven’t done so far is to include receipts with my expenses. So let me walk you through your options here. Click on the receipts tab at the top. You can upload receipts directly from your computer or from Google Drive. But let’s do the third option, so we can forward receipts and invoices directly from our email. Here you set up a special email address that you can forward all of your receipts to. Then I’ll select this email address for later and click next. Looks good to me. Now make sure you understand that the only people who can send receipts to this email address are registered users on this QuickBooks account. If you need multiple people to email receipts, this might bump you up a subscription tier or two. If you’re good with that, click done. Let’s get this invoice in. I’ll tab over to my email and then click on the email that has the invoice attached. Then I’ll click forward. I’ll paste the QBO docs email address and then click send. Back in QuickBooks Online, we’ll wait for about a minute and it should show up. Okay. Receipt number one is in and look how QuickBooks has parsed the amount out of the invoice PDF. Now, before we connect this receipt with the original transaction, let’s import another receipt for the next transaction of Hertz. This receipt is a paper receipt, so I am going to show you how to use the QuickBooks Online app. Go ahead and grab your phone and open up the Play Store or the App Store. What you’re looking for is the QuickBooks accounting app. Download it and open it up. Once you log in, you’re looking for the snap receipt quick action. Tap on it to open up your camera. Now I’ve got my Hertz receipt here. As you can see, it tries to auto detect the receipt. And once it’s detected, you can tap on the circle button at the bottom. It will be captured. You can then tap on the photo and tap on use this photo. The receipts going to get uploaded and we’ll see it in the online version of QuickBooks in just a minute. Now, if we go back to receipts, we can see both of them uploaded. Our next steps are back in the transactions log. Now you should see that QBO automatically associated the receipt that we just uploaded with this Hertz transaction. If you don’t see that, double check that the payment date is set on the receipt. We’ll add Hertz as a vendor here, click save, and then click confirm. Now QBO did not automatically match the ChatGPT receipt, so we’ll have to do it by hand. First, add OpenAI as a vendor, just like we’ve done in the past, then click save. The category of memberships and subscriptions is fine here, so let’s click on confirm. But wait, what about the receipt? Well, I don’t really like this model, but if you click on receipts now, you’ll see that QBO has identified the transaction after we categorized it. You can click on match to confirm it. Let’s head back to the transactions log and finish these up. The next three expenses are my bad. I accidentally put personal expenses on the company card. I just couldn’t stay away from those cookies. Fortunately, I can categorize them all as personal expenses at the same time, just by checking each row, then clicking on the edit button up above. So, this chart of accounts that I’m working with doesn’t have a personal expense option, so I’m going to add one called owner’s draw. Click on the add new button, change the account type to equity and the detail type to owner’s equity, and then click save and close. Now, just a caveat, this is not a chart of accounts tutorial, so if you are working with an accountant or bookkeeper, I get their help here and figure out the right category for you. Let’s also change the transaction type to expense. There are different vendors here, so let’s apply our changes by clicking apply and then handling each one one by one. First, let’s add Amazon as a vendor. Click save just like before. This one looks good, so we’ll click confirm. Next, we’ll go to the Kevin Cookie Company transactions. We’ll add Kevin Cookie Company as a vendor, just like before, and then click on save. Now, did you notice the bug here? Even though we applied owner’s draw, it’s still recategorized it to meals. So, let’s change that and then click confirm. Go to the next transaction. Kevin Cookie Company has already been selected as the vendor, so let’s just add owners draw as the category and click confirm. Okay, we are down to our final transaction. First, let’s add the vendor. Now this time, QBO thinks that the contact type is a customer because it’s money coming in, not going out. But we know that this is a refund from a vendor. So, make sure you change the contact type to vendor before adding the company name. Then click save. For category, let’s put this under commissions and fees, since that’s typically what you’d see from a recruiting agency. You might also put a subcategory under there specifically for recruiting. Finally, click confirm. I know after that you want to put your feet up and get a glass of lemonade, but we got two more things to do. First, let’s head over to the report section and check your work. Click on profit and loss. This is a good way to spot check whether you have made any sort of mistakes categorizing expenses. Unfortunately, it looks like we’re not even covering our costs right now. And I can’t even blame the accounting. The one thing to check is negatives where positives should be. So, on this commissions and fees line item, we know this was a refund, so we’re good. But that might not always be the case. This all looks good. Last thing, let’s go back to the transactions tab. I know it’s scary, but we got one more thing to do, and that is reconciling your books with what your credit card statement and your bank statement say. The way this works is that you pull your latest bank statement and then you enter in the ending balance and ending date from that statement. So, for example, if you had a statement which ended on the second and the ending balance was this. Then you’ve got a bit of a problem. But if we click start reconciling, we can see that our books actually match this balance. This page makes sure that you have all the transactions in QuickBooks up to the statement date that you just put in. Let me make this clear by walking through this equation at the top. We’re trying to make the right side equal zero. This number is what you put in on the last page. And this number is the sum of all the payments and the deposits since the last time you reconciled this account. Since we just created this account in this video with a beginning balance of zero, this value is zero. In most cases, if you’re not hitting zero, you’re missing a transaction. Click finish now and your bank account is reconciled. I’m going to let you reconcile the credit card account because I’ve got to go fix my cashflow problems. Now, if you want to learn more about QuickBooks Online, check out our full tutorial here. And let me know in the comments how much faster you are as a result of this tutorial.