Tagging is one of the newest features in QuickBooks® Online. You’ve probably noticed it by now! If you haven’t started using it yet or need some guidance, let’s take a look at some of the best practices in creating a smart tagging system to give you and your clients business insights that matter. Check out the second article in this series “QuickBooks Online: Tags vs. Classes, Locations, and Custom Fields.”
What are tags?
Tagging is a labeling technique found in modern software, in everything from Gmail to photo libraries. Tags assign keywords to help users quickly search for documents and transactions. QuickBooks Online users will be delighted to learn that Tagging is now available in your accounting software.
Tags are a flexible way to track and understand cash flow, allowing business owners, accountants, and bookkeepers to search for, and report, on daily activity data they care about.
Tags allow users to gain insights about how their business is doing without having to subscribe to more complex versions of QuickBooks Online. Tags are available in Simple Start, Essentials, Plus, and Advanced.
In some ways, Tags behave similarly to Classes, Locations, and Custom Fields, but they have their own distinct purpose. Tagging is great for tracking important front-of-house business activity such as advertising campaigns, fundraising events, and employee actions.
When should I use tags?
Tags work best on lists of information. Sample scenarios include knowing which ad campaigns are generating orders, which employee filled an order, which vehicle and driver were on a job, and how a package was shipped. Tags are effective for these situations because you have specific lists of campaigns, employees, vehicles, drivers, and shipping methods to choose from.
For example, a veterinarian could create Tags for the breed of animal treated: dogs, cats, birds, rodents, reptiles, or livestock. Because the breeds have nothing to do with the business’ chart of accounts and general ledgers, Tags are a perfect solution.
Additional ideas for effective Tag use include tracking:
- COVID-19 expenses
- Internal projects (“what did the newsletter cost?”)
- Shows and productions
- Church missions
- Fundraising campaigns
- Sales reps
- Referral sources
- Sales Channels
- Ship Via
- Work done by:
- Property/unit #
Why not use classes, locations, and custom fields?
Because tags are available in all versions of QuickBooks Online, they open up additional subscription options. If you only need classes or custom fields, but no other Plus or Advanced features, implementing Tags may be a cost-effective solution for many businesses.
One of the main differences between tagging or classes and locations is that tags can be assigned as needed, where the other options need to be used consistently on every transaction to generate accurate reports. Custom fields are designed for unique data, such as PO#, whereas tags work best for data you pick off a list.
If you’re already using any or all of those features, tags provide yet another dimension of labeling in your file.
Tags are available in income and expense fields, allowing profitability reports on multiple segments.
The current list of forms with tags includes:
- Money in: estimates, invoices, sales receipts, deposits, credit memos, credit card credits, and delayed charges.
- Money out: purchase orders, expenses, checks, bills, bill payments, refund receipts, vendor credits, credit card payments, and delayed credits.
Transfers and journal entries will be available over time. Tags can also be applied via the banking feed and rules. As of this publication, tags are assigned to entire transactions.
Planning your tagging system
Designing tag groups
Tags should, in most cases, be grouped together in categories. In each transaction, you can apply one tag from each group. For example, if you create a group called Employees and add all your staff, and a second group called Vehicles with a list of company delivery trucks, you can tag any transaction with one employee name, a vehicle, or both.
You can create up to 40 tag groups in QuickBooks Online Simple Start through Plus, and unlimited groups in QBO Advanced. Altogether, these groups can contain up to 300 tags in total. One workaround to the 300-tag limit is that you can have unlimited ungrouped tags (also called “flat” tags). Non-grouped tags are really only useful for doing searches and can’t be viewed in reports. When you search on an ungrouped tag, you get a list of all the transactions that contain that tag.
When your tags are in groups, you can then create reports such as a profit & loss report on all the tags in that group at the same time. For example, if you ran a P&L filtered by the employee tag, you would see all income and expense transactions in columns by employee.
Tag groups are multi-purpose. Those employee names can be used in any context where identifying the team member would be helpful, whether it’s who is working on an ad campaign or driving the company car.
Only one tag can be applied from each group. If more than one employee needs to be tagged on a transaction, you would either need multiple groups with the same list, or just list the employees as flat ungrouped tags. Both strategies would impact reporting in different ways and should be considered carefully.
Tags can be also used to temporarily label transactions during analysis. Note that tags can be deleted, but be aware that when you do you will lose that tag’s transaction history. Once they’re gone, they’re gone.
Creating groups and tags
Access the tags list either by choosing Gear > Tags, or Banking > Tags. The tagging center opens, where you can manage your tag groups and get a quick look at income and expense graphs.
Create your groups, assign each one a color, and then add tags to each group.
Assigning Tags to New Transactions
As shown in the invoice above, click in the tags field and start assigning tags. Every time you pick a tag from a color group, that tag is added to the transaction and the list of available Tags winnows down.
Only assign tags that are relevant to that transaction. A transaction may not need any tags, or require a choice from every group. That’s why they’re so accommodating!
Note that Tags are for internal use only. They don’t print on customer invoices and vendor bills.
Tags can also be assigned right from the banking feed and with rules.
Batch assigning tags to existing transactions
To apply Tags to past transactions, head to the Transactions by tag list in the tags center. Open it by clicking the small blue “See all untagged transactions” link. You can also open the transactions by tag list by clicking any of the colored bars in the graphs, and then clear the filter. Click in the checkboxes to the left of transactions you want to tag. Then choose Update Tags, and apply the appropriate labels.
Just as Tags are extremely versatile to use, you have several reporting techniques as well.
In the tagging center, there are two charts at the top for Money In and Money Out. Each has a dropdown arrow to switch between tags, and select your date range.
Transactions by tag
Click on any bar to see the related transactions. Try out the filters and tags buttons to create a variety of lists.
Transaction list by tag group report
While looking at the tagging center, each tag group has a Run Report link. Click it to run a transaction list for any date range grouped by tag.
Filtering reports by tag
Many reports can be organized by tag. For example, a P&L can have columns for your choice of tag groups.
While tagging is a welcome addition to QuickBooks Online, it is still in active development. Some abilities are still limited, but new features and enhancements will appear over time.
Here is my own personal wishlist. Many of these are already in development. Please be sure to submit feedback using the links throughout QuickBooks Online for your favorites, and also contribute your own ideas!
- Make tags inactive. Instead of permanently deleting tags, be able to inactivate them. That way we can tag for time-based events.
- Make tags available through the mobile app. I want to tag on my phone!
- An option to print tags on customer and vendor forms.
- Be able to select more than one tag from a group (this can make reports confusing, though).
- Create a pivot table to examine tag groups on more than one dimension. For example: “How much profit came from Alicia’s spending on Facebook Advertising?”
Tagging is a welcome addition to QuickBooks Online. Its versatility allows business owners, and accounting and bookkeeping professionals to analyze their business activity without interrupting the company’s financial structure.
From profitability to employee productivity to slicing and dicing data, labeling transactions with tags brings deep functionality to our favorite accounting software!
Original article by Alicia Katz Pollock, published on the Firm of the Future Blog
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