QBO Class Tracking: Do I really need it?

Question

Hello Everyone!

We are a husband/wife LLC (single member LLC, disregarded entity) and report our rentals on our personal taxes. We currently have four multi-families in two LLCs (10 tenants). We plan to add more small multi-families, probably in another state.

We are just starting with QuickBooks Online (graduating from Excel and a few shoeboxes). We have a Plus subscription and are using the Locations (Properties) field to track finances by building for tax purposes. We could also use Classes . . . for tracking per tenant . . . or tracking per LLC . . . or ?? One possibility is to use Classes to track per state, once we start purchasing more properties.

However, when I think of the additional time and potential errors when tracking by both Classes and Locations, I ask myself what is the benefit to Classes? I honestly can't think of one actual benefit. Do I really care whether the fridge was purchased for tenant 1 versus tenant 2? If we have a single LLC per building . . . . then there is no need to track LLCs. However, the internet clearly states I should be using Classes to track per tenant.

I certainly understand that more details captured on the front end provides more detailed account reporting. But, I want to balance how much I will actually use the data versus how much time it takes to capture it. Please share your thoughts and feedback. Convince me I'm wrong to ignore Classes! :)

Dan V. · Answer

@Heather Miner It is recommended to have different QBO for each entity but if you prefer to do it both in one QBO account, I would setup the LLCs as "Location" and the properties as "Class" and the tenants as customers. You can breakdown further by creating a subclass for the units.

The Location feature has a limitation, you cannot use it per line, that means when you happen to pay something for multiple properties, you will only be able to assign the whole transaction into one location. So it's recommended to use the Class tracking for the properties instead.

Quickbooks is a good software, if it is setup properly for your business model. Things also need to be entered in a certain way in order for the setup to work correctly.

Heather Miner · Answer

@Paul Allen Good catch! In my case, my computer is so old no one would pay me for it, but I will keep that in mind when it needs to be replaced.

Heather Miner · Answer

@Andrew Polsky It sounds like you have QBO Essentials? That sounds like a great workaround if you don't have the class and location fields available in the Plus version. I do have Plus and I do track everything by property ("Location"). . . I also have the Class field available to track another entity. I think I may use it to separate properties by state . . . as this may help with filing state taxes (we're currently gearing up for our first out of state acquisition!). But, your suggestion would help save on QBO subscription costs! :)

Andrew Polsky · Answer

I'm late to the conversation but the way I track multiple properties on qbo is by creating a "customer" and tagging all my expenses with the appropriate "customer", which for my purposes is actually the property.  This is a workaround to the jobbing problem that doesn't have a solution in QBO but does on the desktop version (from what I understand, I've never used the desktop program).  You use the same expense accounts for all the properties.  When you run a P&L by customer you actually get a P&L for each property.  It's a pretty awesome workaround.

Paul Allen · Answer

The computer upon which you are doing the accounting?  :)

Heather Miner · Answer

@Dan Villanueva Thanks for the feedback. I see the difference between Class and Location (categorize entire transaction only versus per line), but I was trying to think of something I've paid that has covered more than one building. I'll keep this concept in mind as I finish 2017 taxes . . . if any transaction covers multiple buildings, I'll find out soon. :)

Do you track subclass by units? If so, do you make any business decisions based on per unit comparisons?

I'm curious, why would it be recommended to have a different QBO file for each entity (LLC?)? Since I'm reporting on my personal taxes and going forward one LLC = one building . . . I don't see any benefit to multiple QBO subscriptions. Maybe separate files would be more applicable to other folks who have a different tax status. If you see anything I am overlooking, let me know.

Your last two sentences summarize my goal for 2018! :)

Gordon French · Answer

Its basically what I do for a living. The rentals are my retirement. I am a senior developer specializing in point of sales and accounting application for internet marketers. I didn't like the stuff I found online. But for some reason I hate quickbooks and the way it is tied to a bank account. I don't want to track every transaction on all my accounts.

I know some people who are content with it, so I hope it works great for you.

Heather Miner · Answer

@Gordon French Thanks for sharing your (unsuccessful) approach and what ultimately works for you. That's cool that you wrote your own program.

Gordon French · Answer

If your the accountant and don't want to use the classes then I see no reason to use them. I had each house set up as a company and then used the classes for the tax categories. That was a mess

I then tried making a class for each property and one company. This was much better. I want to see the year ends for each property to see what houses are working the best. It gives me more info when buying the next one.

But I am sure there is someone better to answer since I trashed it all and wrote my own accounting program. I truly hate quickbooks as a developer and as a property manager.

Heather Miner · Answer

Thanks @Gordon French! Yeah, I think there are other software programs that may be better customized to our industry, but for ease of helping family members also using some version of QB I decided to join the crowd.

My accountant is . . . me! I like knowing the ins and outs of this business so I tend to learn as much as I can before outsourcing.

QBO Class Tracking: Do I really need it?

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