Cloud Accounting QuickBooks

QuickBooks Online Introduces Bank Rules

Written by Greg Lam

QuickBooks Online has add a new feature called Rules (or Bank Rules), which allows you to set up your own conditions for categorizing bank and credit card transactions. Previously, the best QuickBooks Online could do was enter the last known transaction for a contact. This can work well in certain situations, but there’s way too much variability in transactions for this to work all the time. That’s why setting up rules can be an important time saver, especially for businesses with predictable transactions.

QuickBooks Online Bank Rules Video

The video provides a walk through of using QuickBooks Online Bank Rules and goes through a few different scenarios, reveals a few tips, and shows a couple bugs.

Details

You can find the bank rules if you go to Transactions > Banking and then click on the Update drop-down box and choose Manage Rules.

QuickBooks Online Bank Rules

Then you click on New Rule.

New Rule

Here’s the Rules page.

QuickBooks Online Bank Rules page

You have the following fields:

  • Rule Name: This is the name that will show up when a transaction is automatically filled out for your based on the rule. It’s good to be descriptive with the rule name so that you know exactly what rule was applied.
  • For: You can choose from Money Out (expenses) or Money In (income).
  • In: This is where you choose the bank or credit card account to apply the rule to. Alternatively, you can have the rule apply to any bank account.
  • Conditions: When you choose a condition, ALL conditions must be met.
    • Description: This is the description associated with the transaction. You can choose from:
      • Contains
      • Is exactly
      • Doesn’t contain
    • Bank text: This is also some type of description associated with the transaction. It’s unclear when you would use Description and when you’d use Bank Text. In my tests, I found that Bank Text works best. I think it searches all text found in the bank feed. You can choose from:
      • Contains
      • Doesn’t contain
    • Amount: This is the dollar amount of the transaction. You can choose from:
      • Equals
      • Is greater than
      • Is less than
      • Doesn’t equal
  • Payee: This is the Customer or Vendor.
  • Category: This is the Account you’ll attribute the transaction to.
  • Class: This is the Class tracking category
  • Location: This is the Location tracking category
  • Memo: You can use this to leave a memo on the transaction.

Something that you’ won’t see right away is the option to add multiple line items by amount or percentage. If you click on the Split Button you’ll see the option to split the transaction based on allocating percentages to variouses categories.

Bank Rules splits

When you click on Amount from the drop down box, you can choose one or many fixed amounts and then the remainder will be attributed to a single account.

Bank Rules splits

Use Cases

Bank Fees

A simple use case is to automatically categorize bank fees. This is what the rule would look like.

Bank Rules conditions

All I’m looking for in this rule is if the Description contains “Bank of America” and the Amount is less than $50. If the amount were over $50, I think it’s probably not a regular fee (or at least I hope not!)

Bank Loans with Variable Interest

This is an example where rules can really work nicely, and is something that QBO’s internal categorization rules can’t account for, which is for a loan with principal plus interest.

Bank Rules and Loans

As you can see, I’ve set it up so that it’s looking for an amount between $250 and $350 and the Description contains “bank loan #258”. Furthermore, I’ve allocated $250.00 to the principal (Loan Shark Loan) and the rest to interest (Loan Interst). So, if the interest were calculated based on a variable rate like prime + 2%, this formula would easily handle it.

Note: Be careful about choosing Description or Bank Text. Bank Text searches all the text found in the transaction description, while Description only searches the “cleaned up” payee name (ex: Staples #4326 would be cleaned up to only show Staples).

Other Scenarios

There’s of course, many scenarios that can rules can be used for. A few off-the-top-of-my-head scenarios would be:

  • A transaction that has multiple line items (or in other words, a split).
  • A transaction where you need to control the total $ amount. For example, perhaps you only want to categorize transactions under $500 or $1,000 as expenses, since amounts over that may be considered an asset.
  • Likewise, a transaction from a payee where a specific amount can be categorized a certain way. For example, you may receive parking tickets and business licenses from a city, but you know that licenses are $97.00, so you can categorize any transaction with that dollar amount as a license expense, whereas all other transactions are parking fines.
  • A transaction whose description would change based on the type of transaction. For example, perhaps a purchase of an app from Google will contain “App” in the description, whereas payment for adwords would contain “Adwords”. App would be categorized as software expense, whereas adwords would be categorized as advertising and marketing.

Conclusion

I think bank rules can be a great time saver. What I’m a little unsure of is how stable it is. There was a bug where it didn’t save the payee properly and another bug where the wrong description was being displayed (watch the video to see the bugs in action). It’s also brand new, so it could be just a matter of time for these little bugs to get squashed.

Something that I do feel is missing is that there’s not enough flexibility in the rules. I would love to be able to choose among ALL the conditions or ANY of the conditions. I know that with franchises (like Staples or Starbucks) the name may display different on bank or credit card statements, depending on the branch visited. Like if you were buying something from Staples, it might say STPLS as an abbreviation or it might say the whole name like STAPLES. I’d be nice to set up the rule to accept either name. This would be similar to how aliases work with the desktop reconciliation.

Overall, it’s nice to see this new functionality, and I hope QBO still spends some time after this release to fine tune it some more.

About the author

Greg Lam

Greg Lam is a passionate small business guy who loves technology and automation. He holds a BBA from Simon Fraser University, Canada. He's a Certified QuickBooks ProAdvisor, Certified Xero Partner, and Kashoo MVP. His business interests are focused on online accounting and how it can be used to streamline and automate a company’s accounting processes. He currently lives in Tokyo, Japan.

Greg operates the Small Biz Doer website, an "Entrepreneur's Guide to Small Biz Bookkeeping." He is the author of Online Accounting Software: Finding the Right Match, published by The Sleeter Group.

Connect with Greg on Twitter, Google Plus, YouTube, LinkedIn, or Facebook.

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