How to create rules in QuickBooks Online?

Key Takeaways

• Rules are a QuickBooks Online tool that can be used to speed up the process of categorizing transactions. 
• The fastest and easiest way to create new Rules is by choosing an existing transaction from the bank feed. 
• Transactions meeting auto-add rule criteria are automatically added to the books without needing your review or approval. 
• Be careful about using the auto-add feature or creating rules from QuickBooks suggestions. It may lead to inaccuracies in your financial reports.

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Categorizing transactions in QuickBooks Online on a regular basis is an important part of managing your business finances. Your books must be up to date in order to know how your business is doing and make important decisions throughout the year. When you have several other tasks on your to-do list though, it may quickly start to feel like a chore. Creating Rules makes this process much more efficient, but there are some pitfalls to be aware of before you start using the feature. 

What are Rules?

Rules are instructions created in QuickBooks Online that help to automate the process of categorizing and managing your transactions. The more Rules that are utilized, the better QuickBooks Online gets at categorizing transactions to the point where it can even add specific details like the payee or class. This can drastically simplify the categorization process while also ensuring income and expenses are consistently assigned to accounts. 

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How are Rules Created?

The easiest way to create a new Rule is by going to the bank feed to start with a transaction that already exists. You can get to the bank feed by hovering over Transactions in the left panel and selecting Bank transactions. Click on a transaction that is still For review since Rules cannot be created from transactions that have been already been categorized or excluded.

When you click on a transaction, an expanded view will open. At the bottom, there is an option to Create a rule. You will need to name the rule and specify whether it applies to Money in or Money out transactions in a specific account (or All bank accounts). 

Next, tell QuickBooks whether the conditions for this new rule will apply to all or any. In other words, does the transaction just need to meet any one of the conditions set or does it need to meet all of them? You can then add the conditions so QuickBooks knows how to categorize similar transactions a particular way. 

For example, let's say you buy office supplies from Office Depot on a regular basis. You may decide to create a rule so that all Office Depot expense transactions are being categorized the same way. After choosing the transaction you want to create a rule from, you would name it and apply it to Money out transactions in All bank accounts. Then you can add conditions such as: 

• [Bank text] [contains] Office Depot
• [Amount] [Is less than] $100

Note that you can also choose from other options for the conditions by clicking the dropdowns. 

After you specify the criteria, tell QuickBooks what to do with these transactions. Use the drop-down options to choose the Transaction type, Category, Payee, and Tags if you use them. Whenever any new transactions come into the bank feed meeting the conditions you set, QuickBooks will apply the appropriate Rule. 

You will know when a Rule is being applied to transactions for review in the bank feed because it will say so in green text under the Category or Match column. You can also see when a Rule has been applied to categorized transactions. 

Lastly, leave Auto-add toggled on if you want QuickBooks to automatically add the transactions without needing your review. Toggle this off if you want QuickBooks to fill in the transaction details and category while still having to manually review. 

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How to manage Rules

There are two other ways to access Rules. One is by clicking the settings gear at the top right of the screen and choosing Rules under the Lists column. You can also access it from the bank transactions feed by selecting the Rules header. From here you can create new Rules, copy Rules, view previously saved Rules, edit, delete, bulk turn off auto-add, or disable Rules. Any rules that no longer work will be highlighted in red.

What to Look Out for When Using Rules

Although Rules can save you a significant amount of time and energy, they can also do more harm than good if not used correctly. You should only create an auto-add rule if you are sure that you want each transaction meeting the conditions set to be automatically categorized. These transactions will not appear in the bank feed anymore for your review, which means transactions could be categorized or accepted improperly. It is best to start with straightforward, consistent transactions like office utilities or gas if you are not yet comfortable with auto-add rules. A good way to start is by creating rules, but not having them auto-add so that you can easily review and still see all of your transactions. If you use the auto-add feature, you can review these transactions within your financial statements or in the categorized tab in the bank feed.

Beware that QuickBooks Online does pick up on patterns from the way you categorize your transactions in the bank feed. Every so often, you may encounter a pop up asking whether you want to create a Rule from one of your transactions. You should carefully review any Rule that QuickBooks suggests to verify everything is correct before accepting it. Most the time it is better to just create rules on your own instead of using QuickBooks suggestions. It is possible that changes will need to be made to the conditions, transaction type, or something else in order for the Rule to function properly. 

Troubleshooting Rules

If you notice that your Rules are not being applied, you should double check the conditions you have set up. It is possible you may have created a rule based on Bank text when you meant to create one based on Description (or the other way around). Bank text is usually better than using description.

When you choose bank text, you are telling QuickBooks to look for the same information it receives from the bank in the bank memo. When you choose description, QuickBooks will look for a simplified version of the bank text. Having these mixed up prevents QuickBooks from recognizing transactions and applying the appropriate Rule.

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If you need assistance with bookkeeping for your small business, and your books are on the cash-basis within QuickBooks Online, reach out to us! We'd love to help. We specialize in service businesses and non-profits.