(Using Departments for Discretionary Expenses in QBO) Part 1 - Setting Up a Department

Video

Written Instructions

These steps walk you through setting up a separate “Discretionary” department (using Locations) so you can tag and report on discretionary expenses separately from normal operating expenses.

Step 1: Turn On Location (Department) Tracking

1. In QuickBooks Online, click the Settings icon (gear icon).

2. Select Account and settings under Your Company.

3. Go to the Advanced tab.

4. Find the section for Categories (or tracking options).

5. Turn on Track locations.

6. When prompted, select Department as the tracking option.

7. Click Save, then click Done to return to the main screen.

Step 2: Create a “Discretionary” Location

1. Click the Settings icon again.

2. Under Lists, select All lists.

3. Choose Locations.

4. Confirm that your location list is blank.

   • If you already have locations set up, this method may not be the best fit.

   • In that case, consider using Classes instead to track discretionary expenses.

5. Click New.

6. Enter Discretionary as the location name.

7. Leave all other checkboxes unchecked (they are intended for physical locations).

8. Click Save.

You now have a Discretionary location that can be assigned to transactions.

Step 3: Assign the Discretionary Location to an Expense

1. Go to Expenses.

2. Open Expense transactions.

3. Select an expense you consider discretionary.

4. In the Location / Department field, choose Discretionary.

5. Click Save and close.

   • Changes do not save automatically, so be sure to save.

Step 4: Show the Location Column on the Expenses Screen (Optional but Recommended)

1. While viewing the expense list, click the Settings icon on the table.

2. Select Location.

3. This adds a Location column so you can quickly see which expenses are marked as discretionary and which are not.

Next Step: How to use rules & recurring transactions to automatically configure department for new transactions