Does your nonprofit organization regularly do business with the same donors, customers or vendors? Are these transactions usually the same? If so, the “bank rule” function in QuickBooks Online may help you save time and reduce categorization errors. Bank rules automate the categorization of transactions in the bank feed of QBO, including assigning the transaction type, category, payee, class, and location.
There are a couple of different ways to create bank rules in QuickBooks Online. The simplest way to begin is by navigating to the Rules tab on the Banking page.
How to Create a Bank Rule
1. Select New Rule.
2. Give the rule a name. Be clear and concise! Rule names cannot include special characters like colons, semicolons, forward slashes, apostrophes, asterisks, or commas.
3. Apply the rule to a particular type of transaction. This is the criteria QBO will use to categorize the transaction. Select either “Money in” or “Money out” and the bank account to which the rule applies. If you have multiple bank accounts and want the rule to apply to all accounts, select “All Bank Accounts.”
4. Use the additional dropdown menus to set the criteria for the rule. This step is critical to ensure accurate categorization. There are three options:
Description: This comes from the data that QBO pulls from the bank feed or downloaded transactions. This is the broadest, most straightforward option for applying rules. For example, if your organization makes a monthly payment to GoDaddy, you would select Description > Contains > “GoDaddy.” The rule will then apply to any transaction that contains the word “GoDaddy.” Alternatively, you can apply the rule to any transaction that doesn’t contain that word. If you have vendors with similar words in their name, you can select exactly and the rule will only apply to vendors with the exact name as entered in the description.
Bank Text: This is the exact text that is on the bank feed or bank statement. This option is more specific, so not used as often.
Amount: This is the amount of a transaction, and is rarely used unless combined with additional criteria such as Description or Bank Text. If you are using this option, it’s best to add additional criteria as well. Select “Add a condition” to further narrow down the criteria for applying this rule.
5. Set the transaction type from the dropdown menu. These options vary depending upon whether the transaction is “Money in” or “Money out.”
6. Select the category. This step is also very important as it determines where the transaction will be allocated with your chart of accounts. If necessary, you can choose to split a single transaction between multiple accounts. If you need to add a class code or location, click “Assign more” at the bottom of this section.
7. Select the vendor/payee or customer/donor. When creating a new rule, always add a vendor/payee or customer/donor. The only way to know how much you paid a vendor or received from a customer throughout the year is by ensuring they are tied to each transaction.
8. Choose if you would like QBO to auto-add the transaction. If the auto-add feature is turned on, the transaction will be automatically added to the bank register without your review. If you would like to review transactions before they are added to your bank register, turn this feature off. The latter option is recommended when first setting up rules. Your review of the transaction will ensure the rule is being applied correctly. Once you are confident the rule is working correctly, the auto-add feature can be toggled on.
9. Save your new rule.
You can also create rules when you are reviewing transactions from the import/bank feed. Simply open the transaction and select “Create a rule” from the bottom of the page. When you add transactions with the same vendor/category multiple times, QBO will typically ask you if you want to create a rule. In this instance, some of the data will auto-populate in the rule and you can edit as needed.
When you are finished, you can view all of your rules at once by clicking on the Rules tab on the Banking page in QBO. It may take some time to establish the criteria and conditions that work best for your organization. But once your rules are established, you’ll save a significant amount of time in reviewing and accepting recurring transactions. This will help to quickly reconcile your accounts and ensure the accurate recording of transactions.