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The Pitfalls of Auto-Add Rules in QuickBooks Online

There are certain features of QuickBooks Online (QBO) I love – the ability to hook up your bank account so your transactions import automatically, ease of reporting, ease of collaboration, etc.

I even love the Rules function in the banking section, which categorize certain types of transactions based on criteria you set, such as keywords, amounts, or payees. Examples would be: when money comes in from Square, it should go to Sales Income; when money goes out to Verizon, it should go to Phone expenses; when a check goes out in the amount of $1000, it should go to Rental Expense. It can really be a time-save.

I especially love setting these up for clients, because I have multiple and can’t possibly remember what type of vendor to match with what type of expense in every file.

What I don’t like about Rules – and what I remove from every client’s books during a cleanup – is the auto-add feature, which automatically categorizes it and accepts it into the bank feed. And because it’s me, I’m going to tell you why.

  1. Inaccurate Categorization

The first and most significant drawback of auto-add rules in QBO is the potential for inaccurate categorization of your transactions. Sometimes rules can be too general or imprecise, leading to transactions being sorted into the wrong categories. This can result in financial reports that don’t reflect your actual financial status, potentially causing confusion and errors in your records.

For example, if you set transactions from Amazon to office supplies, but then you purchase a piece of equipment for your business (because after all, Amazon has everything), it will be automatically categorized as office supplies when really it should show up in equipment.

This may not seem like a big deal, but having it wrong makes your reports inaccurate. And in the example above, you might be missing categorizing an asset that depreciates – and depreciation is something you can deduct on your taxes. AKA, saving you $$$.

  1. Limited Customization

Rules have limitations when it comes to customization. While you can create rules based on simple criteria, they may not capture the complexity of your financial transactions. Businesses often have unique or irregular expenses that can’t be adequately addressed with automated rules alone. This lack of customization can hinder your ability to accurately track and analyze your finances.

  1. Overlooking Transaction Details

Another drawback of relying solely on auto-add rules is that it can encourage businesses to overlook the details of their financial transactions. Since the rules automatically categorize transactions, it’s easy to become complacent and not review each transaction thoroughly. This can result in missing important information, such as tax-related details, discounts, or reimbursements, which can have significant financial implications.

  1. Difficulty in Handling Exceptions

Not all transactions fit neatly into predefined categories, and auto-add rules may struggle to handle exceptions effectively. When an unusual or one-time transaction occurs, it can disrupt the automated categorization process, causing confusion and requiring manual adjustments. This can be time-consuming and frustrating, especially if you’re relying heavily on auto-add rules for transaction management.

  1. Risk of Overlooking Errors

Auto-add rules are not infallible, and errors can occur in the setup or execution of these rules. If you don’t regularly review and adjust your rules, you may not notice these errors until they have already caused significant issues in your financial records. Manual oversight is essential to catch and correct any errors that may arise.

In Summary – boo to auto-adds

While auto-add rules in QuickBooks Online can be a valuable tool for streamlining your financial workflow, they should not be relied upon as the sole method for managing your transactions. It’s crucial to strike a balance between automation and manual oversight. Regularly reviewing and adjusting your rules, categorizing transactions, and paying attention to the finer details of your financial data will help you maintain accurate and reliable financial records. By avoiding the pitfalls of over-reliance on auto-add rules, you can ensure that your financial management remains efficient and error-free.

How to disable them

In your QBO file, go to Banking > Rules.
For any rules that have the green box with the plus sign in it, click the Edit button all the way to the right.
Scroll down to the bottom of the rule and toggle the Auto-Add feature to off.
Save, and you’re done!