Expense categories: choose, add and change them
What expense categories are, the COGS and OpEx types, how to pick the right one, and how to add, rename, retype or delete them.
An expense category is a label for what you spent money on, such as Materials, Insurance or Telecom. You choose one on every bill line. Categories group your spending in the Profit and Loss report, so you can see where the money goes.
COGS and OpEx: the two types
| COGS (cost of goods sold, "direct job cost") | Money spent because of a specific job or sale: materials for a job, a subcontractor, equipment rented for a site. If you did no jobs, you would not spend it. |
|---|---|
| OpEx (operating expenses, "overhead") | Money spent to keep the business running whether or not you have work: software, insurance, office costs, your phone, bank fees, marketing. |
The split matters. Your sales minus COGS is your gross profit: what the work itself earns. Gross profit minus OpEx is your net profit. A line left Uncategorised is counted as overhead, so it can never make your gross profit look better than it is.
The categories you start with
- COGS: Subcontractors, Materials, Equipment Rental, Travel.
- OpEx: Software & Subscriptions, Office & Admin, Professional Fees, Insurance, Marketing, Telecom, Bank & Merchant Fees.
Travel starts as COGS because many trades travel to job sites. If your travel is mostly general business travel, change it to OpEx.
Add a category
- In the menu on the left, choose Vendors.
- Scroll down to the Expense Categories card and choose New Category.
- Under Name, type the category name, for example Fuel.
- Under Cost Type, choose COGS: direct job cost or OpEx: overhead. It starts on OpEx.
- Choose Add Category. The message "Category added" appears and it is in the list, ready to pick on bills.
Change a category
- Change the type: in the Cost Type column, pick COGS or OpEx from the list on that row. It saves at once ("Category updated").
- Rename it or change its type in a form: choose Edit on the row, make the change, then choose Save Changes.
- Changing a category's type moves every past bill line in it as well, so your reports update for all periods, not just from today.
- To move a single bill line to a different category, choose Edit on that bill and pick the category on the line.
Delete a category
Owners and admins can delete a category with the bin icon on its row; other team members do not see the bin.
- Choose the bin icon on the category's row.
- If no bill lines use the category, confirm "Delete this category?". The message "Category deleted" appears.
- If bill lines use it, a window titled Delete Category opens and says how many lines use it.
- Under Move Those Lines To, choose the category those lines should go to. Choose Leave them Uncategorised only if you really want them without a category.
- Choose Delete Category. The lines are moved first, then the category is deleted, and the message says how many lines were moved.
Good to know: Moving lines to another category changes your reports for every period those bills fall in, the same as if they had been recorded in that category from the start. Lines left Uncategorised are counted as overhead.
Choosing the right category
- Ask: would I have spent this if I had no jobs this month? If no, it is COGS. If yes, it is OpEx.
- Be consistent. The same kind of cost should always go in the same category, so months compare fairly.
- Keep the list short. A dozen clear categories are easier to use than fifty.
- Your accountant may want particular categories for your tax return. Ask them once and set the list up to match.
See also
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