Resolving uncategorized expenses can be one of the biggest headaches in all of bookkeeping. Tracking them down, going back and forth with clients to get the answers you need, and resolving them one by one can be incredibly tedious. Let’s explore some of the best ways to speed up the process so you can focus on providing more valuable services to your clients.

What Are Uncategorized Expenses?

Uncategorized expenses are expenses that appear in bookkeeping or accounting software but haven’t yet been matched with a category from the chart of accounts, like office supplies, travel, or direct labor. While they may be immaterial individually, uncategorized expenses can quickly become significant in the aggregate, adding an element of uncertainty to your records that must be resolved before you can close the books.

The Soul-Crushing Time Waste of Manually Categorizing Expenses in QBO and Xero

Accounting software like QuickBooks Online (QBO) and Xero can streamline some routine aspects of bookkeeping, but they’re not very efficient when it comes to manual categorization of expenses. Even if you follow a month-end close, minimizing the time uncategorized expenses have to accumulate, it can take anywhere from several hours to a few business days to resolve them each period, depending on transaction volume and complexity. For one thing, QBO and Xero put the onus on the accountant to seek out and correct uncategorized transactions instead of flagging them when they occur.  They often fly under the radar until you run a profit and loss (P&L) report only to discover thousands of dollars in uncategorized costs. Once identified, you have to drill down into each expense transaction and reassign it individually. Even when they're multiples of the same transaction type—like a recurring subscription—you can’t adjust them in batches. The process becomes even more time-consuming when the proper categories for the expenses aren’t immediately apparent, and you have to cross-reference your supporting documents to try and figure them out. In the worst-case scenario, you may have to ask your client for help. That’s often the most significant delay of all since you have to:
  • Draft a professional email explaining the issue
  • Wait for a response, which isn’t always prompt
  • Follow up if your client takes too long to answer
  • Clarify incomplete responses when you need more details
  • And more often than not, edit client spreadsheets on their behalf
As powerful as QBO and Xero can be, they’re just not well-suited to manually resolving unknown transactions. If you do all your bookkeeping work in those tools, you’re sure to spend more time on the process than you’d like.

How To Speed Up Expense Categorization and Reconciliation

Let’s explore how you can use software like Keeper to speed up the expense categorization and reconciliation process, shorten your month-end close, and free up time to focus on more valuable and rewarding work.

1. Use Software To Identify Expense Inconsistencies

One of the most effective ways to streamline the expense categorization process is to use software that automatically identifies potential inconsistencies, saving you from having to track them down yourself. By connecting to your clients’ ledger files, Keeper analyzes your client’s previous financial activities and flags expenses that receive contradictory treatment, giving you the opportunity to determine if their expense category was entered incorrectly. For example, if your client typically records purchases from a vendor as Office Supplies but a recent payment to them was unexpectedly categorized as Miscellaneous, Keeper can recognize that and bring it to your attention. These types of inconsistencies are much harder to recognize than an uncategorized expense. Instead of being consolidated in one obvious place, they may be scattered throughout your client’s financial records, blending in with correctly categorized transactions. You might not even suspect there’s an issue unless you notice a variance in your business expense totals compared to previous periods, and even then, narrowing it down to specific transactions requires a painstaking manual review. Using software to flag all of the potentially problematic transactions streamlines the process significantly. Instead of manually comparing your expense categories to your historical records each period, you automatically get a list of expenses to review at once before sending them all off to the client.

2. Use Software To Flag Other Common Transaction Errors

In addition to identifying expense categories that differ from established patterns, Keeper can highlight other common transaction issues and further streamline your month-end close.  transaction history For example, some of the other potential problems it can flag for you include:
  • Missing transaction detail: Expenses may have a category assigned but lack other critical transaction details, such as a class, location, customer, or necessary attachments, like receipts. Keeper makes it easy for you to add in whatever’s missing.
  • Transactions above cash value: Transactions above a certain dollar amount may constitute multiple expenses that should be separated into different categories, such as a $1,000 Amazon purchase that contained Office Supplies and Raw Materials. Keeper can highlight these to streamline splitting them up.
  • Transactions auto-added by a bank rule: Sometimes, bank transactions are auto-coded by preexisting rules, such as all payments to a legal vendor being categorized as professional services. Keeper can flag these to help you double-check that no exceptions are needed.
  • Transactions coded to a parent account: Transactions sometimes get categorized to broader parent accounts rather than more specific accounts. For example, Keeper can highlight all expenses coded to Advertising rather than Social Media to help you decide if they need to be in a more appropriate account.
Ultimately, Keeper significantly reduces the hours you need to spend combing through financial transactions for all kinds of potential problems. You can also customize the types of transactions it flags for you to avoid wasting time on things that aren’t actually an issue.

3. Batch Categorize Transactions

One of the most time-consuming and repetitive aspects of bookkeeping with tools like QBO is the need to edit each individual transaction. When you have a high volume of changes to make, the process can easily take hours, even if the corrections you’re making are relatively simple. For example, say you notice that fifty transactions with the same vendor have been miscategorized as Supplies when they should be under the Cost of Goods Sold.  To correct the issue in QBO, you’d need to click on each transaction, manually update the category, click back out, and repeat the process dozens of times. With Keeper, you can select all of the transactions from the same page and assign the new category simultaneously. Instead of spending ten minutes clicking back and forth, you could have accurate financial records in a few seconds. In addition to speeding things up, batch categorization also ensures that all the transaction updates you make are handled consistently, reducing the odds that you’ll make a mistake. Without it, you’re much more likely to categorize a transaction differently or forget one altogether.

4. Ask Clients Questions In-Portal

Identifying and resolving improperly recorded transactions by hand can be incredibly time-consuming, but trying to get answers from your clients via email may be even worse. Small business owners are busy, and your messages to them often get buried, forgotten, or flat-out ignored. Even when clients do respond quickly, their answers might be incomplete or unclear, which only prolongs the back-and-forth. With Keeper, you can finally stop emailing spreadsheets to your clients. Keeper lets you give your clients direct access to the platform instead, allowing you to communicate with them in the same place where you do your work. That provides several significant benefits, including:
  • Clearer communication: You can attach your questions directly to a client’s bank account feed, putting everything in context and making it much easier for them to understand what you’re referring to.
  • Seamless workflows: Instead of having to switch between apps or tabs, you can assign questions, leave notes, and instant message with your clients on the Keeper platform. When you get answers, you can also immediately make adjustments in the same location.
  • Automated reminders: If your clients ever neglect to answer you in a timely manner, you can schedule automated email or text messages that will remind them to respond to your outstanding questions. 
Keeper’s centralized system isn’t just convenient for bookkeepers. It’s also beneficial for your clients, giving them a single hub for communication and support. It even comes with magic links that allow them to sign in without a password.

5. Use Project Management Software for Quicker Management Review

Management review is an essential step in the month-end close, ensuring everything is approved by a supervisor before being finalized. While that can be cumbersome with traditional systems, project management software can streamline the process significantly. The downside to most project management solutions is that they’re entirely separate from the software you use to actually do your bookkeeping work. For example, there’s no project management tool within QBO or Xero. You have to rely on something external to stay organized. However, Keeper has built-in project management features that allow your team to keep track of everything they’re working on without ever leaving the app. They’re also more powerful than you might expect, capable of:
  • Creating workflow templates: Keeper’s bookkeeping workflow software lets you create reusable templates for month-end closes, automatically creating, organizing, and tracking tasks and subtasks.
  • Assigning and categorizing tasks: You can add tags and categories to tasks within Keeper, making them easy for your team to filter and prioritize at a glance.
  • Facilitating collaboration: Keeper doesn’t just help you communicate with your clients. It also lets you chat with and leave localized comments for your team.
Keeper makes the management review process simple and efficient. Managers are automatically notified when the books are ready for them, and with everything organized and consolidated, it’s easy for them to make necessary changes, provide feedback, and sign off.

Speed Expense Categorization With Keeper

Keeper’s file review tools can streamline the expense categorization process and help you close the books each month in record time.  We designed them to help you tackle all the most time-consuming parts of the process, from identifying problematic transactions to reminding clients to answer your questions. But Keeper’s capabilities don’t stop there. Our goal is to provide bookkeepers and accountants with a single platform where they can do all their work, so it also includes features that support:
  • Form W-9 and 1099 management
  • Receipt capture and organization
  • Customer relationship management
  • Bookkeeping and accounting practice management
  • Two-way syncing with QBO and Xero
  • Customizable integrations with Zapier
Schedule a demo with one of our experts to test drive the comprehensive bookkeeping practice management software trusted by thousands of accounting firm owners.