What a rule can do
A rule watches the downloaded transactions for conditions you choose, such as the description containing a vendor name or the amount being above a certain value. When it matches, it can assign a category, set the payee, add a class or location, split the amount across categories and add a memo. You can choose to have the rule only suggest the match or to add the transaction automatically.
Create your first rule
Open Transactions, then Bank transactions, and go to the Rules tab, then choose New rule. Name it clearly, such as Electric utility monthly. Choose whether it applies to money in or money out and select the bank accounts. Add one or more conditions, using contains rather than exact match when descriptions carry changing reference numbers. Then pick the category, payee and any tags. Save and run it on the existing transactions in the For review tab.
Use suggest first, automate later
For the first month, set the rule to put transactions into a review list rather than adding them automatically. Look at a few cycles. When the matches are consistently correct, switch the rule to auto-add. Keep a lower trust level for vendors who sell many kinds of things, such as a big box store, where a single category will often be wrong.
Order and overlap
Rules run in priority order, and the first one that matches wins. A general rule such as contains Amazon can override a narrower rule if it sits above it. Place specific rules first. Review your list quarterly and delete rules for vendors you no longer use. Exporting the rules list can help you document your setup for a bookkeeper.
Mistakes to avoid
Do not write a rule that categorizes transfers between your own accounts, loan payments or owner draws as expenses, since those are not expenses. Do not use a rule for transactions that need a receipt decision, such as meals with clients. Watch for rules that split a payment into percentages when the proportions change. If a rule does produce wrong entries, fix the rule first, then correct the transactions it touched, otherwise the error returns next month.
Finally, remember that rules classify, but they do not replace reconciliation. Reconcile every month to catch duplicates and missing items.
A simple starter set of rules
Good first rules cover predictable items: monthly software subscriptions, bank service fees, the phone bill, payroll provider debits and merchant fees. Each has a stable description and a single correct category. Leave grocery stores, big box retailers and online marketplaces to manual review until you understand how you use them.
After a few months, check the rules report to see how many transactions each rule has handled. A rule that never fires can be deleted, and one that fires constantly deserves a second look to be sure it is still right.
Common questions
Can a rule split one transaction into several categories?
Yes. Choose the split option and set amounts or percentages for each line.
Why did my rule not match?
Check the description text, the account selected and whether another rule above it already caught the transaction.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.