Transaction Categorization & Auto-categorize

What is Auto-categorize and what’s its logic?

Auto-categorize refers to a system feature that automatically processes bank transactions based on a step-by-step logic, mimicking what happens behind the scenes.

Here’s how it works:

1. Auto-Matching: The system checks if the bank transaction matches an existing transaction in the ledger.
2. Auto-Pairing: If it’s a transfer or credit card payment, the system looks for a matching transaction on the other side of the transfer (i.e., a mirrored transaction in another account).
3. Identify Payee and Transaction Type: The system identifies the payee to determine what type of transaction it might be.
4. Categorization Attempt: The system attempts to categorize the transaction. It also checks whether the transaction could be a bill payment or an invoice payment.
5. Fallback Categorization: If none of the above steps succeed, the system categorizes the transaction as an uncategorized expense or deposit.

When you click the auto-categorize button, the system goes through these steps sequentially. If the transaction successfully matches in one of the earlier steps (e.g., auto-matching or auto-pairing), it stops there. If not, it continues until it finds the correct categorization.

In summary, "auto-categorize" triggers the system to automatically match, pair, and categorize transactions following a waterfall logic until a match or proper classification is found.

How to Use Auto-categorize to tag account, payee, class, department, etc.

1. Click on FOR REVIEW

2. Check Unselect row

3. Check Unselect all rows

4. Click on dropdown trigger

5. Click on Auto-categorize

6. TWC is auto-categorizing transactions. It will be loading for seconds.

7. When Status changes to READY, these transactions are auto-categorized successfully. Category is categorized.

8. Payee is added. Newly created payees will not exist in ERP unless you sync the transaction. We can allow user to edit the payee name before "sync".

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