How to Add Customer Type in QuickBooks Online

Categorizing your customers in QuickBooks Online is a simple step that unlocks powerful business insights. Beyond basic bookkeeping, organizing contacts into specific types transforms your customer list from a simple directory into a strategic tool for analysis and decision-making. This article will guide you through the process of creating and assigning customer types and show you how to use this feature to generate smarter reports that reveal who your best customers are and where you should focus your efforts.

Start with Strategy: Why Use Customer Types?

Before diving into the “how-to,” it’s important to understand the “why.” The Customer Type field in QuickBooks Online (QBO) allows you to tag customers with a descriptive label of your choosing. It seems basic, but consistent use of this feature helps you segment your client base in meaningful ways. This isn't just about tidiness; it’s about answering fundamental business questions.

Once set up, you can filter reports to see which groups generate the most revenue, have the highest average sale, or even which ones pay their invoices the slowest. The goal is to move beyond seeing a single list of customers and start seeing patterns within that list.

Here are a few common and effective ways to segment customers using types:

• Business vs. Individual: Distinguish between B2B and B2C clients. This is fundamental for companies that serve both markets, as buying cycles, pricing, and communication strategies often differ.
• Wholesale vs. Retail: For businesses with different pricing tiers, separating wholesale from retail customers is critical for tracking sales volume, margins, and the performance of different distribution channels.
• Service Level or Tier: If you offer tiered service packages (e.g., Bronze, Silver, Gold), assigning these as customer types helps you track revenue and costs associated with each level. It can also highlight opportunities to upsell clients.
• Geographic Region: For businesses with a regional focus, creating types like "East Coast," "West Coast," or specific state names can help analyze regional performance and inform marketing spend.
• Industry or Vertical: A B2B company might create types like "Manufacturing," "Healthcare," or "Non-Profit." This helps identify which industries you are most successful in and where to focus future business development.
• Acquisition Source: You can even use customer types to track how clients found you, with labels like "Web Referral," "Trade Show Lead," or "Partner Referral." This offers a direct line of sight into the ROI of your marketing efforts.

The key is to choose categories that reflect your business operations and strategic goals. Think about the big questions you want to answer about your sales and customer performance, and design your customer types around them.

How to Set Up Customer Types in QuickBooks Online

Getting your custom categories configured is a straightforward process. You only need to do this administrative setup once, and then you can assign the types to customers as you go.

Follow these steps to create your customer type list:

1. From your QBO dashboard, navigate to the Sales section in the left-hand navigation menu and then select the Customers tab at the top.
2. On the Customers screen, look for the Customer Types button. It’s typically located to the right of the New Customer button. Click on it.
3. A "Customer Types" window will appear. At the top right of this window, click the New customer type button.
4. In the "Name" field, enter the name of your first customer type (e.g., "Wholesale," "Residential," "VIP Client"). Keep it brief but descriptive.
5. Click Save.
6. Repeat steps 3-5 for each customer type you want to create. This will build out your standardized list of categories that can now be assigned to any customer record.

In this window, you can also edit or disable existing types. To change the name of a type, simply click on its row, make your correction, and save. If a type becomes obsolete, you can make it inactive so it no longer appears as an option for new customers, which helps keep your data clean without altering the records of past customers.

Assigning Customer Types to New and Existing Customers

With your customer types created, the next step is applying them to the appropriate customer profiles. You can do this when adding a new customer or by updating existing records, either one by one or in a batch.

For New Customers

When you create a new customer, the option to assign a type is embedded in the customer profile screen.

1. Navigate to Sales > Customers and click the New customer button.
2. Fill out the primary contact information like name and company.
3. Click on the Additional info tab.
4. You will see a field labeled "Customer type." Click the dropdown arrow to see the list of types you just created.
5. Select the appropriate type for this new customer.
6. Finish filling out any other necessary details and click Save.

For Existing Customers (One by One)

If you need to assign or change the type for a single existing customer, the process is quick and simple.

1. Go to the Customers list (Sales > Customers).
2. Find the customer you want to update and click their name to open their profile details.
3. In the top right, click the Edit button.
4. Just like with a new customer, go to the Additional info tab.
5. Select the correct category from the Customer type dropdown list.
6. Click Save.

For Multiple Existing Customers in Bulk

Assigning a type to dozens or even hundreds of existing customers one by one is inefficient. Fortunately, QBO has a batch action that makes this much faster. This is especially useful when you're first implementing customer types.

1. Navigate to the Customers list.
2. Check the boxes next to the names of all the customers you want to assign to the same customer type. For example, check all your wholesale accounts.
3. Once you have at least one box checked, a menu called Batch actions will appear above the customer list. Click it.
4. From the dropdown menu, select Select customer type.
5. A small window will open with a dropdown list of your customer types. Choose the type you want to apply to all the selected customers.
6. Click Apply.

This bulk edit feature is a major time-saver and ensures consistency across your records. You can repeat this process for each of your customer type groups until the entire list is categorized.

Using Customer Types for Powerful Reporting

Now that your data is organized, you can start getting the strategic insights you were after. The real value of customer types is realized in your reports, where you can filter your financial data based on these categories.

Nearly any report that includes a customer column can be filtered by customer type. Here’s a look at some of the most useful reports to analyze.

Finding Your Most Profitable Groups

Report: Sales by Customer Summary (or Detail)
Location: Reports > Sales and customers

This report shows you the total sales for each customer. By filtering it, you can see which types of customers are driving the most revenue.

1. Open the Sales by Customer Summary report.
2. Click the Customize button in the top right.
3. In the customization panel, expand the Filter section.
4. Check the box for Customer Type.
5. A dropdown menu will appear. You can select one or multiple customer types to include in the report.
6. Click Run report.

You can now see a report that only includes sales data for your selected group (e.g., just your retail clients). By running this report for each of your key customer types, you can directly compare their total sales contribution and make more informed decisions about where to invest resources.

Analyzing Payment Behavior

Report: Accounts Receivable Aging Detail
Location: Reports > Who owes you

Do some customer types pay faster than others? The A/R Aging report shows you outstanding invoices, and filtering it by customer type can reveal payment speed patterns.

1. Open the A/R Aging Detail report.
2. Just as before, click Customize, go to the Filter section, and select Customer Type.
3. Select one particular customer type and run the report.

This helps you see if a specific group—for example, your commercial clients—is disproportionately represented in your 61-90 days past due column. This knowledge can inform your credit policies or collections strategy for that segment.

Final Thoughts

Creating and consistently using customer types in QuickBooks Online transforms a flat list of clients into a dynamic tool for performance analysis. It helps you look beyond overall numbers to identify key trends within your customer base, so you can make smarter decisions about marketing, sales, and operations.

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