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Categorization - Fundamentals

What It Is (General)

Transaction categorization is the process of assigning bank transactions to predefined categories for reporting, analysis, and reconciliation. Categories typically align with budget line items, GL accounts, or cash flow statement classifications. Proper categorization enables meaningful analysis of where cash is coming from and going to.

What It Means for Our ICP

How Treasury Teams Think About It

Treasury teams see categorization as the necessary "tagging" step that makes raw transaction data useful. Without it, you just have a list of debits and credits with no analytical value.

Key concerns: - Accuracy: One error pollutes reports - Efficiency: Manual classification doesn't scale - Auditability: Need to track who changed what and when - Flexibility: Categories need to map to multiple structures (budget, GL, reporting)

Personio's Category Structure (Source: 2024-10-03) - Customer inflow - Personal related costs (payroll) - Supplier payments - VAT / tax - Split: Operating vs non-operating (same vendor can be both - e.g., rent = operating, deposit = non-operating)

Typical Processes & Timing

  • Real-time or batch: Some teams classify as transactions arrive, others batch weekly
  • Review cycles: Usually aligned with reporting periods (monthly)
  • Correction process: Often requires support tickets to fix historical errors

Tools They Use Today

  • Cash Analytics - Provides categorization functionality, but manual input only (Mentioned by: Euroports)
  • Excel - Used for mapping and validation (Mentioned by: Euroports)
  • ERP GL accounts - Target structure for categorization (Mentioned by: Euroports)
  • VLOOKUP on memo text - Match bank memo fields to categories via lookup tables (Mentioned by: Personio)
  • Workday ERP - Source of reconciled transaction data (at T+11/T+12) (Mentioned by: Personio)

How They Talk About It

  • "Classification" - the act of assigning categories
  • "Budget categories" - EBITDA, interest, capex, treasury, working capital
  • "GL accounts" - the target accounting codes
  • "Pollution of categories" - when errors corrupt reporting
  • "Reclassification" - fixing past errors
  • "Operating vs non-operating" - key split for management reporting (Personio)
  • "Ad-hoc bank transactions" - catch-all category that's hardest to classify (Personio)
  • "Cash application" - identifying whether payment is vendor, customer, or other (On)
  • "Unprocessed/unposted transactions" - transactions waiting to be identified and booked (On)
  • "Interim account" - holding account for unidentified transactions (On)

"I really don't want to go back to Excel for nothing. Everything needs to be done through the tool." - Matthias, Euroports

"Way too much of my time is spent on data validation... The starting point should be variance analysis, right? It should be the review of actual versus forecast." - Tom Thorn, Personio

"It's rule based. It's not smart and we have to manually create all of the rules." - Rodrigo Cabrera, On

ON's Budget Code Mapping (Source: 2025-10-02) - Budget codes from Anaplan mapped to Palm categories (one-to-one mapping) - File uploads (tax, talent) require column mapping to assign correct categories - Category mapping saved and reused for future uploads of same file type

"Right now until the end of the month, we don't really know how much money we have... from the ERP we'll have to go every day into the bank if we wanted to check." - Rodrigo Cabrera, On

Treasury vs Accounting Scope

At some organizations, GL-level categorization is accounting scope while Treasury only cares about budget codes/cash flow codes. This can create misalignment about who "owns" categorization.

"It's not like a treasury scope... at least for us. Or at least not right now." - Rodrigo Cabrera, On

Categorization Philosophy

90% Rule: Focus on getting the biggest categories right (90%+ on notional value). Smaller categories can be refined over time. Don't try to achieve 100% accuracy on day one.

Completeness over perfection: "For me, when I think of categorization, I want completeness. So I need all of the transactions categorized." - Lucía Galán Cáceres, On

Even if some categories net to zero at entity level, transactions should still be tagged for filtering and drill-down purposes.

"The goal here is not to have you go through every single transaction and mark it as incorrect or correct. We want to get kind of that 90% overall on the notional value" - Gurjit Pannu

Intercompany vs Intra-Company

Important distinction that affects categorization accuracy: - Intercompany: Flows between different legal entities (e.g., On AG → On France) - Intra-company: ZBA/book transfers within same entity (e.g., between accounts at same legal entity)

These need different treatment for reporting purposes even though transaction descriptions may look similar.

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