> ## Documentation Index
> Fetch the complete documentation index at: https://docs.smartbills.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Categorize Expenses

> Assign categories and departments to your expenses

## Overview

Categorizing expenses ensures accurate financial reporting and simplifies the approval process. Smartbills lets you assign a **category** (what the expense is for) and a **department** (which team it belongs to) on every expense.

## How to Categorize an Expense

<Steps>
  <Step title="Open the Expense">
    Navigate to **Expenses** in the sidebar, then click on the expense you want to categorize. The expense detail view opens.
  </Step>

  <Step title="Select a Category">
    Click the **Category** dropdown in the expense detail view. You can:

    * Browse the full category list
    * Type to search for a specific category
    * Select the category that best describes the expense

    Common categories include Travel, Meals & Entertainment, Office Supplies, Software & Subscriptions, Transportation, and Professional Services.
  </Step>

  <Step title="Assign a Department (Optional)">
    If your organization uses departments, click the **Department** dropdown to assign one. Departments help track spending by team or cost center.
  </Step>

  <Step title="Save">
    Click **Save** to apply the category and department. The expense list updates to show the assigned values.
  </Step>
</Steps>

## AI Auto-Categorization

Smartbills can automatically suggest categories based on the merchant name. For example, an expense from a known airline may be auto-assigned to **Travel**, while a restaurant receipt may default to **Meals & Entertainment**.

Auto-categorization improves over time as you review and correct suggestions. The system learns from your choices to make better predictions in the future.

<Tip>
  If auto-categorization assigns the wrong category, simply change it. Your correction trains the AI for future receipts from the same merchant.
</Tip>

## Custom Categories

If the default categories do not fit your needs, administrators can create custom categories:

1. Go to **Settings > Categories**
2. Click **Add Category**
3. Enter a name, optional description, and GL code
4. Save the new category

Custom categories appear in the dropdown alongside the defaults. See [Settings - Categories](/guides/web-app/settings/categories) for more details.

## What's Next?

<CardGroup cols={2}>
  <Card title="Split an Expense" icon="scissors" href="/guides/web-app/expenses/split-expense">
    Divide an expense across multiple categories or departments
  </Card>

  <Card title="Create an Expense Report" icon="file-invoice" href="/guides/web-app/reports/create-report">
    Group categorized expenses into a report
  </Card>
</CardGroup>