Accurate categories are the backbone of your books. When you categorize every transaction, Lili can keep your reports up to date in real time—so you always know where your money is going and you are better prepared for tax time.
 

Which plans can categorize transactions?

How Lili’s smart suggestions work

When a new transaction comes into your Lili account, our AI suggests a category based on:

• Your past categorization behavior
• The type of merchant and transaction

These suggestions improve over time as you review and confirm them, so your books get faster and more accurate the longer you use Lili.

Categorized transactions automatically flow into your Lili reports such as Expenses, Profit and Loss, Cash Flows, and tax reports. This helps you monitor spend by category, understand profitability, and prepare for tax filings with fewer surprises.

How to categorize a new transaction

Option 1: From the Home categorization widget (mobile and web)

Use this when you want to move quickly through new activity.

1. Open Lili and go to the Home screen.
2. In the categorization widget, review the suggested category for each new transaction.
3. Swipe right to approve and save Lili’s suggested category.
4. Swipe left to open the category picker if you want to change it.
5. Select a more relevant category from the list and save.

Once approved or edited here, the category is applied to the transaction and reflected in your reports.

Option 2: From the Transactions list (mobile and web)

Use this when you want to review or change an individual transaction.

1. Go to the Transactions page (or the Transactions tab in the app).
2. Click or tap the specific transaction you want to review.
3. You’ll see the current category under the transaction details.
4. Approve it as is, or tap/click the category to open the full list.
5. Select the correct category and close the transaction details.

Any update you make from the Transactions list will also show everywhere that transaction appears, including in your historical reports.

How to fix a wrong category

You can change a category at any time if you selected the wrong one or your bookkeeping needs have evolved.

1. Go to the Transactions page.
2. Select the transaction with the incorrect category.
3. Click or tap the category and choose the correct one from the list.
4. Save/close the transaction.

Once updated, that transaction will move into the new category in your Lili reports, so your totals stay accurate for management, stakeholders, and tax professionals.

Choosing the right category (business vs personal)

For each transaction, choose the category that best reflects the nature of the payment or deposit:

• Business income (for example, sales, services, or other income) should use an appropriate income category.
• Business expenses (for example, advertising, software, rent or contractors) should use a matching expense category.
• Personal transactions should not appear as business activity—use Nonbusiness Income for personal deposits or Nonbusiness Expense for personal payments, so they are excluded from tax-deductible business totals.

If you are unsure which category to use, review the full list of income and expense categories in this article: What are the different income and expense categories available?

How categorization affects your reports

When a transaction is categorized, it is automatically included in:

• Expense reports
• Profit and Loss
• Cash Flows
• Schedule-C / Form 1065 / Form 1120 / Form 1120-S

Keeping transactions categorized regularly—ideally weekly—helps you:

• See accurate spend by vendor or category
• Prepare cleaner financials for owners, investors, and accountants
• Avoid scrambling at quarter‑end or tax time

If a transaction remains uncategorized, it will not be accurately reflected in category‑level reporting and may require extra cleanup later.

When there’s no perfect category

If none of the existing categories fits your transaction:

• Choose the category that most closely matches the nature of the transaction for now.
• Reach out to Lili’s Customer Service team with your category suggestion. Our Product team regularly reviews requests and may add new categories where they help business owners get cleaner books.

This helps keep Lili’s category list both comprehensive and focused on what growing businesses actually use.

Lili is a financial technology company, not a bank. Banking services are provided by Sunrise Banks, N.A., Member FDIC. The Lili Visa® Debit Card is issued by Sunrise Banks, N.A., Member FDIC, pursuant to a license from Visa U.S.A., Inc. The Card may be used everywhere Visa debit cards are accepted. 

Wire Transfer services are provided by Column Bank N.A., Member FDIC. All wires are subject to acceptance criteria and risk-based review and may be rejected at the sole discretion of Column Bank N. A. or Lili App Inc.