Every transaction that flows into LUMA is automatically categorized using AI. This saves hours of manual work and keeps your books organized for accounting.
#How it works
When a new transaction arrives, LUMA's AI:
- Analyzes the merchant: Identifies the company from the transaction description
- Checks your history: Looks at how you've categorized similar transactions
- Considers patterns: Factors in amount, frequency, and context
- Assigns a category: Picks the most likely category
The AI learns from your corrections. The more you use LUMA, the more accurate it becomes for your specific business.
#Category structure
LUMA uses a two-level category system designed for business accounting:
#Parent categories (14 total)
- Revenue - Income from your business
- Cost of Goods Sold - Direct costs of products sold
- Sales & Marketing - Customer acquisition costs
- Operations - Day-to-day running costs
- Professional Services - External expertise
- Human Resources - Team costs
- Travel & Entertainment - Business travel
- Technology - Software and subscriptions
- Banking & Finance - Financial transactions
- Assets - Capital purchases
- Liabilities & Debt - Obligations
- Taxes & Government - Tax payments
- Owner / Equity - Founder transactions
- System - Uncategorized and transfers
#Subcategories
Each parent category contains specific subcategories. For example, Technology includes:
- Software
- Non-Software Subscriptions
See all categories and subcategories →
#Excluded categories
Some categories are "excluded" from burn rate calculations to prevent double-counting:
| Category | Why it's excluded |
|---|---|
| Credit Card Payment | The purchases on your card already count; the payment would be double-counting |
| Internal Transfer | Moving money between accounts isn't spending |
This happens automatically. Your burn rate and runway calculations stay accurate.
Learn more about how categories affect metrics →
#Changing a category
If the AI gets it wrong:
- Click on the transaction
- Select the correct category from the dropdown
- Save
#What happens when you correct
- The transaction is recategorized immediately
- The AI learns from your correction
- Future similar transactions are more likely to be categorized correctly
- Your financial metrics update to reflect the change
#Bulk categorization
For multiple similar transactions:
- Go to Transactions
- Use filters to find the transactions (e.g., filter by merchant name)
- Select multiple transactions using checkboxes
- Choose Categorize from the bulk actions menu
- Select the category to apply
- Confirm
This is useful for:
- Fixing multiple miscategorized transactions at once
- Categorizing a backlog of transactions
- Applying consistent categories to recurring expenses
#How the AI learns
#Merchant patterns
The AI builds patterns based on merchant names:
- "SPOTIFY" → Technology > Software
- "UBER" → Travel & Entertainment > Travel
- "AMAZON" → Depends on your history (could be office supplies, software, etc.)
#Your corrections
When you correct a category:
- That specific merchant pattern is updated
- Similar merchant names benefit from the learning
- The AI weighs your choices higher over time
#Team patterns
The AI learns from your entire team's categorization choices, building a model specific to your business.
#Categories and financial metrics
How you categorize transactions directly affects your reports:
| Metric | Affected by |
|---|---|
| Revenue | Transactions in Revenue categories |
| Burn Rate | All expense categories except excluded ones |
| Profit | Revenue minus expenses |
| Cash Flow | All income and expense categories |
Accurate categorization means accurate metrics.
#Categories and accounting
#Export to CSV
When you export transactions, categories are included. Your accountant can map them to their chart of accounts.
#Export to accounting software
If you connect Xero, QuickBooks, or Fortnox:
- Categories map to account codes
- You configure the mapping during setup
- Transactions export with the correct account mappings
#Tips for better categorization
#Review regularly
- Check new transactions weekly
- Correct any miscategorized items promptly
- The AI learns faster with quick feedback
#Be consistent
- Use the same category for the same type of expense
- Don't switch between similar categories (pick one)
- Consistency helps both AI learning and your reports
#Use tags for detail
Categories are intentionally broad (for accounting). Use tags for additional detail:
- Project names
- Client names
- Tax deduction status
- Department codes
#Handle ambiguous merchants
Some merchants (like Amazon) could be many categories:
- Office supplies
- Software
- Equipment
- Personal (shouldn't be here!)
Correct these carefully. The AI will learn that Amazon transactions from your account might be different from another business.
#Common questions
#Can I create custom categories?
LUMA uses a standard category set that maps to accounting charts of accounts. This ensures consistency for exports and integrations. Use tags for custom groupings.
#What if a transaction fits multiple categories?
Choose the primary purpose. For example:
- A laptop is Equipment, not Technology
- Conference travel is Travel, not Marketing
#How do I handle personal transactions?
If a personal transaction accidentally appears:
- Categorize it appropriately (or use "Other")
- Consider excluding it from reports
- Discuss with your accountant for proper handling
#Why did the AI categorize this wrong?
Common reasons:
- New merchant the AI hasn't seen
- Ambiguous merchant name
- Similar merchant to one you categorized differently
Correct it once, and the AI will learn.