Customizing QuickBooks Online for a Nonprofit

This article was written by Audrey Blackburn of Blackburn Consulting.

I get asked all the time, “Can I use QuickBooks Online (QBO) for my nonprofit?” My answer is always, absolutely! I have been a fan of QuickBooks for years. My love of QuickBooks started with the desktop version many years ago. Then, Intuit developed QBO and I was intrigued. I’m a techie by nature so I pick up and start using new software easily. The best part of QBO has always been that you can access it from anywhere and it’s so versatile.

I found QBO to be a good fit for nonprofit accounting. BUT, that doesn’t mean one can just start using it without a little prep and setup work. Just like QuickBooks Desktop, we need to set it up to best work for the nonprofit. So what things should we customize:

  1. Does the nonprofit have donors, grantors, members, etc? If the answer is yes then you will want to set them up in the traditional “customers” section of QBO. Why do this? You can track the donations made by your donors or payments made by members to the organization. At year-end, you will be able to issue a statement for your donors for their gifts. By utilizing the Customers section you will be able to get more reports about your donors or grantors.
    • *Tip – You can customize the customer label to say “Donors” or “Members” to better fit the nonprofit terminology. This is found under the Gear-Company Settings-Customer Label. You will also need to turn classes on. This is all done in the same place.
  2. Set up your “products/services” list. Each one of your products or services should be directed to a corresponding income account.
  3. Chart of Accounts – The chart of accounts for nonprofits is always a hot topic. The old standard was to create an account for every separate program or purpose. Office Expense would turn into 5 different accounts as an Office Expense account would be needed for each program, grant or separate purpose so it could be properly tracked. That isn’t necessary if you utilize the classes.
  4. Use sales receipts for donations. This is the quickest and easiest way to record donations so you can produce a year-end statement.
  5. To track any restricted grants, set up a customer of “Restricted Grants” and add a sub-customer under Restricted Grants by the name of the actual grant you want to track. Now you can use the Customer field on income and expenses to utilize the reports. Now you will code the income and expenses for the grant to this sub-customer. You will have all your Restricted Grants in one place for easy reports.
  6. Set up classes – Classes are my favorite part of QBO and QB Desktop. They allow you to “class” any transaction. You can then run a P&L by class or your balance sheet by class. Classes can be anything you need them to be but for most nonprofits, you want to class things such as your programs and fundraising.
  7. Reports for staff and Board – Businesses look for a P&L and a Balance Sheet and a nonprofit Board is no different. These two reports provide a wealth of information. Now that you have classed all transactions you can run a P&L by Class or a Balance Sheet by Class to analyze the income and expense for your programs, your fundraising efforts or for your general operations.

With planning and proper setup, your QBO account can provide you with the information you need for your nonprofit Board and for staff to effectively manage the funds of the organization.

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