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Started: 11/30/2022 3:34 AM
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Benefits of Nonprofit accounting in quickbooks

​Nonprofit businesses hold a very important place in our society.  These businesses are run by Board of Directors, Officers, Employees, and Volunteers all for the betterment of humans or animals.  This article will explain the benefits of using Nonprofit accounting in QuickBooks software to help track and report nonprofit financial data.   You will get a brief overview of what a nonprofit is, learn how class tracking can help, and review the nonprofit specific reports.

Unique Features of QuickBooks Desktop – Non-Profit.

There are a number of great features when choosing QuickBooks Premier or Enterprise-Nonprofit.  The most important one is that the setup is geared to a nonprofit’s specific needs. A nonprofit will save time and efficiency when up to 30 users can simultaneously work within QuickBooks. Create a more secure data file designating user permissions for each user and give them the ability to only access the data they need.  Nonprofit terminology will make the learning curve easier for those users familiar with the nonprofit industry. QuickBooks for Payroll can be further customized where needed to make it uniquely fit each business. Class tracking can be used to further break down the income and expenses within categories like various nonprofit programs. This makes reporting by program easier. Install the Nonprofit version and a number of great nonprofit reports are already set up to use.  Financial reports that can be delivered to the top board members or used to complete IRS or other state agency returns.


Nonprofit terminology makes accounting tasks easier to learn

There are many instances of nonprofit terminology that are included in this version such as Donors, Donations, Pledges, Programs and Projects, Grants, IRS 990 form reporting.  For example, customers are donors, jobs are grants, invoices are used to track pledges and sales receipts are used for donations. Form templates, statements and reports all use the same nonprofit language for better understanding.  

Save time from searching the menu lists for the most frequently used activities a nonprofit needs. Some of the customer, vendor, and banking activities under their own separate menu lists are all found together under one nonprofit menu list.  You can create an invoice, receive a payment and make a deposit by using the Non-Profit menu list see below.

These features are found in the Premier, Enterprise and must be set up during the installation process. (You won’t find the non-profit features available in QuickBooks Pro, QuickBooks Online- Simple Start or Essentials).  QuickBooks Non-profit can be used to:


    Manage donors, grants and pledges, budgets

    Allocate expenses across multiple programs

    Post income and expenses by fund

    Get the reports that nonprofits need


Class tracking allows you segment your data

Class Tracking should be turned on as part of the initial setup of your company file. A class breaks down the income, expenses, assets, liabilities or equity of a business by department, location, funding source, program, grant, fundraising, or administrative type.   The class is used to categorize a smaller section of the business so that additional reporting can be run on these subsections. Class hierarchy can be divided down by class:subclass and to sub:subclass, if necessary. More detailed reports can be run to view either all classes or certain subsections. This is a big benefit to nonprofits that have to report to their board or outside agencies.  

For example, you can run a Profit and Loss Report by Class and get a breakdown of the income and expenses by grant or funding source.  Class tracking has to be turned on and your class list is set up to include each fund source and grant. Be aware you must add the right class to each and every transaction as you go.  

Sales orders track future promised funds

A Sales Order is used to record the promise of incoming funds that will be fulfilled sometime in the future. These incoming funds could be for a donors sponsorship of an event to be held at some future date.  It could be used for collecting reservations for a dinner planned on a particular holiday, months ahead. Or the nonprofit could track tuition for a class planned, but not yet held.

The Sales Order is a non-posting transaction, meaning it won’t show up in the general ledger. The benefit is to be able to track these types of future payments before the donors, sponsors or individuals are invoiced.  

The invoice is the transaction tracked in QuickBooks between the non-profit and the paying individual or group. The invoice will include the customer and their billing address, date, terms of payment, item (what is being purchased), description, amount, total and sales tax if applicable.    

A nonprofit could benefit by using these sales orders any time they want to keep track of future income of a product or service.  When the sale is ready to be completed you can turn the Sales Order into an Invoice for payment using a one-click process at the top of the sales order screen.  Sales Orders are available in QuickBooks Non-profit and should be remembered if the need to track future funds is necessary.

To know more about QuickBooks Cloud or QuickBooks for Payroll​ visit Apps4rent.

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