Non-profit organizations differ from traditional for-profit businesses in many ways. Instead of focusing on sales and increasing the bottom line, nonprofit finances typically focus on generating funding and in-kind contributions through grants, donations, and volunteers.
Although QuickBooks does offer the Premier Nonprofit editions that incorporate nonprofit specific language and attributes, it does cost more than the standard QuickBooks. Another option is to set up the traditional for-profit QuickBooks for a non-profit organization. Here are a few tips to help you format QuickBooks Nonprofits.
QuickBooks Pro and QuickBooks Nonprofit have similar capabilities, with the main difference between the two being the nomenclature. Nonprofit organizations can simply convert the QuickBooks labels to reflect their terminology. For example, a label available in QuickBooks Nonprofit called “Enter Donations” is the same thing as “Create a Sales Receipt” in QuickBooks Pro. Likewise, the “Create Invoice” field can be replaced with “Enter Pledges” to meet the nonprofit’s needs.
When it comes time to run reports, the standard QuickBooks reporting function creates the same reports as QuickBooks Nonprofit, and once again, the only difference between the two is the labels. For example, the “Biggest Donors” label in QuickBooks Nonprofit edition is the same thing as “Sales by Customer” in QuickBooks Pro. By reworking some of the names in QuickBooks, nonprofits can use the standard QuickBooks Pro without having to spend extra for the official nonprofit edition.
Making Audits Easier
A lot of times when a nonprofit receives a large grant, it is earmarked for one specific function. The contribution may arrive a large sum specifically for building renovations, or a small stipend to assist with a special event. To manage these grants, you can set up restricted accounts in QuickBooks to track how much money is left per grant. In QuickBooks Pro, you can track a “Restricted Funds Profit & Loss” statement by filtering by customer type. This report will reflect how the funds were received and how they were disbursed. By running a Summary Report, you can see the total Restricted Funds received, the amounts spent, and the balance in the Restricted Funds, which can be recorded on the balance sheet. Keeping each restricted account clean and organized will make any future audit a much smoother process. You, your bookkeeping staff, and your auditor will all be incredibly thankful to have this information broken down as such.
Tracking Capital Campaigns
In addition to annual fundraising campaigns that support a nonprofit’s yearly operations, a charity organization may also initiate a capital campaign. Capital campaigns are a large fundraising effort for a building, so the organization can repair, expand or relocate to another building. If the campaign lasts one year, all donations are recorded as income and the expenses of the campaign are recorded as negative income, leaving a balance which is the net in the capital campaign fund. If the campaign lasts more than a year, the organization will need to make adjustments to the balance sheet at the end of the year.