How to Set Up and Use QuickBooks for Nonprofits

Nonprofit financial management comes with unique challenges. Your organization needs to track donations, manage grants, and demonstrate financial stewardship to your board and donors. This requires specific accounting practices, such as fund accounting and preparing IRS Form 990. ¹

Many nonprofits turn to QuickBooks for their accounting needs. While powerful, it's a general business tool, not a specialized nonprofit solution. This means you must customize it to meet your organization's specific compliance and reporting requirements.

This review will break down how to use QuickBooks for nonprofits, its key features, and potential costs. We'll help you decide if it's the right financial tool to support your mission. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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QuickBooks Nonprofit Account Review: Quick Overview

Key Features: Fund accounting (via classes) ², grant and donor tracking ³, budget creation and monitoring, generation of reports for Form 990.¹

Main Fees: Monthly subscription fee based on the selected plan (Plus or Advanced). Discounts may be available through partners. ⁴

Great For: US-based nonprofits of all sizes that need a robust, scalable, and widely-used accounting platform.

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Does QuickBooks Offer Discounts to Nonprofits?

Intuit does not offer a direct discount for QuickBooks Online to nonprofits. However, significant savings are available through a key partner program. This makes the platform much more affordable for budget-conscious organizations.

The Techsoup Discount for QuickBooks

Eligible 501(c)(3) nonprofits can get substantial discounts on QuickBooks Online through TechSoup. TechSoup is a nonprofit that provides technology products to other NGOs at a reduced cost. This program can reduce the monthly subscription fee for QuickBooks Online Plus or Advanced to a small administrative fee, making it a very cost-effective option. ⁵

QuickBooks Nonprofit Account Key Features

To be effective, a standard QuickBooks account must be configured for nonprofit use. This involves leveraging existing features for new purposes.

• Fund Accounting: The "Class Tracking" feature in QuickBooks Online Plus and Advanced is essential. You can create different classes for unrestricted, temporarily restricted, and permanently restricted funds. By assigning every transaction to a class, you can generate reports that show the financial position of each fund. ⁶
• Grant and Donor Management: You can track grants and donations by changing the name of grant-making bodies and donors from customers into donors. This allows you to record incoming funds, track pledges, and run reports to see who has donated and how much. For a nonprofit with 20 active grants, this simplifies monitoring the income and spending for each one.⁷
• Budgeting and Reporting: QuickBooks allows you to create budgets for your entire organization or for specific programs, funds, or grants. You can then run "Budget vs. Actuals" reports to monitor spending and ensure you stay on track. Key nonprofit financial statements, like the Statement of Activities and Statement of Financial Position, can be generated.
• Form 990 Preparation: QuickBooks does not file your Form 990. However, it streamlines the preparation process by generating the necessary financial reports. You can produce a Statement of Functional Expenses, which is a required component of the Form 990, by properly categorizing expenses.^{1 7} This saves your finance team or accountant hours of manual work.

QuickBooks Nonprofit Account Fees

The cost of using QuickBooks depends entirely on the plan you choose. Most nonprofits require either the QuickBooks Online Plus or Advanced plan to access critical features like class tracking.

Without a discount, these plans represent a significant monthly expense. However, the TechSoup program makes QuickBooks highly affordable for eligible nonprofits, often reducing the cost to a small fraction of the retail price.

QuickBooks Nonprofit Plan Breakdown

Choosing the right plan is critical for getting the features you need without overpaying.

• QuickBooks Online: This is the most common choice for small to mid-sized nonprofits. It includes up to five users and provides the essential Class Tracking feature for fund accounting. It also includes Project Tracking, which can be adapted to manage specific grants or campaigns. ²
• QuickBooks Online Advanced: Larger or more complex organizations may need the Advanced plan. It supports up to 25 users and offers advanced features like custom user permissions, which enhances financial controls. It also includes batch invoicing and expenses, which can save time for a nonprofit that processes dozens of vendor payments monthly.

QuickBooks Nonprofit Account Benefits and Considerations

QuickBooks offers powerful tools but requires a clear understanding of its limitations.

Benefits:

• Industry Standard: QuickBooks is the most popular small business accounting software. This means many bookkeepers and accountants are already familiar with it, making it easier to find qualified help.
• Scalability: As your nonprofit grows, you can easily upgrade your QuickBooks plan to add more users and unlock advanced features.
• Integrations: QuickBooks integrates with a vast ecosystem of third-party apps, including donor management CRMs, payroll services, and payment processors.

Considerations:

• Requires Customization: It is not a ready-made nonprofit solution. You must set it up correctly with a nonprofit chart of accounts and use features like classes and customers to track funds and donors.²
• Not True Fund Accounting: While the class-tracking feature is a strong workaround, it is not the same as a purpose-built fund accounting system found in specialized software.⁶ This may be a limitation for organizations with highly complex funding structures.
• Learning Curve: Because it requires specific setup, there is a learning curve for staff and volunteers who are not experienced with nonprofit accounting principles.²

Is QuickBooks for Nonprofits different from QuickBooks Online?

No, there is no separate product called "QuickBooks for Nonprofits."^{3, 6} The term refers to the practice of using a standard version of QuickBooks—typically QuickBooks Online Plus or Advanced—and customizing its features for nonprofit financial management.² While a Desktop version for nonprofits exists, the cloud-based Online platform is now more common.

FAQ: QuickBooks for Nonprofits Review

What is the best accounting software for a nonprofit organization?

The best software depends on your organization's size, complexity, and budget. QuickBooks Online is a strong, flexible choice for many nonprofits because it is scalable and widely used. However, organizations with very complex fund accounting needs might prefer a specialized nonprofit accounting solution.

How to use QuickBooks for nonprofits?

To use QuickBooks effectively, you should:

1. Choose the QuickBooks Online Plus or Advanced plan.
2. Set up a nonprofit-specific chart of accounts.
3. Use the "Class Tracking" feature to manage restricted and unrestricted funds.
4. Set up donors and grantors as "Customers" to track income sources.
5. Regularly generate key reports like the Statement of Activities and Statement of Financial Position.

What accounting method do most nonprofits use?

Most nonprofits use the accrual basis of accounting. This method records revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands. It provides a more accurate picture of an organization's financial health and is a requirement under Generally Accepted Accounting Principles (GAAP) for most nonprofits.

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