Get started with QuickBooks Online as a nonprofit

In this section, you can customize the fields display on your forms. QuickBooks uses the term "sales forms" to refer to estimates, invoices (pledges), and sales receipts (donations). There's also options to track additional details on pledges and donations. Many of these settings don’t apply to a nonprofit organizations, so you shouldn't need to spend much time here. Use the tool tip (question mark icon) beside each setting to learn more about it.

Note: Leave Tags on for now. We'll talk more about using tags for tracking later.

1. Find Products and services, then select Edit .
2. Turn on Show Product/Service column on sales forms. This is important even if your nonprofit doesn't provide products/services in exchange for revenue. We'll go over this in more detail when you set up lists for products and services.
3. If your nonprofit provides products/services in exchange for revenue, turn on Track quantity and price/rate. If not, turn this setting off.
4. Select Save.

Most nonprofits turn off Default charge applied to overdue invoices.

Most nonprofits turn off Create multiple partial invoices from a single estimate.

If you plan to email pledges or donation receipts to your donors or members, you can edit the standard email message that QuickBooks includes. Here’s how:

1. In Messages, select Edit .
2. In the Sales form section, select the dropdown ▼ and choose the form you want to customize. (Remember, invoices are pledges and sales receipts are donations.)
3. Customize the Email subject line and Email message as needed.
4. As needed, update the terms "invoice" and "sales receipt" to "pledge" and "donation receipt."
5. Repeat for any other forms you need to customize.
6. Select Save.

QuickBooks can send donors automatic reminders of what they pledged to your organization. However, most nonprofits avoid automatic reminders because they feel more like a bill than a friendly reminder. For that reason, we don't recommend using automatic reminders. If you'd like to use them, here's an article to learn more about setting up invoice (pledge) reminders.

We do recommend setting up a custom reminder message for donors that need a gentle, one-time reminder of their pledge. Here's how to set it up:

1. In Reminders, select Edit .
2. If you see Automatic invoice reminders, turn it off. Otherwise, skip to Step 4.
3. If you see a Default email message for invoice reminders ▼ dropdown, expand it.
4. Customize the Subject line and Email message as needed.
5. If you need to, update the terms "invoice" and "sales receipt" to "pledge" and "donation receipt."
6. Select Save.

Tip: Make sure the language is friendly. It shouldn't feel like a past due bill. Thank them for pledging their support, and remind them of the difference they’ll make by contributing.

For the best experience as a nonprofit, make sure to check these settings (some settings are only available with QuickBooks Online Plus or Advanced):

1. In Bills and expenditures, select Edit .
2. Turn on Show Items table on expenditure and purchase forms.
3. Turn on Show Tags field on expense and purchase forms.
4. If you have grants and need to track expenditures by each grant or donor:
   • Turn on Track expenditures and items by customer.
   • Turn on Make expenditures and items billable.
5. Select Save.

Most nonprofit organizations will need the following advanced settings (only available with QuickBooks Online Plus or Advanced):

1. In Categories, select Edit .
2. Turn on Track classes. Classes are used to track your various programs or funds.
3. Optional: Check Warn me when a transaction isn’t assigned a class.
4. Expand the Assign classes ▼ dropdown, then choose One to each row in transaction.
5. Turn on Track locations. You can use locations to track whether a donation or fund is donor-restricted.
6. Optional: You can change the location label to something else, like division or department. Keep in mind, this guide will still refer to the field as location.
7. Select Save.

If you have grants and need to track your spending for each grant:

1. In Projects, select Edit .
2. Turn on Organize all job-related activity in one place.
3. Select Save.

You can also change the customer label to in QuickBooks Online to avoid confusion:

1. In Other preferences, select Edit .
2. Select the Customer label ▼ dropdown, then choose Donors or Members.
3. Select Save, then Done.

If you selected nonprofit as your business type when you signed up, QuickBooks automatically set up many accounts in your chart of accounts for you. To find your chart of accounts:

Need to make some changes? No worries. You can tailor the accounts and categories to fit your business by renaming them, making them inactive, or adding new ones. You can also import your chart of accounts from a spreadsheet.

To avoid common mistakes, follow these general guidelines:

1. Keep your categories simple and generic to start. This helps you stay under your usage limit for the chart of accounts. Plus, your reports will be easier to read.
   • For example: Set up one Expenditure account for office supplies instead of creating separate accounts for pencils, pens, staples, and paperclips.
2. You’ll likely need to create separate Equity accounts to track Restricted Net Assets versus Unrestricted Net Assets. To split funds between these accounts at year-end, use a journal entry. (We strongly recommend working with an accountant on this.)
3. Most nonprofits don't set up their individual programs, donors, or grants in the chart of accounts.
   • Use classes for programs.
   • Use the customer/donor list for donors.
   • Use projects for grants.
4. When in doubt, always consult with your governing body or accountant for guidance.

Learn more about the chart of accounts, or check out this overview video: Understand the chart of accounts in QuickBooks Online

Most nonprofits use classes to track transactions for their programs or funds. This is critical for fund accounting and year-end reporting. We'll show you how to get started, but keep in mind that these are just suggestions. Your governing body may have different requirements.

Here’s how to get started with setting up your programs as classes:

1. Go to Settings ⚙, then select All lists.
2. Select Classes. (Not seeing classes? Make sure class tracking is turned on in Advanced settings.)

Start by setting up three main classes: programs, admin, and fundraising.

1. Select New.
2. In the Name field, enter Programs.
3. Select Save.
4. Repeat these steps to add Admin and Fundraising to your class list.

Then, add your programs as sub-classes.

1. Select New.
2. In the Name field, enter the name of one of your programs.
3. Select the Is sub-class checkbox.
4. Then select the Enter parent class ▼ dropdown and choose Programs.
5. Select Save.
6. Repeat these steps until all programs are added.

As you enter donations and grants as transactions,  it's critical to keep track of whether the donor placed restrictions on how the funds are used. In QuickBooks, you can use the location tracking options on each transaction to track whether funds are restricted or not.

You'll need to add at least two items as locations:

• Without Donor Restrictions
• With Donor Restrictions
• Optional: You can create separate location items for Temporary Restrictions and Permanent Restrictions. (Check with your accountant if you’re not sure.)

Here’s how to add each restricted/unrestricted item as a location:

1. Go to Settings ⚙, then select All lists.
2. Select Locations. (Not seeing Locations? Make sure location tracking is turned on in Advanced settings.)
3. Select New.
4. In the Name field, enter Without Donor Restrictions.
5. Leave all other boxes unchecked and select Save.
6. Repeat these steps to add With Donor Restrictions (or add separate locations for temporary and permanent restrictions).

Remember, QuickBooks Online typically uses business language. The products and services list is still helpful for your organization, even if you don’t actually provide a product or service in exchange for revenue.

Think of it this way: Products and services help you track revenue and expenditure categories that are too specific for the chart of accounts. Here’s a couple examples:

1. In the chart of accounts, you have an expenditure account for office supplies. In products and services, you can create specific items for pencils, staples, and paperclips, and tie each of them back to the office supplies expenditure account.
2. In the chart of accounts, you have a revenue account for fundraising events. In products and services, you can create your specific fundraising events and tie them back to the fundraising revenue account.

This helps you avoid hitting your usage limit for the chart of accounts.

For an overview of products and services, check out this video:

How to set up products and services

We'll show you how to add a new product or service, but more often you’ll simply add a new product or service as you're entering pledges, sales receipts (donations), or expenditures.

Here’s how to add a new product or service:

1. Select Settings ⚙ on the toolbar, then select Products and services.
2. Select New.
3. Select Non-inventory or Service. (It doesn’t matter which one you pick, unless you actually provide products or services to your donors.)
4. Enter a name.

If you need to track this product/service to a revenue account:

1. Select I sell this product/service to my donors.
2. Optional: Enter a description. This will show up on pledges and sales receipts (donations).
3. Select the Income account ▼ dropdown to find the revenue account you want to use.

If you also need to track this product/service to an expenditure account:

1. Select I purchase this product/service from a vendor.
2. Select the Expense account ▼ dropdown to find the expenditure account you want to use.

Then, select Save and close, or select Save and new to add another product/service.

You can also import products and services from a spreadsheet if needed.

Tags are an optional, free-form way to track additional info at the transaction level. There’s no right or wrong way to use tags, and they don’t affect your books or tax filing.

Learn how to use tags to track customized info that matters to your organization, or check out this overview video:

How to use tags in QuickBooks Online

Ultimately, tags are nice to have, but they’re nonessential. So if you’re not sure how to use them yet, don’t worry. Feel free to move on to the next step.

The donor list in QuickBooks Online helps you keep track of individuals or entities that have contributed or plan to contribute to your organization. This helps you stay in contact with donors who made pledges, and quickly pull reports of their contribution history.

Check out this video for more info about setting up donors:

How to add and manage donors

Note: This video uses “customers” instead of “donors” since it’s directed to a broader audience.

Add a donor

Here's how to add new donors so you can use them in future transactions and keep track of their pledges.

1. Go to Sales & expenditures and select Donors.
2. Select New donor.
3. Enter your donor’s info.
4. Select Save.

Tip: If you need to keep notes or mark a donor as tax-exempt, you can enter this when you create their profile.

You can also import your donors from a spreadsheet.

If you need to track spending for specific grants, we recommend setting them up as projects in QuickBooks Online. With projects, you can see expenditures and labor expenses, and run grant-specific reports, all from a single dashboard for each grant.

Here’s how to set up a grant using projects:

Step 1: Set up a grant as a project

1. Go to Business overview and select Projects (Take me there).
2. Select New project.
3. For the Project name, enter the grant name.
4. From the Donor ▼ dropdown, select the donor who funded this grant. (You can select + Add new if the donor isn’t in QuickBooks yet.)
5. Add any notes or details about the grant in Notes.
6. Select Save.

Step 2: Add funds to the project

1. Go to + New and select Sales receipt.
2. From the Donor ▼ dropdown, select the project added in Step 1.
3. For Receipt date, enter the date you received funding.
4. From the Deposit to ▼ dropdown menu, select the bank account these funds were deposited to.
   • Note: If you deposited the funds on a different day than the receipt date, select Undeposited funds or Payments to deposit. This will help you reconcile QuickBooks with your bank account later.
5. From the Location ▼ dropdown menu, select whether the funds are restricted or unrestricted.
6. Select an item from the Product/Service▼ dropdown column and add a Description if needed.
   • Note: Most nonprofits create an item for Corporate Contributions or Foundation Contributions. See the section above for more guidance on setting up a product/service.
7. Enter the value of the grant in the Amount column.
8. Select a program from the Class ▼ dropdown column.
9. Select Save and close.

Here’s how to view your grant and add transactions or expenses:

1. Go to Business overview and select Projects (Take me there).
2. Select the project. The funds you added in Step 2 show as income.
3. To add expenses, bills, or payroll hours to the grant, select Add to project and choose the transaction type.
4. To view grant-specific reports, select Project reports.

Check out this video for more info about using projects:

How to set up and use projects in QuickBooks Online

In QuickBooks Online, a vendor is a person or business that sells a service or product that you're paying for. Contractors are people assigned to a specific task that provides a service to yo. You can also track contractor payments for year-end 1099 filing.

Who needs a 1099? Any non-employee who you might pay $600 or more in a given year (although electronic payments like credit cards don't count).

Find out more about adding vendors to QuickBooks. Before you start, check the IRS guidelines so you know who you need to file 1099s for.

Note: 1099 E-File Service only supports contractors with addresses in the United States.

Have your contractors complete a W-9

Before you start, we recommend having your contractors fill out a W-9. Then you have all the info you need to set up the contractor. You can download W-9 forms directly from the IRS.

Check out this video for more information about adding vendors:

How to add and manage vendors in QuickBooks Online

Here’s how create a vendor/contractor:

QuickBooks will start tracking their payments behind the scenes. When you're ready to file 1099s, you can seamlessly add tracked payments to the form.

Here's how to prepare and file your 1099s during tax season.

We'll cover more info about creating transactions and paying bills in Step 4.

QuickBooks is improving the look and feel of pledge forms. Depending on the version you have, there are two possible ways to customize them.

The original version (old invoicing) uses templates to customize your pledge and donation (sales receipt) forms. These templates are a great way to update any invoice or sales references to pledge or donation, to avoid confusion. You can also add disclaimer statements required by the IRS to the footer of your donation receipts.

For example: Donations with a value greater than $250 typically require a statement of whether goods or services were provided. You can create a donation (sales receipt) template to accommodate that requirement.

The new version (new invoicing) lets you customize pledge forms directly on the pledge itself. Donations (sales receipts) can’t be customized with the new version yet.

However, for donations with a value greater than $250, you can add the required disclaimer statement to the Message displayed on receipt field.

Learn more about which version you have and how to customize your forms for either version. 

Here’s how to track donor funds using pledges and sales receipts. You can also record in-kind donations in QuickBooks Online.

Remember: Pick one date as the start of all your bookkeeping in QuickBooks and then avoid adding any transactions from before that date.

Sign up for QuickBooks Payments to accept donations and payments directly through QuickBooks Online.

If you connected your bank in Step 3, take the opportunity to review and match imported transactions. Be sure to exclude any transactions that occurred before your chosen start date for QuickBooks.

Credit cards are the exception. If your credit card statement date doesn't line up with your chosen start date, sync and match your transactions back to the last statement before your QuickBooks Online start date.

Reconcile your bank accounts

After the end of each month, you’ll want to make sure the transactions in QuickBooks match your bank statement exactly. Reconciling monthly is not only important for good bookkeeping, but it saves a lot of headache in the long run. Learn more about reconciliation.

Set up budgets

Budgeting is especially critical to help nonprofit organizations stay on track with their spending. You can subdivide your budgets by grant or program. Learn more about budgets in QuickBooks Online. Note: The budget feature is only available with QuickBooks Online Plus or Advanced.

Manage users

Keeping your books in order is a group effort. Find out how to add users to QuickBooks Online and manage their roles.

For nonprofit organizations, it’s especially important to consider limited permissions for your users. For example, if someone has access to enter donations, consider limiting their access to enter expenses. Small safeguards go a long way to protect your organization from errors.

In reports, you can see how your hard work is paying off. Now that QuickBooks is set up for your organization, you can run reports to track revenue, expenses, funds and more.

There are two reports that are foundational to nonprofit accounting:

1. Statement of Activity: This report shows your revenue, expenditures, and net income for a given period. It's similar to the profit and loss statement for small businesses.
2. Statement of Financial Position: This report shows your assets (what you own), your liabilities (what you owe), and your net assets/equity (what your organization is worth). It's similar to the balance sheet for small businesses.

To run reports by program or by restricted/unrestricted funds, enter Class or Location in the search bar. The Statement of Activity by Class or by Location will be especially helpful for fund accounting.

Find out more about reporting in QuickBooks Online, or watch the following video:

How to run reports in QuickBooks Online

You can customize reports to fit the needs of your organization, and email reports on a regular schedule to key stakeholders.

Donor contribution letters

Year-end donor contribution letters are foundational to nonprofit operations. They let donors review their charitable giving for the year and keep records for taxes. They’re also a chance to say thank you and reinforce why their contributions matter.

There are some limitations for creating these statements in QuickBooks Online. We’ll cover two options for creating them, but neither are perfect. If these options don’t suit your needs, feel free to check out the Apps section below for alternatives.

Option 1: Create a statement

The advantage of this option is that you can send these statements fairly quickly and efficiently. The drawback is that you can't customize the statement to include info typically required by the IRS, like a declaration of 501(c)3 nonprofit status.

1. Go to + New and select Statement.
2. From the Statement Type ▼ dropdown, choose Transaction Statement.
3. For Customer Balance Status, choose All.
4. Set your desired start and end dates and select your desired recipients.
5. Select Print or preview if you plan to print and mail statements. (If you plan to include a thank-you letter, you’ll need to compose and print it separately.)
6. Or, select Save and send if you’d prefer to email statements to donors. (To include a thank-you letter, compose it in the email body before sending.)

Option 2: Customize a sales report

The advantage of this option is that the sales report is more customizable, which helps with IRS compliance. The drawback is that there are more steps involved.

You can print this report to mail a copy to the donor, or save it as a PDF to send via email. If you’d like to include a thank-you letter, you’ll need to compose it separately.

Check out this blog post for more details about nonprofit reporting in QuickBooks Online.

Mailchimp

When you connect QuickBooks Online with Mailchimp, you can sync your marketing and financial info to the Mailchimp audience of your choosing. Your QuickBooks Online donor information—including email address, name, physical address, purchase history, and more—will sync to Mailchimp as contacts in the audience.

Nonprofit organizations can benefit from a strong marketing platform like Mailchimp. Plus, they have a nonprofit discount.

Find out more about our Mailchimp integration here.

Keela

Keela is a donor management and communication software, as well as a fundraising tool. It integrates with both QuickBooks Online and Mailchimp and helps fill some compliance gaps when providing donor acknowledgements.

Find out more about Keela’s integration with QuickBooks here.

Kindful

Kindful is an integrated, web-based software with built-in fundraising automation, online donation pages, donor CRM, and reporting tools, all aimed at helping nonprofit organizations fundraise effectively. Kindful also helps with automating compliant donor acknowledgements.

Find out more about Kindful’s integration with QuickBooks here.

Method:Donor

Method lets you save the names, contact info, donations, activities, tasks and follow-ups for your contacts all in one place. Method’s sync provides more than just a view of your organization. Your team can edit and add info including contacts, donations, expenses, lists, and more, all from within Method.

Find out more about Method:Donor’s integration with QuickBooks here.