QuickBooks for Churches

Accounting Software for Churches and Nonprofits

I love QuickBooks Online (QBO)! I use it for my bookkeeping business and it does everything I need and more.

I have set up more churches than I can count in QBO and have found it works well for them as well...with a little adjustments.

Using  QuickBooks for Churches and Nonprofits:

Let me lay a little ground work here first...

If you are a start up church or a small church...without many assets and liabilities...

single entry bookkeeping...such as my accounting spreadsheets may work fine for you.

However, double entry bookkeeping is always the best option...if possible. See this page on basic accounting for the difference between single and double entry bookkeeping.

For those who do have it in their budget for accounting software, I recommend doing some extensive research before choosing your software.

See this page for some tips to help you decide which software is the best accounting software for your church or nonprofit.

One of the best incentives for using QBO or QB Desktop is TechSoup and Intuit's "almost" free offer! Click on the link in the box below for more details...

Like I stated above...I have set up many churches in the online version of QuickBooks and like the extensive reporting capabilities among other things with QB desktop and online software. 

Let's start with the desktop version:

Features I like with QuickBooks Desktop:

• One time purchase and it's yours! (Update: you can now get the Nonprofit desktop version or the online QB almost free of charge through Techsoup! See more on that offer here!)
• QB Centers along with icons make it easy to access frequently used functions
• Can password protect it
• Handles bills, payments, and bank reconciliation easily
• Great budgeting tools
• Computes and processes payroll and its taxes...for an additional cost (Note: I can not recommend using Intuit's Payroll as I personally have had too many bad experiences with them)
  
• Prints Checks
• Compatible with Microsoft Office (Word, Excel, Outlook, etc)
• There are more reports you can create in the desktop than the online version.
• You can track donors easier in the desktop version.

Features available in the Nonprofit Edition:

• Tracking donors and contributions
• Creating personalized letters and envelopes for donors
• Tracking budgets and finances by program
• Preparing IRS Form 990 or Form 990-EZ
• Creating other reports specifically for non-profits
• Can create a Statement of Financial Position (Balance Sheet) by class (funds)

So in a nutshell...

1. QBDT (QuickBooks Desktop) (Nonprofit and Pro) works best for churches and non-profit organizations with operating budgets of all sizes ....even those with an operating budget of  $1 million plus. However, I strongly suggest either hiring someone very familiar with setting up churches or nonprofits in this "off the shelf" accounting software OR purchasing Lisa London's 3 Online Course Bundle (more information below on the classes) BEFORE setting up and using this desktop software...even with the Nonprofit Edition!

I have seen too many "messed up" QB files that caused a lot of problems and stress for the users....some were even set up by CPA firms that were just not familiar enough with church accounting to set up an "effective, easy to use" QB file.

So if you decide to use QBDT or QBO, do at least one of the following:

• Find a CPA that KNOWS how to set up QB for a church (ask for references!)
• Purchase and USE Lisa London's hundreds of short online videos and PDFs in her online classes that show you how to set up the file properly for a church or nonprofit and HOW TO use it efficiently! 
• At the very least...purchase her book "Quickbooks for Churches". She will show you how to set up and use QB in her book too...but I have found the online courses with the lifetime access are the best...especially for visual learners. 

Something to keep in mind with the desktop version is the importance to keep a backup copy "off site" in case the file gets corrupted or the computer it is on crashes.

Which brings me to the QuickBooks software I prefer: QuickBooks Online!

Features I like with QuickBooks Online:

• Web based so more than one person can use it at the same time
• In the "cloud" ...you don't have to worry about "backing it up"
• Tons of "How To" videos available for the basics ...but not many specified for churches...such as how to track a grant?

• Great reporting capability...even though there are not as many reports as the desktop version, the reports in QBO are easy to create and modify
• Ability to create a "report package" with the click of a button which includes a cover sheet
• Connects with a LOT of apps!
• Can connect to almost any bank and credit card and roll in transactions for easy importing. (Let me state here that even though I love the bank integration...I always manually add paper checks and then "match" them in the bank feed...so I can properly track outstanding checks) 

Now let me tell you what I do not like about QBO. 

I don't like tracking donors/donations in it. It can be done, but it gets time consuming with entering EACH donation as a Sales Receipt. 

I always suggest my clients use a great online donation tracking software such as Breeze or Planning Center that tracks off-line giving and well as online. Then I just split the deposits in QBO using the designation reports from those software.

To sum it all up... I believe QBDT and QBO can be affordable options for many churches and nonprofits. Once it is set up PROPERLY -- volunteers with little or no accounting knowledge can easily use it.

The difficult part is setting it up correctly. If your church can afford it, I highly recommend using someone that is very familiar in church or nonprofit accounting to set it up for you AND train you how to use it effectively. That way it will be done correctly and saves possible headaches down the road. 

However, if hiring someone to set up your QB or QBO is not an option due to a limited budget. There is still a way for you to set it up and enjoy all the benefits of this very effective accounting software...

Purchase Lisa London's QuickBooks for Churches. Lisa is a CPA and has written this book that is a must for anyone setting up or even maintaining a QB file for churches.

Lisa will walk you through DESKTOP QuickBooks from start to finish, complete with examples, terminology, and everything a busy church administrator or bookkeeper needs to know.

The book is written for beginner and advanced church bookkeepers alike, in a friendly and easy-to-understand style. It includes:

• Step-by-step instructions on how to set up QuickBooks and utilize it more efficiently for your church
  
• Valuable tips on how to make QuickBooks work better for churches, both large and small   
• Numerous illustrative screenshots and time-saving shortcuts

QBO Tips and Comments...

Handling a Bounced Donor Check

I had a client that sent thru a donor's check twice and it bounced both times. They requested that I deduct the amount from the donor's giving record (they were not going to try to deposit it again, nor were they going to attempt to collect the amount from the donor) and properly handle all of the transactions that occurred with the event. 

This is how you take that donation back out of the donor's giving record and handle the returned check:

Go to the Quick Create (Plus Sign) ----> CLIENTS ---> Refund Receipt.

Choose

• the donor whose check bounced.
• the date that you want the donation deducted off the donor's giving record.
• the church/nonprofit bank account the check was deposited and returned for NSF (insufficient funds).
• the Product/Service that was chosen for the original donation (we need to deduct that amount from that income account)
• the amount of the bounced check

If you are rolling in your bank transactions, you will simply match the above transaction to the returned check. You can assign the returned check charge (if applicable) to Bank Fees/Charges.

Accounting for Online Donations on QuickBooks Online

I don't like tracking donations in QBO. I would rather use donation tracking software outside of QBO and just properly assign the deposits in QBO.

However, if you track and record donations in QBO, you must record the full donation and give the donor full credit for their donations...even though your online payment processor may take a processing fee out before depositing it into your bank account.

Here is a way to do that...

Record the full donation in a Sales Receipt.

Click the Quick Create Button (see image above). Click Sales Receipt. Enter the full donation...

1. Enter the donor's name (if it is a new donor ... click Add and add their information in "Details")

2. Enter the date of the online donation.

3. On Payment method...I Add "EFT"...but you can name it what you want or leave it blank.

4. On Reference no. I usually add the transaction ID from the online processor.

5. Make sure you deposit to: "Undeposited Funds"!

6. Choose your Product/Service

7. Enter the full donation amount and class ... if using classes to track designated funds.

8. Click Save and New if you have more donations to enter or Save and Close if you don't have any more donations to add.

Now let's take those "undeposited funds to the bank and subtract the online processing fees...if applicable... 

Click the Quick Create Button and then Bank Deposit. I like to have my online giving app open at this point or a report printed out that shows what donations are included in each deposit and how much the online fees were...

1. Select the bank account the funds were or will be deposited in.

2. Select the date of the deposit.

3. Select the donations that were included in that deposit.

4. Under "Add New Deposits" select the expense account you use to track your online processing fees.

5. Put the amount of the fees in as a NEGATIVE number!

6. Make sure the amount in the top right corner equals your actual deposit.

7. Click Save and New if you have more deposits to enter or Save and Close if you don't have any more deposits to add.

One last tip...if you have a large number of donations (online and onsite) to enter, use an app such as SaasAnt to import multiple transactions into sales receipts.

P.S. I also like to put the gross amounts and fees in as negative numbers when I am just assigning the online deposits in QBO (if the deposit is the "net" donations).

Handling Unusual Donations in QBO 

I am going to include some tips on handling specific donations in QBO in the next few months.

The first one is how to handle Pass Through donations (donations received for other organizations).

There are a couple of ways to handle these types of donations. Which method you choose depends on your accounting requirements...or how you prefer to track the donations.

First method: Track pass through donations using accrued liability accounts.

Go to Accounting: Chart of Accounts.

Click on the green "New" button in the top right corner.

Category Type: Other Current Liabilities

Detail Type: Other Current Liabilities

Account Name: Pass-Through or whatever you what to title it

Add a appropriate number and description if desired.

Do not put a balance in! You can add in any beginning balances in through a journal entry.

You can add more accounts as sub accounts to track specific pass throughs. Just repeat that above steps and click the little box to indicate it is a subaccount of your original account.

If the pass through donation is eligible for a donation receipt ...then you will need to set up a Product/Service, so you can track the donation for a contribution receipt. See more below.

If no donation receipt is required, you can just create a bank deposit and assign your new liability account. When you pay the organization that the donation was collected for, you will assign the same liability account when you create the check or expenditure. That will zero out the liability account.

Second method: Using income accounts

If you need to track the pass through donation for a contribution receipt OR if you just want to track those donations for management purposes, you can set up the pass thru donations as product/service items.

Go to the gear wheel at the top right (see image above). Then under the Lists column, go to "Product and Services". 

Click on the green "New" button in the top right corner.

Choose the type: Service

Name it Pass Through Donations (or something similar) then choose which Income account you want to link to (Outreach or Pass Through Funding, or something similar?). Note: if you are using the accrued liability method, you can use that account.

"If you are receiving the donations through a fundraiser or cash not from a particular donor, set up a Customer named for the other organization (i.e. Food Bank). If the money is received from a donor, use their name instead.

Enter the donations as you normally would, but set the product/service item to the Pass Through Donation. If you are collecting for several different organizations, set up sub-product/service items to track by organizations. After all of the donations for are entered, run a Sales by product/service report for the time period of the donations to see the total dollars owed to the receiving organization.

You will now set up a product/service item with Service as the type called Pass Through Payments linked to an Expense Account-Payments of Donations to Others or Pass Through Donation. Set up any sub-items for any multiple organization to match the ones you set up above.

Next, go to the Vendor Center and set up the receiving organization as a Vendor.It cannot be the same as the Customer name, so simply add a "v" after the organization's name. Enter a bill for the amount of the donations (from the Sales by Item report) and charge it to the Pass Through Payments item or related sub-item. The check can then be printed as usual". (excerpt from the Accountant Beside You)

Check with your accountant to see which method you should use to record the pass through donations.

Comments...

The comments above are for general information purposes only and do not constitute legal or other professional advice on any subject matter. See full disclaimer.