Why the QuickBooks Class Feature is a Nonprofit’s Best Friend (Part 2)

Most nonprofit organizations use the chart of accounts to capture functional allocations in QuickBooks, resulting in a complicated and lengthy account listing and reports that are at best, difficult to interpret. Without exception, every nonprofit organization that has hired me for QuickBooks support exported financial reports into Excel so data could be manipulated to create a suitable report format. This is unnecessary and can usually be avoided using QuickBooks classes with a streamlined chart of accounts. (Nonprofits seeking a general account listing may wish to use the Uniform Chart of Accounts, which can be downloaded from http://nccs.urban.org/projects/ucoa.cfm.)

Instead of the examples shown last time, let’s now assume our sample nonprofit organization uses classes. The purchase of trophies will now be recorded as:

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And the sponsorship will be recorded as:

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Notice that both entries use the same class. By using classes we can easily filter reports to show only those functional allocations we wish to review. We can also take advantage of the built-in reports in QuickBooks such as Profit and Loss by Class or the Statement of Functional Expenses.

To set up classes, choose Lists>Class List. This screen looks very much like the chart of accounts window. You can create classes by typing Ctrl + N or by Clicking Class > New at the bottom of the window.  To provide more detail, you can also create subclasses. Our sample nonprofit organization might have a class list that looks like this:

Mgmt & Admin

Fundraising  

• General Fundraising
• Golf Tournament
• Annual Dinner & Silent Auction

Program Services

• Community Outreach
• Education Programs
• Medical Services
• Research

An even more useful feature is the ability to record budgets by class. Suppose our nonprofit organization has developed a budget specifically for its golf tournament. When recording the budget, we can segregate the budget into specific classes so we can report on them later. Wouldn’t it be much easier to generate a Budget vs. Actual report for just the golf tournament, rather than exporting the report for the entire organization into Excel and picking it apart to separate out the items relating to the golf event? Using the built-in reports also reduces human error. Too many times I’ve seen an organization create a report in Excel that contained data entry errors or problems with formulas.

The Budget vs. Actual report in QuickBooks allows the user to view data as “Account by Class.” This option generates a report with columns for all classes, with budget and actual data presented for each.

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Switching to a class structure in QuickBooks may require some adjustment at first, but I have yet to encounter a nonprofit organization that didn’t benefit from this change. There are many benefits to the organization, more than can be outlined in a few blog posts. If you work with a nonprofit organization and would like to speak with me directly about how your organization might use classes, please contact me at lori <at> myshoeboxbookkeeper.com to arrange for a consultation.