Create Accounting System

Requirements

Generally Accepted Accounting Principles (GAAP)

Compatible with Form 990

On Form 990 all expenses must be classified into three types:

  1. Program Services expenses.
  2. Management & General expenses.
  3. Fundraising expenses

Activity Based Accounting (see Implementing Beyond Budgeting Exhibit 3.10) (“Every action has a purpose and every cost can consequently be attributed to an objective.”)

Chart of Activities Example
  • What: Type of cost
    • Salary
    • Travel
    • Rents
    • Consultants
    • Insurance
    • etc.
  • Who: Department
    • LD Plant
    • Site management
    • Logistics department
    • Sales
    • Etc.
  • Why
    • Activities
      • Quality control
      • Packaging
      • Technical support for customers
      • Order handling
      • General management
      • Training
      • Etc.
    • Projects
      • Year 2000
      • Euro
      • Etc.

Resources

Basics

Legal

Implementation

Checklists
Monthly-Close-Checklist-Project-Plan.xlsx (63.5 KB)

Community

Related Projects

@michael I started a Discourse topic to track us creating our finance protocols and systems. The first item on the list (financial management for nonprofits) is a resource on how to set up internal checks and balances!

Great article!

How to Set Up Your Nonprofit Accounting System RIGHT So it Helps You Grow

nonprofit accounting system

When set up right, your nonprofit accounting system will help you manage your nonprofit and streamline processes like budgeting, projecting cash flow, and even hiring.

The problem is that if you’re like most, you haven’t paid a lot of attention to your accounting system.

Most people who start or lead nonprofits aren’t numbers people.

In fact, they’d rather do most anything else than manage numbers. Maybe that’s you!

But you must learn to manage numbers if you want to grow your nonprofit, fulfill your mission, and make a big difference in the world.

The best time to implement and start using a good nonprofit accounting system is from the beginning.

It should be part of your organization’s internal culture.

If you don’t yet have good accounting systems in place, NOW is the time to correct that.

We’ve worked with nonprofits that ignored their Quickbooks and just did the minimum to get by.

Not only is it a mess to get accurate financial reports, you can’t get the data you need for grants which can wipe out your chances of getting grant funding.

So, it’s best to take the time to get your financial house in order.

Starting or fixing your accounting system BEFORE you have a problem is just smart planning.

Because believe me, without a good nonprofit accounting system in place, you WILL run into problems later. I promise you will.

What a Nonprofit Accounting System IS

What do I mean by “nonprofit accounting system?”

I mean two things: One is the actual software you use like Quickbooks or Aplos that is meant for nonprofit use, and two, the actual processes you use to manage your accounting.

It’s best to get both in place as soon as possible.

Even if you have a tiny nonprofit and everything is recorded neatly on spreadsheets, you need more.

Maybe not today, maybe not tomorrow, but you will need more.

And going back to retroactively enter data is a huge time-consuming headache.

We’ve tried to help small nonprofits with messed-up accounting systems raise money, and it’s extremely difficult. We always have to hit the “pause” button while we clean up the accounting mess.

It’s best to set things up right and follow nonprofit Accounting best practices to keep your system working well.

So, let’s talk about what it takes to put a good nonprofit accounting system in place, starting with some common misconceptions and fears related to accounting.

Myths About The Nonprofit Accounting System

MYTH: I already have a Donor Management System, so I don’t need an accounting system.

FACT: Donor Management is NOT the same as Accounting. While Donor Management is crucial, it’s crucial for different reasons. The sole purpose of a Donor Management system is to track donors, track your communication with donors, and track donation information. Accounting on the other hand, tracks how those donation dollars are allocated and spent. Your Donor Management system helps you identify potential major donors and spot trends in giving. Your Accounting system helps you manage cash flow and prepare your 990.

MYTH: I don’t need an accounting program to tell me how much money I have. I can look at our bank account anytime and know exactly where we stand.

FACT: A properly managed nonprofit accounting system tells you much more than where you are today or this month. It will give you a historical view of your income and expenses and tell you exactly where your money is going each month. You can run reports and see quickly the key pieces you need to monitor to assess the nonprofit’s financial health. Financial management is about much more than just dollars in the bank. It’s about spending patterns, revenue projections, and the likelihood of reaching financial goals. These are all things you should be carefully monitoring as your nonprofit grows.

MYTH: Nobody has time to enter data into an Accounting program.

FACT: Most Donor Management Systems automatically integrate with the most-used accounting programs, including Quickbooks. This means that when someone donates online, that information automatically transfers from your Donor Management software to your accounting software. There’s no need for duplication of effort with the automation that’s available through most programs. Plus, once you set it up and map the fields (i.e. how they “talk” to each other), the information will always be coded and categorized correctly and not subject to human error. For information that does need to be entered, Quickbooks remembers how you coded items last month and will offer those as suggestions for any new entries, making data entry pretty fast, especially if you spend money with the same vendors each month.

MYTH: We don’t have much money right now, and we just have a few donors. There’s nothing to really manage and definitely not enough to justify spending money on Accounting software.

FACT: This is EXACTLY the time when you need Accounting software. Here’s a visual example for you.

Imagine you have a pile of marbles, and they need to be sorted out by color.

Is it easier to sort them now?

Or is it easier to wait until you have more marbles?

It’s easier with fewer marbles right?

Let’s take it a step further.

Let’s say you run an animal shelter. And everyone who has donated a red marble says they want that marble to be used for spay/neuter surgeries.

Without an Accounting system, how will you know how many red marbles there are?

You can’t use those red marbles to buy food or supplies because they have been earmarked for spay/neuter.

To make matters more complicated, some people donated green marbles to pay for dog and cat food.

How in the world are you ever going to keep track of all this?

With a properly functioning Accounting system, that’s how.

Different categories can be set up in the software to track exactly how much you’ve designated for specific purposes and to fulfill your obligation to the donors who wanted their dollars to go to a specific cause.

So, let’s compare again:

With an accounting system:

Without an accounting system:

The same concept applies to expenses.

You want, and actually need, to know exactly what you’re spending your money on. Past and present patterns help you plan for the future!

Can you afford to hire someone now or do you need to wait 3 months?

Can you afford to rent that space next month based on cash flow projections?

What about that old horrible computer, can you afford to replace it by year end?

Most importantly, are you spending wisely so that you can make the most impact on the most lives?

Using your Accounting System Smartly

The categories and sub-categories in your Accounting system should give you fast and accurate information to make important decisions without jeopardizing your financial stability.

As long as they’re set up right and properly maintained, they’re super helpful.

If not? Well, your tool won’t exactly do its job.

If you have multiple people entering data and they’re categorizing stuff all willy-nilly, that’s where the mess starts. You’ll wind up with duplicate categories, mislabeled expenses, and more — none of which is fun to clean up. And if you have to hire someone to clean up your mess, that can get really costly.

So, set it up right, and use it right from the beginning.

Then, you can use reports from your Accounting software to manage your nonprofit and see things you might not notice otherwise.

Maybe you’re spending a little too much money on office supplies and not enough on your programs. A simple report with a pie chart can easily show you that.

Maybe you’re spending significantly more this year compared to last year without a significant increase in the number of program participants. A report showing comparisons can help you see this increase.

The only way to learn and to grow your organization is to understand where you’re spending, where you need more, and where you need to cut back.

Your Accounting system should be your # 1 tool in managing your nonprofit’s finances and keeping it financially healthy.

Applying for Financial Help

If you are in a position to apply for a grant, apply for a business credit card, or even apply for a loan or line of credit, you will NEED to have comprehensive data to present.

Lenders and grantors want to see a snapshot of your finances to get a sense of how well your nonprofit is doing.

They will want to know that you’ll be responsible with the funds they offer you and that you won’t be closed in, say, 6 months.

And more than anything, they’ll want to know that you truly need the funds you’re asking for.

They’ll discern all that from the financial statements and reports you provide them.

When your Accounting software is set up right, this should be an easy report or two.

Filling Out Form 990 or Other Government Reports

Having an organized Accounting system can make your tax filing a breeze.

You no longer have to dread the IRS Form 990 because with just a few clicks, you’ll generate all the reports you need.

Print, sign, send. Done.

Who Should Do Your Bookkeeping

One really important piece of your nonprofit accounting system is identifying who will do the day-to-day data entry and who will manage the whole system.

When your nonprofit is new, it’s tempting to use the cousin, friend, neighbor, or in-law that does “bookkeeping.”

And many of those people are willing to volunteer their time to help you out, which saves money!

While this may seem like an ideal situation, proceed with caution .

You need a qualified bookkeeper who understands the software system you’ve chosen, who understands the basic principles of nonprofit accounting, and who can keep your system current — meaning, they have the time to spend keeping everything entered.

Volunteers can be awesome, but with no skin in the game, they can get behind or take shortcuts just to get the job done (I’ve seen it happen).

It might be better, since your Accounting is critically important, to spend the money on a paid contractor to tend to your books.

As a nonprofit organization, full transparency is required of you and it’s crucial to have a clean, well-kept set of books.

On top of the day-to-day bookkeeping needs, you should also work with a Certified Professional Accountant (CPA) to review your financials and do your tax filings (a separate person than the one doing your bookkeeping). There are a few reasons for this.

  • A professional CPA will take full responsibility if anything in your filings is inaccurate.
  • It’s always a good idea to have more than one set of eyes on your books and your finances.
  • CPAs keep up-to-date on filing requirements, deadlines, and tax changes that may affect you.
  • If you’re ever subjected to an audit, the CPA will know how to answer any questions or inquiries that arise.

Set It Up Right From the Beginning

Trust me, it’s a PAIN to have to clean up a Quickbooks file!

So set up your Chart of Accounts right from the get-go.

That means you need to think about the different ways you’ll both generate and spend money.

And customize your accounts so they make sense for YOUR nonprofit.

One size does NOT fit all here.

We had a client that worked with an accountant to set up their chart of accounts and it was clearly copied from some standardized list.

The list contained several accounts that were business-oriented that had nothing to do with the nonprofit or its operation.

There were also lots of duplications of accounts that made it difficult to get accurate information from the system, requiring hours of manual data manipulation to get what was needed.

The worst part was, at the end of the day, we still didn’t trust that the numbers we had crunched were accurate because of how they were entered initially.

So, take the time to plan out what you’ll need from your system and set it up right from the beginning so YOU don’t have to clean up a mess later!

Sharing Isn’t Always Caring

Your nonprofit should have its own bank account without exceptions.

That means you should never mix or commingle yours or anyone’s personal funds with the nonprofit’s funds.

Not only does this create a very gray area in terms of finances, it’s also illegal in some states.

The same rule applies to credit cards and loans.

As a general guide, keep everything that belongs to the nonprofit completely separate from things that belong to you — money, equipment, tools, credit cards, and anything else you can think of.

Handling Restricted Funds Correctly

Getting donations is one thing. Handling them correctly is another.

And depending on how you ask and the donor’s intent in giving, you may have restricted funds on your hands that need to be carefully managed to prevent your nonprofit from getting in trouble with the donor or the government.

Any donation given with the intent that it be used for something specific needs to be carefully recorded in your Accounting software so you can be sure the money is spent appropriately.

It’s important to track, manage, and spend restricted funds carefully and purposefully so you can report back to the donor exactly what happened to their donation.

Here in the U.S., the IRS is serious about restricted funds. Improper use can result in severe penalties or even loss of your tax exempt status. Boards can be sued by donors for misuse of such funds.

And maybe worst of all, your reputation and future fundraising potential can be destroyed by mishandling donations.

So, take this one seriously. Figure out how to track restricted funds in your system and do it.

Monthly Monitoring

Every month, you and your Board should be reviewing the financials from the previous month to see how the nonprofit did and to decide if there are any adjustments you need to make to spending or fundraising for the coming months.

Specifically, you should be monitoring:

  • Organizational profit/loss to see if you stuck to your budget or had a surplus or deficit for the month.
  • Month vs Year-To-Date numbers to see if your monthly income and expenses were on track and if you’re on track year-to-date.
  • Cash in the bank to see if you have enough money to pay upcoming bills.
  • Debt to see where you stand with anything you owe.
  • Next 90 days to see what’s coming up and if you’re ready financially.

Depending on your situation, there may be other things that you need to monitor each month, too.

If you don’t monitor your nonprofit’s financial health each month, it will be easy for things to get real bad real fast. Then, you’ll find yourself facing some very difficult decisions about which programs to scale back and who gets laid off first.

Annual Operating Budget

One HUGE part of any good Accounting nonprofit system is a detailed annual budget that’s written and tracked.

Let’s be honest here — without a budget, you’re operating on hope that things will work out.

So take the time to create an operating budget for your nonprofit.

Even if you’re busy and don’t have time. Even if you don’t have a lot of money coming in. Even if you’re not a numbers person.

Take the time to create an operating budget so you can better manage your growing nonprofit.

Bonus points if you enter it into your Accounting software and let the system track your progress for you!

Documenting Processes

We have a saying that if it’s not in writing, it’s not real.

That means that any process that isn’t documented isn’t a real process.

It may seem silly, especially if your nonprofit is brand new or tiny, to write down how you do things.

But you won’t be a new or tiny nonprofit forever.

And it’s much easier to train new hires or new volunteers if there’s a documented system in place.

So, whatever decisions you make about how you’ll do things, write them down somewhere so that it becomes part of your nonprofit’s operation.

Count Your Eggs Before They Hatch

Developing and organizing a nonprofit accounting system well before you think you need it is one time when we recommend putting the cart before the horse.

Any successful nonprofit starts with planning, planning, planning, and more planning.

And while you may not have gotten into this to deal with numbers and manage money, it’s part of the job.

Taking care of this task now will actually free up your time so that you can focus on what you WANT to do: Change Lives.

Example of how Sunrise Movement sets up their accounting system.

Checklist of Elements Needed

Full Article

Excerpts

Fiscal Policies and Procedures Manual (or Accounting Procedures Manual)

Type of Accounting System and Recording of Financial Transactions

  • Cash Receipts Journal
  • Cash Disbursements Journal
  • Payroll Journal
  • Accounts Receivable Ledger
  • Accounts Payable Ledger
  • Sales Journal
  • Purchases Journal
  • General Ledger

Accounts and Chart of Accounts

  • assets, liabilities, net assets (or fund balances), revenues, and expenses
  • program vs general

Financial Forecasting

Petty Cash

Trial Balances

Internal Controls

Financial Statements

  • cash flow statement
  • statement of activities
  • statement of financial position

Great questions for people to answer in order to inform implementation

Full Article

Excerpts

  • What is the nonprofit’s mission?
  • What programs do we offer? (Not who funds us — but what service or product do we provide or produce — what do we do?)
  • What are our sources of revenue?
    • Grantors
    • Corporate donations
    • Individual donations
    • Program income (fees for services)
    • Foundations
    • Special events
    • Other?
  • What types of reports are required for all users? Bring samples of these reports.
  • What does the nonprofit’s chart of accounts currently look like? Is it sufficient? Does the chart use account names that are understandable to all readers? Should we use account names that our funders use?
  • What is our current budget? Bring a copy. How does it sync up with the chart of accounts?
  • How is payroll processed? Is there a labor distribution? How is the labor distributed to each account, program, and funding source?
  • How do we request funding from our funding sources? How are the receivables and the subsequent receipts recorded?
  • How does the nonprofit enter invoices from vendors? Is there an approval process? How are the expenses coded with regard to account, program, and funding source?
  • What is the nonprofit’s current hardware and network setup? Is the current environment sufficient to run accounting software? Will we need to upgrade our system anyway?
1 Like

Proposal to Engage A Bookkeeping Cooperative to set-up our systems

I’ve been doing a lot of research on what support is available for nonprofits that are just starting up, and propose that we engage with A Bookkeeping Cooperative. They’re super values aligned! I also appreciate that they offer a solidarity rate. Their initial assessment and set up package is $1130, I propose that we request a solidarity rate of $565. What do you all think?

Draft of our Email To Them

Tell us a little about your organization and why you’re getting in touch with ABC now.
Youth Power Coalition is youth leaders and adult allies building a movement for youth-led collective impact. We believe that when young people — young people of color, young people who are poor, young people with the most experience with society’s challenges — lead, we can reach a future in which ALL young people are equipped to thrive as healthy, happy, and impactful citizens of the world. Our programs include young people training young people in how to lead collective impact movevments and advocating for youth decision-making rights in all spaces where decisions impacting young people are being made.

We’re getting in touch with ABC now because we’ve made do on all volunteer labor and have had at most $5000 in the bank for the past four years, but this past month we’re finally having initial success mobilizing the resources necessary to make our organization financially sustainable, so we’re looking for support to set up our business systems for the very first time.

We also got in touch with ABC specifically because we want to support a fellow worker-led organization that is dedicated to our collective liberation. We want a partner who understands how Youth Power Coalition wants to work in ways different from the status quo.

  • We want completely transparent financials including where money is coming from and how it is being spent
  • We want decentralized decision-making regarding how resources are allocated
  • We want to financially support organizers according to the principles of mutual aid

We humbly request a solidarity rate.

We’re majority governed by people most impacted by inequity.

  • 82% of our organizers are youth leaders under 25 who are directly experiencing how lack of youth power lead to policies and practices that harm them (53% under 18, 29% 18 to 24)
  • 92% of our youth leaders are Black, Indigenous, and/or people of color (38% Black, 7% Indigenous, 46% Asian, 20% Latinx)
  • 86% are first or second-generation immigrants
  • 75% are from poor or working-class backgrounds (33% poverty, 42% working-class)

We have access to grants but have received our first grant just this month! Our grant is $20,000 from the North Star Fund. Our annual budget the last year was less than $5000. In addition, we ultimately want to be funded primarily by our members and partners. Members and partners must set Youth Power Coalition’s priorities, not funders.

We are focused on solidarity economy work in that we aspire to practice it internally and advocate for it externally. We aspire to be community financed, practice gifting and bartering, purchasing ethically, and ensuring that what we create as a movement is accessible to all.

We are focused on collective liberation work by being community-led, working to transform oppressive systems including adultism, racism, sexism, and classism, and practice values of equity, care, courage, love, and accountability.

What is your annual gross revenue?
July 2020 - June 2021 (estimated $5000) / July 2021 to present:

What is your budget for ABC services?
Would you consider doing an initial assessment and working with us on the set-up package for $565?

What is your ideal timeline for services?
This month

UPDATE: We’ve decided to engage! Link to the agreement (Private).

Welcome @Nandy who is now taking on this project. Next step to move it forward is to create our chart of accounts.

Hey Deborah! I have uploaded the Chart of Accounts word document on the Finance drive. The file name is “CoA”. @deborah @michael @valli, please take a look at it. I created it using form 990. Let me know what you think. Thanks!

1 Like

Thank you @Nandy! I went through with comments. I also answered your questions at the bottom of the page. My general thought was, let’s have this match the 990 as closely as possible, which will make life easier when we need to file the form.

@insiyalambe and I met with Terry of ABC today!

Date and Time
October 29, 2021 at 10 AM Eastern

Updates
Terry of ABC collaborated with us on figuring out what our initial set-up could be. We decided to

  • Use Quickbooks because it’s very affordable via Techsoup
  • Try the workflow where expense and income receipts are tracked via Open Collective and that’s what the bookkeeper will use to reconcile Bank Accounts
  • Explore how we might incorporate our department, programs, restricted grants, and chart of accounts into our set-up

Next Steps
Deborah purchases Quickbooks
Deborah adds finance team members + Terry (as an accountant)
Deborah adds bank feed to Quickbooks starting July 1st, 2021
Deborah sends bank statements to Terry so Terry can spot check the bank feed
Deborah tries out the Open Collective workflow
Terry sets up Quickbooks given our Quickbooks Setup info

Next Meeting Date and Topics
November 12th at 11AM Eastern

  • QBO Orientation

Link to Full Meeting Notes

In Attendance
@insiyalambe @deborahchang

November 12, 2021
#finance

@insiyalambe and I met with Terry of ABC to do a Quickbooks Online Orientation. Full recording here.

Terry showed us our chart of accounts and how to reconcile transactions. I was then able to ask the following questions and recorded the answers plus any next steps that came out of the meeting. I have since documented additional questions that have come up and what the answers ended up being.

Answered

:heavy_check_mark: How do we transfer information in Quickbooks to Form 990?
I made our Chart of Accounts match the Form 990.

:heavy_check_mark: What do we do with Opening Balance Equity?
Delete Journal Entry that Quickbooks Created! How to cleanup Opening balance equity in QuickBooks Online - YouTube. Add the Opening Balance Equity to Retained Earnings Opening Balance Equity Account: Common QuickBooks Mistakes.

:heavy_check_mark: What do we do with Billable Expenditure Revenue?
What Billable Expenditure Revenue is: https://www.dancingnumbers.com/quickbooks-billable-expense/
Instructions from Quickbooks Made Easy: QB Online QuickTip Nov 2021: Using the "Billable" Feature to Track Reimbursement-Based Grants - YouTube

I followed the directions above with the exception of moving income into Uncategorized income instead of Billable Expense Revenue. Now we can make Billable Expense Revenue inactive and have just one place we need to monitor when categorizing income.

Response from Quickbooks for Nonprofits Thread

You’ve got two options when pulling expenses into invoices for reimbursable grants in QBO to get the income where you need it, which is contributed grants income.

  1. Choose the “multiple accounts” option under reimbursable expenses under the gear, and then map each expense account you use to the desired income account by editing it in the chart of accounts.

  2. Use product/ service items and mark the “buy from a vendor” option to map both income and expense accounts. This option can be really useful when the grant requires more detail -say on salaries or travel - than you want in your chart of accounts.

A different option from Quickbooks for Nonprofits Thread
We use the billable revenue, with 2 sided items using the we buy from a vendor. We wanted to show the reimbursed funds coming through our programs as the benefit they are. The 10% we actually receive from the grant collapses on the statement of activity to show the total grant amount. So the billable revenue + the 10% = the amount of the grant. The expenditures are recorded as items not categories/accounts to record both the purchases and labor cost of for the grant. All receipts/invoices/billable time records are separate line items. They are all attached when we email the invoice/pledge.

Direction from QuickBooks Help Pages

This feature allows you to use one or more income accounts to track billable expenses. See some examples on how this work:

On the Check page, you enter a payment for $200 worth of lumber, using an expense account called Lumber, and make it billable to one of your customers. Then you include that billable expense on the invoice to that customer.

What happens?

In the check transaction, QuickBooks decreases your checking account by $200 and increases the Lumber account by $200.

In the invoice transaction, QuickBooks increases your accounts receivable account by $200. It’s also affected by the income account setting you choose:

  • If you choose In a single account , the account specified in the setting Gear> Chart of accounts > Billable expense income account is increased by $200.
  • If you choose In multiple accounts , the account specified in the Account information page for Lumber is increased by $200. For example, you might specify an income account called Reimburse:Lumber.

Note : Be sure to check out this related setting: Advanced > Chart of accounts > Billable expenses income account.

:heavy_check_mark: How do we handle unapplied cash revenue?
This is a default accounts used when reporting by cash basis. They cannot be changed and can be left alone. See QuickbooksHelp Unapplied Cash Payment

:heavy_check_mark: How does this work with distributed decision-making?

Create a class for every circle
This would be easier for people to split their time between circles.
We’d have to figure out what we do if someone spends time writing a grant application for a specific circle, though. Maybe we can believe it all washes out.
Another reason why we would do this is maybe in the future, we would want to do fiscally sponsored projects, or maybe it’s just used for when circles mature to the point when they’re fairly self-sufficient and are run like its own business unit. The challenge with this is that would the classes now be off? Other locations would have different circles. Could we filter by both class and location?

Another idea that maybe we pursue in the future? Create a location for every circle.
When we have employees, we’ll need to do some jiggering to accurately organize how much each employee is earning across each circle but this may not be scalable at all as we grow.

:heavy_check_mark: How do we use classes for income?
Tie income to the circle that generated it. Some other nonprofits will put all unrestricted income into fundraising and only restricted income to Management or Programs, but because we practice distributed leadership, we’ll want to know the statement of activity for each circle.

:heavy_check_mark:We use Flipcause for both donations and (likely) earned income from events. What’s the best process for moving money from Flipcause to Quickbooks and then tracking it correctly?
Make Flipcause a Bank. Then when we move money from Flipcause to our Bank Account, we can categorize it as a transfer.

Directions for uploading Flipcause transactions

(See Flipcause Merchant Account information and Common questions about importing data into Quickbooks)

  • Download Flipcause Report
  • Delete Rows with $0 Amount because Quickbooks doesn’t recognize those. Be careful. Do NOT delete any of the debits.
  • Import Data in QuickBooks
    • QuickBooks Account: Flipcause
  • Add Transactions
    • Use Rules to categorize transactions automatically
      • Donate Now Campaign: Money in: Flipcause, Bank text contains: Donation, Category: Individual Donations, Payee: Donors, Class: Fundraising, Location: Fundraising, Memo: Empty

Process Flipcause transactions including starting balance as of July 1st, 2021
July 2021
August 2021
September 2021
October 2021

:heavy_check_mark: How do we enter outstanding reimbursements? (enter as opening balance of accounts payable)
Create bills
Create bill for outstanding reimbursements (see Outstanding Reimbursements (Funded) - Open Collective)

To Be Answered

How do we track restricted grants?
Have a _ RESTRICTED GRANTS customer with the exact grants as Sub- customers (method from QuickBooks Made Easy).

Other methods to explore in the future

Explore method of using locations to track restricted and unrestricted (How to Record Nonprofit's Restricted & Unrestricted Bank Deposit in QuickBooks Online - YouTube + facebook thread on how to move money between accounts + how to release funds)

Explore method of having equity accounts

Explore combination with Profit First and bank accounts. Perhaps restricted grants have their own bank account since we need to segregate those funds. But how does this work accrual basis for grants and pledges receivables?

How do we handle pledges?
Pledge 135 QuickBooks Online Not for Profit - YouTube.
New Pledge (all invoices are called pledge in QuickBooks Online for Nonprofits)
Product/Service: Pledged Donation
Customer _ RESTRICTED TIME, Sub-customer Pledger.

Here’s another idea? Use same Individual Contribution product/service and run Statement of Activity to check amount of pledges? (Quickbooks Community Thread)

How do we invoice and expense clients?

How do we use products and services?
What makes this different than tracking in Chart of Accounts is that customers will see these products and services on their invoices
Add our products and services
Add our customers
Set up our invoice settings
Process Camelback Ventures

How does this work with Profit First?How do we get the information necessary from Open Collective? Do we need the YPC Collectives to be reflected in Quickbooks like restricted grants are reflected?
Not as a customer (which is how restricted grants could be tracked) because the customer is used for where money is coming in from and so that conceptually doesn’t fit.

If we go with Open Collective, figure out how Bookkeeper can use Open Collective information to properly categorize transactions and figure out how Bank Reconciler can reconcile QuickBooks with Bank Accounts with Open Collective

Another option I just realized we could do is literally create different bank accounts. The monthly process will be for people to see the cash in every account. We’ll use Divvy to manage distributed purchasing instead of Open Collective.

How do we pay contractors? (Deborah as a contractor)
Use Split function across classes. Will need separate transactions per Department

How do they track time across circles (whatever is ultimately decided by distributed decision making)?
Unsure. We’ll pick this up later as a separate project when the need arises.

Another idea

My workaround might not work for you based on volume and frequency needed, but here it is. For “customers” who had both contributed revenue and earned revenue, I created sub-customers. 1 for the contribution invoices and 1 for the earned services invoices. Then at year-end, I run an aging summary filtered for only my contribution customers. Then I do a reversing journal entry from regular A/R to an “other asset” account called contribution A/R. So, only once a year. I got approval from the auditor for this process. 2020 year-end that aging was $0 and I had nothing to move. This was way easier than what they were doing before, a journal entry for every invoice and every payment. That audit was a freaking nightmare. The auditors wanted substantiation for every. single. journal entry! Hopefully this helps, even if only stimulates some ideas.

How do we handle pre-paid expenses?
$0 expense through Clearing Bank account with payment method of Prepaid + recurring transactions when regular (see QuickBooks for Nonprofits thread #1 and thread #2)

Journal Account

Expense #1
Payee: Venue Provider
Payment account: Checking account
Category: Pre-paid expense asset account, $750

Expense #2
Payee: Venue Provider
Payment account: Clearing
Category: Pre-paid expense asset account, -$750 // Category: Facility rental, +$750

Add Flipcause as a pre-paid expense. We pay in advance for one full year. Create recurring transactions to make the correct journal entry each time.

Any recommendations for division of roles and responsibilities for internal controls?
One person enters the expenses, income, invoices, bills, etc. Another matches the transactions. Another does the bank reconciliation.

What’s in our bookkeeping and accounting manual?

  • Set-up Accounts

    • Statement emails from Flipcause on the 10th of every month by (add directions for Flipcause)
    • QuickBooks Online access
  • Entering

    • Income
  • Once a month

    • Add Flipcause transactions
      • Download Flipcause Report
      • Delete Rows with $0 Amount because Quickbooks doesn’t recognize those. Be careful. Do NOT delete any of the debits.
      • Import Data in QuickBooks
        • QuickBooks Account: Flipcause
      • Add Transactions
        • Use Rules to categorize transactions automatically
          • Money in: Flipcause, Bank text contains: Donation, Category: Individual Donations, Payee: Donors, Class: Fundraising, Location: Fundraising, Memo: Empty
          • Additional rules will need to be made for different types of transactions (e.g. sponsorships, tickets, merchandise)
    • Complete Profit First transfers

@Nandy @insiyalambe I started a Quickbooks Guide for Youth Power Coalition! I added what I understand so far but am relying on your expertise to correct things and make it better.

UPDATE: This guide has now been renamed the Financial Policies and Procedures Guide for Youth Power Coalition.

I also suggest Accounting Def for accounting Helpline.