Mastering QuickBooks for nonprofits: Top 10 practical skills for tracking funds

By Cierra Neil, CPA, and Lisa Kelly

In the nonprofit world, leadership, board members, donors, auditors, and the public demand assurances that dollars are being spent wisely and according to plan.

QuickBooks offers a powerful tracking tool, but many nonprofits don’t fully leverage its wealth of features to follow income and spending. These 10 common mistakes can be avoided and resolved through simple QuickBooks fixes, for cleaner audits and healthier nonprofits.

Mistake #1: Skipping class or program tracking

• The issue: If all expenses and income land in one pot, then program costs – and the use of funders’ money – can’t be broken down unless they’re tracked elsewhere.
• Resolution: Turn on Class Tracking, and assign every transaction a class, such as Program Services, Fundraising, or Administration. Classes can also be named by grant or project.
  Tracking allows reports to be run showing that class only, which helps with grant reporting.

Mistake #2: Recording donations as sales or invoices

• The issue: Treating donations like customer sales can confuse accounting, donor reporting, and IRS filings. They are not earned income but contributed revenue. Recording them as sales inflates earned income and distorts program vs. contribution ratios.
• Resolution: Record contributions using sales receipts or bank deposits to contribution income accounts, and not to sales. For tracking purposes, use the donor name as the customer.

Mistake #3: Recording grant advances as immediate revenue

• The issue: Many nonprofits win grants in advance but must earn them, perhaps by launching a new program or service. Booking the grant prematurely inflates revenue and violates accounting standards.
• Resolution: Record the grant as Deferred Revenue (Liability) and recognize it only when expenses are incurred or milestones are achieved.

Mistake #4: Skipping reconciling bank and credit card accounts monthly

• The issue: Unreconciled accounts can hide duplicate, missing, or even fraudulent transactions. Without reconciliation, organization leaders might assume there is more cash available than the bank statement shows.
• Resolution: Reconcile all bank accounts -- and credit card accounts, too -- every month, and review discrepancies promptly.

Mistake #5: Not attaching supporting documents

• The issue: Missing receipts, grant agreements, donor letters, and other key documents create audit problems and lead to lost institutional knowledge. Separating explanatory documents from transactions can complicate the search for answers when questions arise.
• Resolution: Scan the document and use the QuickBooks Attachments feature to link it to each transaction. Organizing transactions and documents keeps the audit trail clean, especially if the auditor has access to the organization’s QuickBooks Online account.

Mistake #6: Misclassifying expenses

• The issue: Skewed expense allocations – not properly classified as program, administrative, or fundraising – can make the Form 990 or financial statements misleading and discourage funders.
• Resolution: Use clear expense categories and educate staff on proper transaction coding. Review reports monthly for accuracy, which helps prepare for an accurate 990 at year’s end.

Mistake #7: Giving everyone full administrative access

• The issue: Too many users with full rights can accidentally or intentionally change data, delete transactions, or alter history. Excess input and inconsistent changes can hamper the quality of audits.
• Resolution: Keep errors to a minimum by carefully assigning user roles. Use the View-Only or Limited Access options for most staff, and require passwords for all. Reserve Admin rights for finance leads only.

Mistake #8: Not closing periods after each month or year

• The issue: Because QuickBooks is a live database, every edit automatically updates all connected accounts and reports, including historical ones. Users making changes can unknowingly alter past transactions, changing reports that have already been presented or audited.
• Resolution: Lock statements in place by setting a closing date (go into Settings and follow the Advanced and Accounting links) once a month or quarterly. Require a password to make any changes.

Mistake #9: Failing to use budgets and reports regularly

• The issue: Without budgets for Statement of Activities by Class, leadership can’t see how programs are performing or whether grants are being overspent. Reports show only actual income and expenses, without the context of spending trends and remaining funds within the established budget.
• Resolution: Stay on track by entering annual budgets and running Budget vs. Actual and Statement of Activities by Class reports monthly.

Mistake #10: Mixing restricted and unrestricted funds

• The issue: Donations with donor restrictions might be lumped in with general operating income, making it impossible to track them or report on compliance. Unless the funds are tracked outside of QuickBooks, the organization can’t document for auditors and donors how the money has been spent.
• Resolution: Clearly track restricted vs. unrestricted activity by using Classes, Projects, or separate income accounts as classifications. Also, create matching “net Assets-Restricted” accounts on the balance sheet to run net income for restricted programs every year.

Bottom line

QuickBooks can do much more than simply managing your nonprofit’s budget. By mastering its sophisticated features, it becomes a powerful tool for strategic planning and for maximizing nonprofit resources.

Even with these best practices in place, QuickBooks isn’t always the long term answer for every organization—especially as financial needs grow more complex. As nonprofits expand, even a well‑configured QuickBooks environment can start to feel strained. Growing organizations often encounter more complex financial needs, require deeper reporting and analytics, or look for smoother integrations with the other systems they rely on. While QuickBooks remains an excellent solution for many nonprofits, there comes a point where additional automation, stronger internal controls, and multidimensional reporting become essential.

In those moments, some organizations consider moving to other platforms. Microsoft Dynamics 365 Business Central is an option that offers scalability and unified data for nonprofits looking to streamline operations. Other familiar systems like Aplos, MIP, Sage Intacct, and Fund EZ may also align well depending on specific budgets, structures, or reporting requirements.

If you’d like help evaluating these alternatives—or exploring ways to continue optimizing QuickBooks, please contact us.

About the Authors

Cierra Neil, CPA is a member of the Nonprofit Practice Services Group and the Small and Entrepreneurial Business Practice Group. Contact Cierra at 717-761-7210 or cneil@cpabr.com.

Lisa Kelly joined Boyer & Ritter in 2025 as a paraprofessional. Lisa assists clients in managing financial operations, including QuickBooks. Contact Lisa at 717-761-7210 or lkelly@cpabr.com.