QuickBooks for Nonprofits Setup: Step-by-Step Guide (2025 Edition)
- Roberto Striedinger
- 4 days ago
- 7 min read
If you lead a nonprofit, chances are bookkeeping isn’t the part of your mission that excites you. You’d rather focus on programs, community impact, or donor relationships. But here’s the truth—how you set up your accounting system can make or break your financial clarity.
That’s where QuickBooks Online comes in. It’s one of the most powerful tools for nonprofit accounting—if it’s set up correctly. In this guide, you’ll learn exactly how to complete your QuickBooks for nonprofits setup, from choosing the right plan to customizing your chart of accounts, programs, and donor tracking.
By the end, you’ll have a financial system that not only keeps you compliant but helps you tell the real story behind your mission.
Why QuickBooks Online Works So Well for Nonprofits
Nonprofits have unique financial needs—tracking restricted grants, recording in-kind donations, and reporting to funders all require structure and transparency. QuickBooks Online (QBO) can handle all of that when configured properly.
Here’s why nonprofits love QuickBooks Online:
Cloud-based flexibility: Access your books anywhere, anytime—perfect for distributed teams and remote staff.
Customizable structure: You can track funds, donors, and programs in one place.
Audit-ready transparency: Generate reports that satisfy boards, funders, and the IRS with ease.
Integration ecosystem: Connect QBO with fundraising platforms like Donorbox or CRM systems like Bloomerang.
✅ “Can Nonprofits Use QuickBooks?” – The Charity CFO explains that QuickBooks Online can meet most nonprofit accounting needs, provided it’s tailored for fund accounting and program tracking.
Step 1: Choose the Right QuickBooks Online Plan
Before diving into setup, select the plan that fits your organization’s size and reporting needs.
QuickBooks Online Plus: Ideal for small to mid-sized nonprofits. It includes class and location tracking, which are essential for fund accounting.
QuickBooks Online Advanced: Best for growing organizations that need deeper reporting, custom roles, and automation.
💡 Pro tip: You can access discounts for nonprofits through TechSoup, often saving 30–50% on subscription costs.
✅ “How to Set Up QuickBooks Online for Nonprofits” – FitSmallBusiness recommends starting with Plus unless you need advanced analytics or more than five users.
Step 2: Configure Your Organization Settings
Once you’ve chosen your plan, it’s time to configure the foundation of your account.
Here’s how:
Click the Gear icon → Account and Settings → Company.
Under Company Type, select Nonprofit Organization.
Add your organization name, EIN, and contact details.
Set your fiscal year start date.
In the Advanced tab, turn on Class tracking—this will allow you to track programs and funds later.
In the Advanced tab, change the Customer Label to Donor.
Why this matters: Setting these preferences early ensures that every report you generate reflects your nonprofit structure—especially when preparing your annual Form 990 or financial statements for your board.
✅ “Chart of Accounts for Nonprofit” – Intuit QuickBooks Support confirms that nonprofits should always set the company type and enable class tracking during setup.
Step 3: Build Your Financial Architecture (COA, Classes, Donors)
A successful QuickBooks for nonprofits setup depends on building a system that mirrors your mission operations. That means three core components: Chart of Accounts, Classes, and Donors.
A. Customize Your Chart of Accounts (COA)
Your Chart of Accounts is the backbone of your accounting structure. It’s how you categorize every transaction.
Use these five core categories:
Assets – Cash, grants receivable, equipment.
Liabilities – Loans, credit cards, unpaid bills.
Net Assets – Funds without donor restrictions, with donor restrictions.
Revenue – Donations, grants, memberships, program income.
Expenses – Program, administrative, fundraising.
Example numbering system:
1000–1999: Assets
2000–2999: Liabilities
3000–3999: Net Assets
4000–4999: Revenue
5000–9999: Expenses
✅ “Nonprofit Chart of Accounts Guide” – Donorbox notes that leaving space between numbers makes it easy to add new accounts later without reordering your entire structure.
B. Set Up Classes for Functional Expense and Programs
Classes in QuickBooks Online allow nonprofits to categorize expenses and revenue by program or activity.
How to use them effectively:
Go to Settings → Advanced → Categories → Track Classes and turn it on.
Create three parent classes:
Program Services
Management and General
Fundraising
Add subclasses for each program under “Program Services.” For example:
Program Services: Youth Mentorship
Program Services: Community Health
Program Services: Food Assistance
This setup allows you to produce Statement of Functional Expenses reports automatically—no manual sorting needed.
✅ “Fund Accounting for Nonprofits in QuickBooks Online” – Intuit Support recommends class tracking as the best method for nonprofit fund accounting.
C. Add Restricted funds (as Customers/donors)
QuickBooks Online doesn’t have a built-in restricted fund module, but you can use the Customers/donors list to track donors and grants.
Here’s how:
Go to Sales → Customers → New Customer.
Add a donor named: Restricted Funds
Add every Restricted fund donor as a sub-customer of the Restricted Fund Parent Donor (this will help with easy reporting later on).
Here’s an example of the hierarchy: REstricted Funds-Gates Foundation-Afterschool Grant 2025
Add every grant from that donor as a sub customer of the donor.
Use the donor’s name and add their type (Individual, Foundation, or Grant) in the “Display name” field.
Use custom fields to note grant restrictions, fund names, or pledge details.
When donations are recorded, assign them to the donor’s profile—this allows you to run Donor Contribution Reports later.
✅ “QuickBooks Online Nonprofit Setup Tips” – Aplos Academy shows that using Customers for donor tracking gives nonprofits a simple but effective CRM within QuickBooks.
Step 4: Track Restricted and Unrestricted Funds
Now that your funds are set up correctly, you need to track income and expenses to those funds.
Here’s how to manage that in QuickBooks Online:
Code the Income: For the income, make sure it is recorded to the specific fund, not to the parent account Funder.
Code the Expenses: Make sure to edit the customer/donor field for every expense related to the restricted fund. This is done at the transactional level for every expense, bill, or journal entry.
Run a Profit and Loss by Donor report monthly to ensure restricted funds are being used correctly. You can filter the report by the “Restricted Fund” parent donor to see all your restricted funds.
✅ “QuickBooks for Nonprofits: Fund Accounting Basics” – Araize.com notes that properly using Classes and sub-accounts prevents restricted funds from being accidentally spent elsewhere.
Step 5: Integrate Payroll, and Bank Feeds
QuickBooks Online becomes far more powerful when you connect it to your daily operations.
Integrate these key tools:
Bank Feeds: Sync your checking and credit card accounts to automate reconciliations.
Payroll Tools: If you pay staff, integrate QuickBooks Payroll or Gusto to assign wages to specific programs (via Classes).
Cloud Storage: Store receipts and contracts directly in QBO using Google Drive or Dropbox integrations.
✅ “Using QuickBooks in Non-Profit Organizations” – LiveFlow found that integrating donor and payroll systems can save nonprofits 30–40% of their monthly admin time.
Step 6: Generate Reports That Tell Your Story
Accurate financials are only useful if they make sense to your board and funders. QuickBooks Online makes it easy to present financial data in a mission-driven way.
Essential nonprofit reports:
Profit & Loss by Class – Shows spending by program or fund.
Statement of Activities – Displays revenue vs. expenses for the period.
Statement of Activity by Donor, i.e. restricted fund report – Lists the activity of each restricted fund, and, if run for all dates, will show the balance as well.
Budget vs. Actual by Program – Monitors how funds are being used throughout the year.
✅ “Common Nonprofit Financial Statement Errors” – Cook & Company CPA highlights that using consistent report templates improves clarity and donor trust.
Step 7: Avoid These Common QuickBooks Setup Mistakes
Even experienced teams can make setup errors that create reporting headaches later.
Watch out for:
Forgetting to enable Class tracking before data entry.
Overcomplicating your Chart of Accounts with too many details.
Mixing personal and organizational finances.
Ignoring restricted vs. unrestricted distinctions.
Skipping monthly reconciliations.
✅ “QuickBooks for Nonprofits Setup Mistakes” – The Charity CFO emphasizes that starting with a clean setup saves hours of cleanup work later.
Your 2025 QuickBooks for Nonprofits Setup Checklist
Here’s a quick recap before you get started:
Choose QuickBooks Online Plus or Advanced
Configure Company Type as Nonprofit
Customize your Chart of Accounts
Enable and design your Class structure
Add restricted funds as donors/customers
Track restricted funds correctly
Integrate bank feeds and payroll.
Run reports monthly for board review
FAQ: QuickBooks for Nonprofits Setup
Q1: What’s the best version of QuickBooks for nonprofits? Most nonprofits find QuickBooks Online Plus works best. It includes class tracking and fund reporting. Larger organizations may prefer Advanced for custom reporting.
Q2: Can QuickBooks track restricted grants? Yes. Use Customers or Donors to separate restricted funds and run “Profit and Loss by Donor” reports to monitor spending.
Q3: How do I record donations in QuickBooks Online? Record each donation as a Sales Receipt or Deposit, assign it to the correct Donor (Customer), and categorize it under a “Donations” income account.
Q4: Does QuickBooks Online integrate with donor management software? Yes. Tools like Donorbox, Bloomerang, and Kindful integrate seamlessly with QuickBooks Online to sync donor and contribution data.
Q5: Can QuickBooks Online help prepare Form 990? While QuickBooks doesn’t file Form 990, it can generate accurate reports—especially Statement of Activities and Functional Expense Reports—that make 990 preparation much easier.
Final Thoughts: Simplify Your Nonprofit Finances and Focus on Impact
A proper QuickBooks for nonprofits setup isn’t just about accounting—it’s about freeing your time and energy for what matters most: your mission.
When your financial system is clean, your team can focus on growth, grant management, and transparency with funders.
If you’re ready to build a structure that scales with your impact, MightyNonprofits can help.
👉 Schedule a free discovery call today to learn how we can set up QuickBooks Online for your nonprofit—so you can focus less on spreadsheets and more on changing lives.
Sources: ✅ “How to Set Up QuickBooks for Nonprofits” – Jitasa Group ✅ “Fund Accounting for Nonprofits in QuickBooks Online” – Intuit ✅ “Using QuickBooks in Non-Profit Organizations” – LiveFlow ✅ “QuickBooks for Nonprofits Setup Mistakes” – The Charity CFO ✅ “Nonprofit Chart of Accounts Guide” – Donorbox