How to Use Classes in QuickBooks for Nonprofits
By David Roberts
The Class feature is one of the least utilized of all of QuickBooks features. The Class feature is used in any number of ways to keep track of transactions, purchases or sales by assigning another identifying designation to the transaction. Some businesses use classes to identify the location of the transaction if it has more than one location. Others use classes to identify the area of business in which the transaction occurs. For example, a restaurant/catering company may want to assign classes to designate the income generated by the restaurant and by the catering separately so that a profit and loss statement can be generated for each section of its business.
Use the Class Feature to Track Programs
Create a new class for each program that generates donations for the nonprofit. Click the "Lists" button on the top menu bar. This will open up the class list. Click on the lower-left "Class" button and then on the "New" button. Many nonprofit institutions have multiple programs that both generate revenues (donations) and have expenses. Churches, for example, will have evangelism, youth and missions programs. Creating a class for each of these will allow you to keep track of all donations or designated gifts to each program and to keep track of expenses related to each program.
Designate each transaction to the particular class to which it is related. For donations, the class would be entered into the Donation form on the fourth column from the left. For expenses, the class would be entered under the Expenses tab and in the last column of the Write Checks screen. For example, a church member donates $300 to the missions of the church. The youth program purchases a $300 Vacation Bible School curriculum. The $300 designation to missions is recorded on the Donation form. The designated funds cannot be used for a program other than the one for which they were designated. Using these designations will keep these transactions separated as required by law for nonprofit companies.
Create subclass items for multiple programs under one class. For example, the larger missions program may have several missionaries being supported. Under the main class, Missions, create a subclass for each individual missionary. This is done in the same way you created the class to begin with. When adding a new class in the Class List window, check a small box to indicate whether this is a subclass. This will allow a glimpse into the totals being given to missions, with the capability to keep each missionary's donations separate.
Use the Class Feature to Track Locations
Create a class for each separate location of a larger organization, such as an organization operating multiple locations for thrift stores, soup kitchens and child care for the poor. For tax reporting purposes, it will be necessary to keep careful track of each location. For an organization with four thrift store locations, the classes can be separated by a one word designation that distinguishes them from the others (for example, North, West, Uptown and Downtown).
Assign all expenses to the correct location. Rent, payroll and utilities are examples of all expenses each location may have. If each location is the same type of location (such as a thrift store), the expenses would be similar enough to have one QuickBooks company file and simply use the Class feature to distinguish them.
Assign all donations or revenue to the correct location. In the case of a church, the donations that come in are not in exchange for a good or service, as would be the case in a thrift store. Although it is a nonprofit organization, a thrift store may consider the monies given for used goods as revenues. This information can allow the organization to make an appropriate decision should the expenses begin to exceed the revenues or donations.
- Other uses for the Class feature include keeping track of what kind of donations are given (such as cash or noncash), separate departments and fundraising or special events.
- The Class feature of QuickBooks is known as the Mighty Putty of features. Mighty Putty is that malleable clay that can be formed to do one of any number of different jobs, but once mixed and exposed to air becomes hard as steel. After you choose the purpose for your class designations, it cannot be changed or used for two different purposes.
David Roberts has been writing since 1985. He has published for various websites including online business news publications. He has over 11 years experience in tax preparation and small business consultation. He is also a Certified Fraud Examiner. He received a Master of Business Administration from Florida Metropolitan University in 2005.