How to Track Restricted Funds in Quickbooks

How Do Nonprofits Track Restricted Funds? 

If you’ve watched any of my previous videos or read my blogs, there’s a good chance you’ve already heard me emphasize the importance of differentiating restricted funds from unrestricted funds when measuring your net assets. Well, today I want to move beyond the realm of what you “should do” and share with you a really practical, step-by-step “how to” that will actually help you get started! 

But first, if you haven’t heard me talk about net assets and restricted funds, here’s a few of my other posts for some helpful background before moving on to the following steps. 

What Are Net Assets for Nonprofits?

How Do I Handle a Donation When the Donor Has Restrictions? 

Can a Nonprofit Sell Their Assets?

How to Track Restricted Funds in Quickbooks

The good news is… you don’t even need a separate process to track you restricted funds! If you’re using Quickbooks, it’s just a matter of knowing how to configure your settings to do it for you! Here’s the steps you’ll need to get started tracking these funds automatically: 

1. Go to “Account and Settings” 
2. Click on the “Advanced” tab.
3. Under “Categories” find the features labeled “Track classes” and switch that to “On”
4. From this point on, each time you enter an expense, you’ll see a new column labeled “Class” where you can select any class you’ve previously entered, or create a new one on the fly which will be saved in this dropdown for next time. 
5. Likewise, when you enter a bank deposit, you’ll now find the same “Class” column as you enter your usual deposit details. 

How to Show Restricted Funds in Quickbooks Reports

So now that you’ve enabled class tracking, and you’ve entered the classes you want to track, let’s look at how to display these funds in your reporting: 

1. Click on “Reports”
2. Then click “Report Options”
3. Next click the “Standard” tab, and scroll down through the various report types until you find “Profit and Loss by Class” 
4. By running this report, you’ll now have a column for each of the things that are restricted along with their respective activities (positive or negative) which will now be reflected on your balance sheet! 

I hope that this gives you a clearer understanding of what is possible as you put these principles into practical next steps! If you’d like help setting this up, feel free to book a free call with me here! I’d be happy to help you get started!