From planning and implementation to creating financial reports to tracking donations, Mark McCallick walks us through Quickbooks step-by-step. McCallick’s expert advise will help your nonprofit get organized, save time and money. Check out this comprehensive Quickbooks guide for nonprofits.
Guest post by Mark McCallick, CPA.CITP
Founder of NonProfit Connect™
STEP 1 – Planning and Implementation (Blog 1 in a series)
“Begin with the End in Mind” when implementing a new accounting system. “Begin with the end in mind” is based on the principle that all things are created twice. There’s a mental or first creation, and a physical or second creation to all things. This concept is explained in “The Seven Habits of Highly Effective People” by Stephen R. Covey.
The very first step in installing and implementing Quickbooks for your Nonprofit Organization has nothing to do with software or computers and everything to do with communication and understanding and the good news is “communication and understanding” is normally a Nonprofit’s strength. Working with nonprofit organizations for over 25 years has made it very clear (to me at least) that the “right brain” is dominant in most Nonprofits. So, please, before you go and install a “left brained” accounting tool into a “right brained” environment – step away from your computer/server, put the Quickbooks CD back into the box, take a deep breath and use your imagination to go to a vantage point where you can see the “End” that Covey speaks about so eloquently. Close your eyes and imagine that “Promised Land” where you can produce reports by Grant or Program or by the Combined entity as a whole – where you can satisfy the reporting needs of Grantors, Program managers, the board, your auditors – yourself.
Now that you have stepped back and are in that “clarity-zone”, setup a “QuickBooks Implementation and Planning meeting “. Invite ALL of the following (I know that this may sound like the tea party in Alice in Wonderland but just trust me on this one):
- Treasurer – Board of Directors
- All Program Managers
- All Accounting staff (normally one person!)
- Your Auditor (You may be charged a fee for this so consider that fact)
- Development Director
- Executive Director
- IT consultants or staff
- Any other “stakeholder” who uses or needs financial information to perform her/his job in the Nonprofit
The main goal (but not the only goal) of the “implementation and planning” meeting is to best identify how information entered into the system should be grouped and presented for the purpose of providing useful reports to all of the readers and those who use financial information. The readers of these reports may include government and private funding sources, internal managers, data entry staff, board members, auditors, and others, and each may have a different focus on your organization. Once you have a vision and plan of how the reporting should come out of the system you can work backwards to determine the best structure and setup to use in Quickbooks.
To prepare for the implementation meeting, create a “Quickbooks Implementation Questionnaire” (since Nonprofits never get enough acronyms, we’ll call it the “QIQ”). The QIQ will act as the centerpiece for the meeting. You will send this questionnaire out to all the participants prior to the meeting and have them complete it. At a minimum, the following should be included in the questionnaire:
a) What is the Nonprofit’s Mission?
b) What ‘Programs’ do we offer (not who funds us – but what service or product do we provide or produce – what do we “do”)?
c) What are our sources of revenue?
– Grantors
– Corporate Donations
– Individual Donations
– Program Income (fees for services)
– Foundations
– Special Events
d) What types of reports are required for all users? Bring samples of these reports.
e) 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?
f) What is our Current Budget? Bring a copy. How does it sync up with the Chart of Accounts?
g) How is payroll processed? Is there a labor distribution? How is the labor distributed to each account, program and funding source?
h) How do we request funding from our funding sources? How are the receivable and the subsequent receipt recorded?
i) How does the Nonprofit enter invoices from vendors? Is there an approval process? How are the expenses coded as to account, program and funding source?
j) What is the Nonprofits current hardware & network setup? Is the current environment sufficient to run accounting software? Will we need to upgrade our system in anyway?
I have developed and use a questionnaire in my practice when I assist clients in setting up Quickbooks and you are welcome to use it for your Nonprofit [Download PDF >>>]. The end result of this meeting should be a written plan that at a minimum defines your reporting requirements, Chart of Accounts, Programs and Funding Sources. This will be the “raw material” you will use to setup Quickbooks (I’ll be submitting a blog on how to setup Programs and Funding Sources in Quickbooks – so stay tuned). There is another equally important by-product. This exercise will promote team building and allow stake holders to “walk a mile in another’s shoes.” People will come to see what a challenge it is to be a bookkeeper or accountant in a Nonprofit and the Accounting system will cease being called “your” system and start being called “our” system. Because good or bad, all the stakeholders had a hand in building it.
My next Blogs in this series will be:
STEP 2 (Blog 2 of 6 in series): Setting up the Chart of Accounts in a Nonprofit environment
STEP 3 (Blog 3 of 6 in series): Setting up the QuickBooks “Customer/Job” utility in a Nonprofit Environment
STEP 4 (Blog 4 of 6 in series) : Setting up the QuickBooks “Classes” utility in a Nonprofit Environment
STEP 5 (Blog 5 of 6 in series): Coding transactions with QuickBooks “Customer/Job” and “Classes” utilities
STEP 6 (Blog 6 of 6 in series): Creating Financial reports in QuickBooks for a Nonprofit Organization
About the Author: Mark McCallick, CPA.CITP has a practice dedicated to nonprofit organizations and small business. He has served nonprofit organizations for over 25 years and is a Certified QuickBooks Pro Advisor. He is also the founder of the website www.nonprofit-connect.com whose mission is to provide nonprofit organizations with a forum to collaborate with one another and share access to resources and best practices in the nonprofit industry. You can contact Mark McCallick at markm@mac-cpa.biz or markm@nonprofit-connect.com .
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[...] is the 2nd Blog of the series on configuring QuickBooks for use in a Nonprofit organization. In Quickbooks for Nonprofits: Planning and Implementation, I mentioned that the very first step in configuring Quickbooks is to have an implementation [...]