QuickBooks for Nonprofits: Why It Falls Short
QuickBooks is great for businesses. Here's why it struggles with nonprofits.
QuickBooks for Nonprofits: Why It Falls Short
QuickBooks is the most popular accounting software in America. It's well-designed, affordable, and works great for small businesses.
It's also a poor fit for nonprofits.
This isn't a knock on QuickBooks—it's a recognition that nonprofit accounting has requirements QuickBooks wasn't built to handle. Here's what you need to know.
What QuickBooks Does Well
Credit where due. QuickBooks excels at:
- Basic bookkeeping: Income, expenses, bank reconciliation
- Invoicing: Creating and tracking invoices
- Bill pay: Managing vendor payments
- Payroll: Processing payroll (with add-on)
- Tax prep: Generating reports for business taxes
- Integrations: Connecting with banks, apps, services
For a small business tracking profit and loss, QuickBooks is excellent.
Where QuickBooks Falls Short for Nonprofits
No Native Fund Accounting
This is the fundamental problem. QuickBooks tracks one pool of money. Nonprofits track multiple funds with different restrictions.
The Workaround: Use classes or locations to simulate funds.
Why It Fails:
- Classes weren't designed for fund accounting
- No automatic restriction tracking
- Reports require manual manipulation
- Audit trails are unclear
- Easy to make mistakes that violate restrictions
We've seen nonprofits with elaborate 50+ class structures trying to make QuickBooks do fund accounting. It's fragile, confusing, and error-prone.
No Donor Management
QuickBooks tracks customers, not donors. The difference matters:
| Customers (QuickBooks) | Donors (What Nonprofits Need) |
|---|---|
| Buy products/services | Give gifts |
| One-time transactions | Lifetime relationship |
| Invoice and collect | Acknowledge and steward |
| Simple contact info | Rich relationship data |
The Workaround: Use QuickBooks for accounting, separate CRM for donors.
Why It Fails:
- Two systems to maintain
- Data sync issues
- Reconciliation headaches
- Incomplete picture of donors
No Grant Tracking
Grants require tracking spending against specific budgets over specific time periods. QuickBooks has no concept of this.
The Workaround: Spreadsheets alongside QuickBooks.
Why It Fails:
- Manual data entry and reconciliation
- Version control issues
- No real-time visibility
- Audit documentation gaps
Wrong Report Formats
QuickBooks produces business reports: Profit & Loss, Balance Sheet. Nonprofits need different reports:
- Statement of Financial Position (with net asset categories)
- Statement of Activities (by restriction type)
- Statement of Functional Expenses
- Grant budget vs. actual
- Donor giving summaries
The Workaround: Export to Excel and reformat.
Why It Fails:
- Hours of manual work monthly
- Formula errors
- Inconsistent formatting
- No audit trail for adjustments
No FASB Compliance
FASB standards require specific accounting treatments for nonprofits:
- Net asset classification
- Contribution recognition
- Pledge accounting
- In-kind donation valuation
QuickBooks doesn't understand these concepts. Compliance requires manual tracking and adjustments.
The Hidden Costs
QuickBooks seems affordable—$30-200/month depending on version. But the real cost for nonprofits includes:
Staff Time on Workarounds
| Task | Hours/Month |
|---|---|
| Fund tracking in spreadsheets | 5-10 |
| Donor reconciliation | 3-5 |
| Grant reporting | 5-15 |
| Report reformatting | 4-8 |
| Audit prep (annualized) | 5-10 |
At $25/hour, that's $550-1,200/month in staff time—far exceeding the QuickBooks subscription.
Error Correction
Mistakes in fund tracking, donor records, or grant reporting create real costs:
- Staff time to investigate and correct
- Potential grant fund returns
- Donor relationship damage
- Audit findings and fees
Opportunity Cost
Time spent on workarounds is time not spent on mission. Your development director shouldn't be reconciling spreadsheets.
When QuickBooks Can Work
To be fair, QuickBooks can work for some nonprofits:
Very Small Organizations
- Under $250K budget
- Few or no restricted funds
- No complex grants
- Minimal donor tracking needs
- Board does the books
Transitional Use
- Just starting out
- Planning to upgrade soon
- Need something immediately
With Significant Add-ons
- QuickBooks + Bloomerang (donor CRM)
- QuickBooks + Salesforce (with integration)
- QuickBooks + grant tracking software
But at this point, you're paying for multiple systems plus integration costs. Purpose-built nonprofit software often costs less.
Better Alternatives
For Small Nonprofits
Aplos: Purpose-built for small nonprofits. True fund accounting, basic donor tracking. $50-150/month.
Wave + Bloomerang: Free accounting (Wave) plus donor CRM (Bloomerang). Disconnected but affordable.
Alignmint: All-in-one accounting and CRM. Fund accounting, donor management, grant tracking integrated. Designed for organizations that have outgrown QuickBooks.
For Growing Nonprofits
Alignmint: Scales from small to mid-sized. No need to switch systems as you grow.
Sage Intacct: Enterprise accounting with nonprofit features. Expensive but powerful. Usually paired with separate CRM.
Blackbaud Financial Edge: The incumbent. Expensive, complex, but comprehensive. See our Blackbaud Alternative analysis.
Making the Switch
If you're on QuickBooks and ready to move:
1. Document Current Pain Points
What's not working? Quantify the time spent on workarounds.
2. List Requirements
What do you need that QuickBooks doesn't provide? Fund accounting, donor CRM, grant tracking, specific reports?
3. Evaluate Options
Look at purpose-built nonprofit software. Get demos. Talk to similar organizations.
4. Plan Migration
- Export QuickBooks data (chart of accounts, transactions, vendors)
- Map to new system
- Choose a transition date (fiscal year-end is ideal)
- Run parallel for one month if possible
5. Train Staff
New software requires training. Budget time for it. The investment pays off in reduced errors and faster adoption.
The Alignmint Alternative
We built Alignmint for nonprofits stuck in the QuickBooks trap:
Real fund accounting: Restrictions are a core concept, not a workaround.
Integrated donor CRM: One system for finances and relationships.
Grant management: Budget tracking, reporting, compliance—built in.
Nonprofit reports: FASB statements, Form 990 support, donor analytics.
Easy migration: We help you move from QuickBooks. Your history comes with you.
Fair pricing: Less than QuickBooks + CRM + spreadsheet time.
Learn more:
QuickBooks is great software for businesses. Nonprofits aren't businesses—they have different requirements, different reports, different accounting. Use software built for how you actually work.