Donations vs. Payments in QuickBooks for Nonprofits

Nonprofits receive income through fundraisers, auctions and philanthropists, which means that income entered as deposits provides minimal information and results in poor reporting. Using donation or pledge forms provides the information necessary for effective reporting. Pledges, or payments received, increase the value of your Accounts Receivable register using invoices, and allow you to track payments over a period of time. Donations increase your checking account balance immediately using sales receipts. Choosing between a donation or pledge requires an understanding of what each option entails.

Donation forms work in a similar manner to sales receipts. Donors hand you cash, credit cards or checks, resulting in an immediate company credit. Donations deposited into the Undeposited Funds account require you to create a Deposit transaction to move funds to your checking account. If you turn off the option to use the Undeposited Funds account in your "Sales & Customers" preferences, select the appropriate checking account directly on the donation form to deposit the funds.

Pledges act as promises of future payments. When a donor promises a future payment, the total and customer information gets recorded on a Pledge form. Donors receive invoices as a payment reminder. When customers send payments, they get recorded using the Receive Payments form. Linking the pledge to the payment on the form provides a way for QuickBooks to track how much of the pledge remains due. The balance due appears below the total on the Pledge form.

Setting up your donations as items provides a way to quickly associate a donation or pledge with an account. Create new items for each account you use, and choose Service as the account type. When entering a name for the account, choose something that describes the account; your nonprofit might accept individual donations with one account and group donations with another account. Name the item for the individual donations account "Individual Donations," and the group donations account "Group Donations."

Pledges and donations options appear within the Nonprofit menu. The Enter Pledges option opens an invoice to input information for the pledge. Once you receive a payment, use the Receive Payments form and link the payment to the pledge you created with the Enter Pledges option.

The Enter Donations option opens a sales receipt for you to provide the customer and item details. In this case, enter the donor's name into the "Customer:Job" drop-down menu. Complete the required fields on the Donation form, and save the form to complete and record the transaction.

Information in this article applies to QuickBooks 2013. It may vary slightly or significantly with other versions or products.