While QuickBooks is a very good accounting program for a for-profit business, it simply was not designed for fundraising and donor management.
Sometimes we get questions from nonprofit controllers why they should use a fundraising program instead of QuickBooks to track their donations and donors. There are several ways to approach this question.
Cannot Do Multiple Classifications for Revenue
As a nonprofit, who must file a 990, it is important to segregate your sources of revenue by the following categories: Grants, Charitable Contributions, Fundraising Event Revenue and Program Service Fees. With QuickBooks, it is difficult to separate revenue generated from these sources. Since Quickbooks does not provide multiple classifications for types of revenue, you cannot separate a receipt from a donor that is designated as a fee for service (i.e tuition paid) from revenue from the same donor that is a charitable contribution. You also cannot identify the amount of the donation is tax-deductible to the donor, if the donor receives something in return for their donation, such as the cost of a dinner at your annual fundraising banquet.
Tracking donors, members volunteers and clients is extremely difficult, or next to impossible in Quickbooks, if the same person can be classified in more than one of those categories. For example, at a local museum, Jake Scott has volunteered at the annual Golf Tournament, but he also donated to the event, and paid membership dues for a Family Membership to the Museum, and finally paid for art classes at the Night Time Art School. In QuickBooks, you would have to set up Jake Scott multiple times, with variants of his name to track all of his activity making it virtually impossible to get a 360 degree view of his participation in the museum. Plus, you would not be able to generate an annual giving statement for his charitable contributions.
Cannot Record In Kind Donations
In addition to regular cash contributions, nonprofits often receive in kind donations such as goods and services. Donated goods should be recorded as revenue with a corresponding offsetting expense, or asset (whichever is appropriate) at fair value in the period in which they are received. QuickBooks does not have the ability to record an in-kind contribution that is associated with a donor, you must enter the donation as a Journal Entry. This prevents you from tracking all contributions from donors and creating receipts to donors for in kind contributions.
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Cannot Do Target Mailings Using Queries
One of the most important activities that you can accomplish with fundraising software is to select certain names from your list of donors who have something in common and send them a targeted message. For example, you can filter your database for all donors who attended a special event, or responded to a newsletter appeal. When you communicate to donors based on their previous interests, they respond more readily, and feel more connected. This type of communication can keep costs down, increase the response to your mailing, and also increase your donors’ sense of connection to your organization. Targeted mailings are accomplished by using queries to segment your mailing list, using codes or tags which you have defined in your donor management software, which cannot be accomplished in QuickBooks.
Codes will allow you to query your database by role (board member, staff), or by interest, or by first contact, or any other aspect that is vital to your organization. This is useful not only for queries and targeted mailings, but also for analytical reports, and special communications. Coding is a central tool in donor management software and is not available in QuickBooks.
Cannot Handle Donor Management Techniques
Beyond queries and coding; there are many different techniques for fundraising which are basic functions of donor management software. Among these are pledges, in-memory gifts, and memberships. QuickBooks was never intended to handle the fundraising side of these activities. For instance, with pledge giving, you need the ability to generate reminder letters and overdue letters. With in-memory gifts, you need to be able to list names of both donors and honorees for newsletters, thank you letters, and publicity; none of which can be accomplished in QuickBooks.
Cannot Generate Donor Statistics Using Queries
In addition, fundraising software is used to give you access to statistics that can provide a comprehensive overview of your fundraising activities. You may want to know how many new donors you’ve gained over the last few years; or to see how much is donated by zip code, gender, or donor type so that you can solicit your most enthusiastic supporters.
If all you need to do with your donors is to record a donation and and send out thank you letters, or if you send the same letter to your entire mailing list, then QuickBooks may work. However, this is seldom the case, and is almost never the case for an organization that depends on fund-raising for its operating costs. Fund-raising is a competitive activity, growing more so all the time, and successful fund-raising requires additional ability to address specific donor interests within your overall list.
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Bottom Line
We hope this helps you understand the role that fundraising software plays in providing your organization with the tools needed for proper stewardship of funds, accountability and transparency.
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