What is the difference between QuickBooks and nonprofit accounting software?

QuickBooks is business accounting software that can be customized for nonprofits, while specialized nonprofit software (Aplos, Blackbaud) is built specifically for fund accounting from the ground up. Key differences: QuickBooks requires workarounds using "Classes" to simulate fund accounting and cannot track true Fund Balances without exporting to Excel. Form 990 preparation requires manual mapping of accounts and calculations. Nonprofit-specific software offers true fund accounting (automatic tracking of designated funds), Form 990-ready reports (charts of accounts designed around IRS requirements), integrated donor management, and grant tracking built-in. Small nonprofits may find QuickBooks sufficient with customization, while organizations with multiple restricted funds, grants, or complex reporting needs benefit from dedicated nonprofit platforms.

How do nonprofits track restricted funds?

Nonprofits track restricted funds by creating separate fund accounts within their chart of accounts under the net assets category. Best practices include: maintaining separate account categories for temporarily restricted, permanently restricted, and unrestricted funds; creating individual fund accounts for each major grant, endowment, or restricted donation (allows detailed tracking and donor reporting); documenting all restrictions in writing (donor letters, grant agreements) and storing with transaction records; using fund accounting software to automatically allocate revenue and expenses to correct funds; and running fund-specific reports to monitor balances and ensure restrictions are honored. Software like Aplos and Blackbaud automates this tracking, while QuickBooks requires manual class assignments to simulate fund separation.

Can nonprofits use QuickBooks for bookkeeping?

Yes, nonprofits can use QuickBooks Online or QuickBooks Desktop Nonprofit Edition for bookkeeping, but it requires significant customization to meet nonprofit accounting standards. QuickBooks can be configured for basic fund accounting using Classes to represent different funds (unrestricted, temporarily restricted, permanently restricted). To track donations, use the Sales Receipt or Invoice features (rename customer to donor). For Form 990 preparation, manually map GL accounts to IRS categories and calculate functional expense allocations in Excel. QuickBooks works well for small nonprofits with simple finances (single fund or few restrictions) and limited grant reporting needs. However, organizations with multiple restricted funds, complex grant tracking, or frequent donor reporting should consider dedicated nonprofit software (Aplos, Blackbaud, Sage Intacct) that handles these requirements natively.

What is the best free nonprofit bookkeeping software?

Free nonprofit bookkeeping options include QuickBooks Online (discounted or donated through TechSoup), Wave Accounting (completely free for basic bookkeeping but lacks nonprofit-specific features), and Aplos (offers a free plan for very small nonprofits with limited transactions). However, free options typically lack critical nonprofit features like true fund accounting, grant tracking, and Form 990 reporting. Most nonprofits outgrow free software quickly and need paid solutions to ensure compliance and donor accountability. Consider the cost-benefit: paid nonprofit software ($20-200/month) prevents costly errors, saves staff time on manual workarounds, and provides audit-ready financial reports. For organizations with restricted funds or grant requirements, investing in proper fund accounting software (Aplos at $59/month, QuickBooks Online Plus at $49/month via TechSoup) is essential.

How much does nonprofit accounting software cost?

Nonprofit accounting software pricing varies by organization size and features. Entry-level options: Aplos starts at $59/month for basic fund accounting and donor management. QuickBooks Online Plus costs $49/month (discounted through TechSoup for nonprofits). Mid-tier solutions: Sage Intacct pricing starts around $400-600/month for multi-fund accounting with grant tracking. Enterprise platforms: Blackbaud Financial Edge NXT offers custom pricing (typically $10,000-50,000 annually) for complex multi-entity nonprofits. Consider total cost of ownership: cheaper software may require more staff time for manual workarounds, while specialized platforms automate compliance tasks (Form 990 preparation, grant reporting) that would otherwise require accounting consultants at $150-300/hour.

What features should nonprofit bookkeeping software have?

Essential nonprofit bookkeeping software features include: Fund Accounting (track restricted vs unrestricted funds automatically, maintain separate fund balances), Donor Management (integrated donor database, contribution tracking, acknowledgment letters, gift receipts), Grant Tracking (monitor grant budgets vs actual spending, track grant restrictions and deadlines, generate funder-specific reports), Form 990 Reporting (automated IRS Form 990 preparation, functional expense allocation to program/admin/fundraising, compliance with FASB and GAAP standards), Chart of Accounts (nonprofit-specific account structure, separate revenue/expense categories for programs), Budget Management (create fund-specific budgets, compare actual vs budget by program), and Audit Trails (complete transaction history for annual audits, restrict user permissions by role).

Best Nonprofit Bookkeeping Software 2025

Compare fund accounting platforms for tax-exempt organizations. Track restricted funds, manage donor contributions, automate Form 990 compliance. Aplos, QuickBooks, Blackbaud, Sage Intacct reviewed.

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What is Nonprofit Bookkeeping Software?

Nonprofit bookkeeping software is specialized accounting software designed for tax-exempt organizations that need to track restricted funds, manage donor contributions, and comply with unique financial reporting requirements (Form 990, FASB standards, GAAP for nonprofits).

Unlike business accounting software, nonprofit systems use fund accounting principles—separating assets with donor-imposed restrictions from unrestricted funds. For example, if a donor gives $10,000 for scholarships, fund accounting ensures that money is tracked separately and spent only on scholarships, not general operations.

The FASB requires nonprofits to maintain at least two fund categories: net assets with donor restrictions (temporarily or permanently restricted) and net assets without donor restrictions (unrestricted operating funds).

Key differences from business accounting:

Fund accounting vs profit tracking (nonprofits track stewardship of donor funds, not profit)
Form 990 tax return instead of Form 1120 (requires functional expense allocation)
Donor management integrated with accounting (track contributions, send receipts, manage relationships)
Grant tracking to monitor restricted fund compliance and funder reporting
Program-based reporting showing revenue and expenses by mission area

Nonprofit Accounting Software Comparison

Compare fund accounting platforms by organization size, features, and pricing.

BUILT FOR NONPROFITS

Aplos

Best for: Small to mid-sized nonprofits

Pricing:From $59/month

Fund Accounting:True fund accounting

Implementation:1-2 weeks

Key Features:

Built specifically for nonprofits and churches
True fund accounting with automatic tracking
Integrated donor management
Online donation forms and giving tracking
Form 990-ready reports
Restricted funds tracking

Limitations:

•Less robust for very large organizations
•Limited advanced grant management features

QuickBooks Online

Best for: Small nonprofits with simple finances

Pricing:$49/month (TechSoup discount)

Fund Accounting:Simulated via Classes

Implementation:2-4 weeks (customization)

Key Features:

Familiar interface for most bookkeepers
Strong bank reconciliation
Wide integration ecosystem
Available at nonprofit discount via TechSoup
Mobile app for on-the-go access
Automated expense categorization

Limitations:

•Not built for fund accounting (requires workarounds)
•Form 990 requires manual mapping and export
•No integrated donor management
•Cannot track true Fund Balances without Excel

Blackbaud Financial Edge NXT

Best for: Large complex nonprofits

Pricing:Custom (enterprise)

Fund Accounting:Advanced multi-fund accounting

Implementation:3-6 months

Key Features:

Comprehensive fund accounting capabilities
Advanced grant tracking and billing
Multi-entity consolidation
Integrated with Blackbaud donor CRM
Automated compliance reporting (FASB, GAAP)
AI-assisted workflows

Limitations:

•High cost prohibitive for small orgs
•Steep learning curve
•Requires dedicated accounting staff
•Long implementation timeline

Sage Intacct

Best for: Growing mid-to-large nonprofits

Pricing:From $400/month

Fund Accounting:Dimensional fund accounting

Implementation:6-12 weeks

Key Features:

Dimensional chart of accounts (analyze by location, program, entity)
Native grant tracking and billing
Revenue recognition automation
Outcomes reporting
Multi-currency support
Scalable for growth

Limitations:

•Higher price point than entry-level options
•May be overkill for very small nonprofits
•Requires accounting expertise to configure

Zera Books

Best for: Nonprofit accounting firms

Pricing:$79/month unlimited

Fund Accounting:Not applicable (document processing)

Implementation:Zero setup

Key Features:

AI-powered financial document processing
Unlimited client bank statements, invoices, receipts
Auto-categorization for QuickBooks/Xero
Multi-client dashboard
Direct accounting software integration
No per-document fees

Limitations:

•Not a complete fund accounting system
•Focused on document processing automation
•Best as complement to nonprofit accounting software

Essential Fund Accounting Features

Required capabilities for nonprofit financial management and donor accountability.

Fund Accounting

Track restricted vs unrestricted funds separately to ensure donor-designated money is used only for its intended purpose. Maintain separate balances, income statements, and reporting for each fund automatically.

Restricted Funds Tracking

Automatically categorize donations as temporarily restricted, permanently restricted, or unrestricted. Honor donor restrictions by preventing spending outside designated purposes. Generate fund-specific reports for donor accountability.

Donor Management

Integrated donor database tracking contribution history, contact information, and giving patterns. Generate acknowledgment letters, tax receipts, and year-end giving statements. Track pledge commitments and recurring donations.

Grant Tracking

Monitor grant budgets vs actual spending in real-time. Track grant restrictions, deadlines, and reporting requirements. Generate funder-specific financial reports showing how grant funds were used. Alert when grants near spending limits or deadlines.

Form 990 Compliance

Automated IRS Form 990 preparation with pre-mapped chart of accounts. Functional expense allocation to program, administration, and fundraising. Generate required schedules (Schedule B for major donors, Schedule D for investments). Ensure FASB and GAAP compliance.

Program Reporting

Track revenue and expenses by program or department. Allocate overhead costs across programs using configurable methods. Generate program-specific financial statements for board reports. Compare program performance year-over-year.

Nonprofit Bookkeeping Best Practices

Follow these practices to maintain donor accountability, ensure compliance, and prepare for annual audits.

Separate Fund Categories

Set up distinct fund accounts for unrestricted, temporarily restricted, and permanently restricted net assets. Create individual funds for major grants, endowments, and donor-designated contributions. This separation ensures compliance with FASB standards and donor accountability.

Document All Restrictions

Maintain written records of every donor restriction, including letters, grant agreements, and board designations. Store documentation with transaction records for audit purposes. Update restrictions when donors release funds for general use or modify designations.

Allocate Expenses by Function

Categorize all expenses as program, administration, or fundraising for Form 990 compliance. Allocate shared costs (rent, utilities, salaries) across functions using documented methods (square footage, time studies, FTE allocation). Review allocations quarterly to ensure accuracy.

Monthly Bank Reconciliation

Reconcile all bank accounts monthly to catch errors early. Verify that restricted fund balances match actual bank account balances for designated accounts. Investigate discrepancies immediately to maintain donor trust and audit readiness.

Run Fund Balance Reports

Generate fund balance reports quarterly to monitor restricted vs unrestricted net assets. Compare fund balances to budgets to identify overspending in restricted funds early. Present fund summaries to the board showing compliance with donor restrictions.

Prepare for Annual Audit

Maintain complete audit trails for all transactions. Organize supporting documentation by fund and transaction type. Review internal controls and segregation of duties. Schedule audit prep meetings with your CPA 2-3 months before fiscal year-end.

Nonprofit Compliance Requirements

Tax-exempt organizations must comply with federal, state, and accounting standards.

Form 990 Filing

Annual tax return required for tax-exempt organizations

Due 5 months after fiscal year-end (with extensions). Requires functional expense allocation and program descriptions.

FASB Standards

Financial Accounting Standards Board compliance

ASU 2016-14 requires two net asset classes: with and without donor restrictions. Must present expenses by function and nature.

State Reporting

Charitable solicitation registration

Most states require annual financial reports for nonprofits soliciting donations. Requirements vary by state and revenue size.

Donor Acknowledgments

IRS-compliant donation receipts

Required for donations over $250. Must include organization name, donation amount (or description), date, and no-goods-or-services statement.

Frequently Asked Questions

Common questions about nonprofit bookkeeping software answered.

Nonprofit bookkeeping software is specialized accounting software designed for tax-exempt organizations that need to track restricted funds, manage donor contributions, and comply with unique financial reporting requirements (Form 990, FASB standards, GAAP for nonprofits). Unlike business accounting software, nonprofit systems use fund accounting principles—separating assets with donor-imposed restrictions from unrestricted funds. Key features include: fund accounting (track multiple funds separately), restricted funds management (honor donor designations), donor management (track contributions and relationships), grant tracking (monitor grant budgets and compliance), and Form 990 reporting (automated IRS compliance).

Automate Document Processing for Nonprofit Clients

If you manage bookkeeping for multiple nonprofit clients, Zera Books automates financial document processing—bank statements, invoices, receipts—with AI categorization for QuickBooks and Xero. Unlimited processing, $79/month.

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