Speaker 1: Today's video is an intro into bookkeeping for nonprofit organizations. So today I'm going to go into four things. The first thing is how to break out expenses, the second one is budgets, the next one is audits, and the last one is in-kind donations. I'm Morgan from FindingPoints.biz and my goal is to help you get organized. A thumbs up helps me out a lot as well as if you subscribe to this video with the red button down below you'll get a new video from me every single week. Alright, the first thing to know about nonprofits is that you most likely will need to break out your expenses into different buckets. So say you get office supplies coming into your nonprofit, there are four different places that that needs to be allocated. So I'll put them on the screen what they are according to my research and it may vary depending on your exact nonprofit. So it's generally going to be something like program services, fundraising, and admin, and possibly one other. So I'm going to go kind of more into the nitty-gritty of this. Before I do I just want to say a caveat I'm not an expert in nonprofit organizations. That's not a niche that I am currently like working towards or I don't work for a lot of nonprofits. I did work for one large nonprofit in the past. They did like medical services for people, and then I've also worked for a preschool and my church. So those are nonprofits. So because I have some experience doing that and I did some research as well for this video, I think I can give a pretty good overview, but definitely there will be holes. So let me know in the comments if you have other expertise in this area that you want to share or if you know of any experts that can help people out if they're looking to specialize in nonprofits. So I did just post this video recently which was all about 30 different clients that are great to work for when you're starting out. So check out that video if you're interested in that subject. But within that video I did talk about some niches have more specialized functions. So that was kind of the inspiration for me to do this little series on like an intro to different types of bookkeeping. So this one is nonprofits. I'll do attorneys next and then probably a couple others. Let me know in the comments if there's something that you're interested that you want to know more about. So QuickBooks does have a nonprofit mode. I took a screenshot of like the instructions on how to set your settings into the nonprofit mode. So I'm gonna put that screenshot on the screen here for you guys so you can grab that if you need it if you want to change the settings into nonprofit mode. I don't know if it's always going to be necessary but you can do some research into that to see if that works for you. Okay and then in terms of breaking out the expenses, I'm gonna speak to the company that I worked for and what we did. So for that organization there's three different sections. It was admin, fundraising, and then medical was the other one which would be like the program services I believe. So every time I got an expense coming into me I had to categorize that and the way we did that was using classes. So again with the example of office supplies. So how the building was laid out we did kind of sit in our teams in those three areas and then there was a big office supply area in the middle. So everyone from all the categories was using the office supplies. The pens, the pencils, the paper, the everything like that that you would need. The like postage stuff. When I get a big like order from Amazon or wherever they're buying their office supplies, I would use classes to break it up into those three categories. So I can do a screen record over this as well. So for example if you are in your banking feeds and you're categorizing expenses and you see the expense that needs to be broken up, go into it and then sometimes you might need to click edit or you might need to click like more you know to get more information. And there should be a place that has class. So ahead of time you can set up these classes for fundraising, medical, and admin. So you can see right here I am just I have three lines and I have this expense and I have and I break it up like one-third one-third one-third into those three different categories. And just to note if you don't see classes in your QuickBooks file that may be something that you need to turn on as well. I think it automatically comes turned on but um you can turn it on and off and you can also have it force you to ask for a class so it'll prompt you if you know if you want to make sure you always remember to put it in class. Alright and then what these classes do is it makes kind of like I've heard it described as like a little mini profit and loss statement. So when you pull reports let's go to a profit and loss and we'll pull that report. You can see each section is a column and it'll tell you all of the expenses for that column. So if you're breaking everything up one-third one-third one- third then it'll you know just be evenly divided. But there are definitely times when only one program uses the expense. So for example maybe the fundraising team goes out to lunch or something and they have a you know some kind of function for just that team that would most likely be only an expense for that team. I believe you're also supposed to categorize salaries like that also so maybe you have a person who works half and half on two teams and then you have another person who's only on one team. It gets a little bit tricky but make sure you do some research into that as you're working with nonprofits. So like I said my experience was using classes to the to do those breakouts. In my research I also found you can do it in the chart of accounts. So you can you can make like basically four different accounts for office supplies. So the top one would be the parent account and then you would have office supplies admin, office supplies fundraising, office supplies medical. To me that seems a little bit more cumbersome and it would make your profit or make your reporting like really long. But again customize it to what works for you. I know there's also special programs like outside of QuickBooks that are specifically for nonprofits. They're advertising those as I was doing this research so that might be helpful as well because it is a fairly specialized you know there's some special things you need to do and that might make it easier for you in the long run. Alright number two thing I wanted to cover is audits. So again depending I think on the size and the spending of your nonprofit organization you may have to complete an audit each year. So for the organization that I worked for we hired an outside company to come in and audit us and that is obviously an extra expense but I think it's part of the rules or the laws to some extent when you are you know when you have a certain kind of nonprofit. Again I'm not an expert but this is kind of the information I'm gleaning from different sources. In that particular organization I probably talked about it before but I sat in the same room with the controller with the accountant so she was kind of like my boss. She was like overseeing what I was doing if I had questions I would come to her etc. So she was really the one who like headed up the audit and like met with the auditors and all that kind of thing but she did give me some tasks that I needed to complete for the audit and for me that required pulling some invoices. I think the auditors would look through all of our records and they'd be like okay we want to make sure you're you know keeping good records so pull these like five or ten invoices. So then I would go into my filing cabinet and I would grab the paper copies of those invoices for them. And if you want to know all about how to and I go into great detail about how I filed all those invoices and all that paperwork in my video about receipt management I'll leave the thumbnail right here so you can go find that. Part two is the part where I talk mostly about paper filing systems and then part one is more about the QuickBooks receipt capture function. And I've also gone through internal audits with the preschool that I work for. So what that entails for me is a couple board members and maybe a volunteer or two looking at the books. Usually they compare the bank balance to what's in QuickBooks and make sure you know everything matches at the beginning and the end. And then they also do look through my receipts and my records to make sure I have a receipt for every transaction. And the last couple years I started putting all my receipts into QuickBooks digitally so I'm hoping that's going to make my prep for those audits way easier. Because I used to have to kind of like shuffle through tons of paperwork and then I would do it halfway through the year and then maybe you know I would feel like I needed to recheck it all the time. But in QuickBooks I can just see okay all these things have attachments we're good to go. And again more about that in the part one of that receipt management video. Alright and the number three thing that you need to know for nonprofits is most times they require a budget. So you can do a budget for any client that you have but I'm pretty sure it's required for nonprofits in particular. So I can do a whole video on how to make a budget and budgeting if you're interested. It's a little bit like not the most intuitive process in QuickBooks I don't find because you're gonna have to go into this other place. But basically you know what a budget is. It has all of your what your expected income is and what your expected expenses are. And there's all kinds of reports you can pull in QuickBooks so you can do a budget versus actual to kind of give your client a picture of how they're doing sticking to their budget. Maybe you want to pull that halfway through the year or every month. And you can also do a budget versus last year. So usually last year's profit and loss statement is a really good indicator of what the spending and the income is gonna be for the next year. So I usually use that as kind of a baseline when I'm creating a budget. And for nonprofits usually it's kind of like the staff or like maybe the admin or the finance team that starts out creating the budget. So they'll go over each of the categories. They'll probably ask the people who are spending money like oh are there any unexpected expenses coming up or you know do you need this much or that. So they'll kind of get input from all the different departments and so they create kind of a draft of the budget. Sometimes there's feedback and eventually the board of directors has to approve that budget. So I haven't really mentioned the board too much but usually there is like a board that kind of oversees is like the boss of a nonprofit organization. So really I think the point of these budget is transparency and then intentionality. So as a nonprofit you can make it either over under like a surplus or a deficit budget or just like a break-even budget. And there might be different business reasons to do that different years. Maybe there's a big expense coming up and you have some savings and so you've been planning ahead so your budget would look like you're you know way under that year like you're spending too much money. But really you know that's part of the plan. So I actually enjoy budgeting. I think it's fun to kind of look at the overall picture of the organization and kind of like think about the future and direct where you're going in the future. Alright and then we come to in-kind donations. So this basically just means that someone is donating their time in a professional sense and you it's kind of like income for your business even though it's not like cash coming in. So maybe you had a plumbing problem and you had a connection to a plumber who wanted to donate their time because they really love your organization and they want to support you. So that plumber probably has an hourly rate. Maybe they charge $100 an hour and they work for three hours. So that's like a $300 donation coming into your organization. So in my research for this, it recommended creating a separate income account for in-kind donations just to kind of keep it separate from the cash and then you know like that's not going to the bank account or anything. So you want a separate income account to record that and the IRS does let you determine the fair market value on your own unless it's over a certain threshold which I think is $5,000 or so. So if it's a really big donation then you want to get it appraised but otherwise you can add that to your business kind of whatever you think that fair market value is. Alright if you stayed to the end don't forget to give this video a thumbs up and let me know in the comments what other bookkeeping specialties you want to hear more about and you want to learn about. Make sure to subscribe and stay tuned for that attorney one coming up next week. Thanks so much. Bye.