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Why we don’t suggest clients use Departments to classify transactions in QuickBooks Online 

When recording financial transactions for nonprofit clients there is often a percentage of a full amount that is best tracked to various pieces of the organization (Programs, Admin, etc.) 

When QuickBooks is set up to use Departments to track data points of information for a nonprofit, it’s not taking into account the concept of database management and how software works. 

Let us explain: 

Are you familiar with databases? (If nothing else, from back in the old days when Microsoft Access was taught as the standard in all college computer courses - but maybe that’s just the author of this post!) 

When you build databases, you can decide to build it where it's tracking information one-to-many, meaning that one item can be assigned to many trackable things, or, the other option is you can have a one-to-one assignment where only one piece of information is being assigned to one piece of tracking information. 

Both have their benefits in different uses, but for nonprofit accounting, by using department locations, that is selecting a closed ended one-to-one relationship. So, when you have a financial transaction, you can only assign that location code to that entire transaction versus percentages of a total amount.

You can't split it to multiple tracking sources.

Instead, if you're using classes or projects, for example, you can easily use the one-to-many option. 

That one transaction can be assigned to many different things, which is often the most beneficial long term tracking option for a nonprofit. 

Does your nonprofit use Departments?  Many of our incoming clients choose to add a one-time Chart of Accounts improvement project during onboarding to ensure their tracking is optimized for reporting to grantors, the IRS and for Board review. 

Contact us if you’re not sure if your organization is taking full advantage of the features available in QuickBooks Online. 


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