This is the fun part: seeing the grant grow into maturity and eventually closing it out. The accounting transactions themselves aren’t the most complicated part; the challenge is getting it all done in Quickbooks Online (QBO).
It’s the most practical choice not because it’s the best at tracking grants, but because it’s affordable through Techsoup. I’m not a fan of QBO or Intuit for reasons I will not get into in this blog, but I recognize the reason why most small to medium-sized nonprofits use it.
However, using QBO alone to track more than a dozen grants starts to get challenging. The more grants you have, the more probable that you will start making mistakes that can have serious compliance issues or miss sending out critical invoices on time. And organizations that rely on hard-won grant revenues are already dancing on razor-thin margins; they can’t afford to leave anything on the table.
It’s unfortunate that there seems to be no “right” way to use QBO to track grants at scale, that is going to cover all the facets of the grant you need to cover. I have done it myself in my own way, I have seen others use some variation of a few basic techniques. At present, my best recommendation is to implement a spreadsheet to track all the details that QBO won’t.
You may be saying “Wait, I heard somewhere that if you have to keep spreadsheets to supplement your bookkeeping software, then your bookkeeping software isn’t up to the task, or you are not using it appropriately.” In most situations, that may be true, but smaller nonprofits are making the best with what they have.
So here’s what you need to keep your eye on:
- Obviously, you want the grant contract where everyone involved can see it – I usually add this as an attachment under the customers in QBO, if you are using that. I would put a copy of the budget there, too.
- The budget you supplied to the grantor may need a little more work before it can go into the budget module of QBO. Those classifications a grantor may ask for may not line up to your chart of accounts, for starters, but this subject may require a blog of its own.
- Type of grant – see my guidance in part 3 of this series for more information.
- The grant period – you may think about putting this under the ‘Class’ description, so that every time you run a report by class, you may see something like “Grant A – 7/2025 – 6/2026,” for instance. Alternatively, you may find that the end date is way more important that the beginning date.
- Expenses - I wouldn’t say these are easy to track, but QBO has a system. Two caveats I should add is that is that managing Indirect cost rates is a topic of all its own, and that you may want to document those ‘final’ expenses when you close out your books, in the event that someone posts or changes a transaction that changes those numbers – you will need a trail to come back to in order to reconcile those differences and make any necessary adjustments.
- Revenues – On the one hand, see part 3 of this series for how you will recognize those revenues for most grant types. On the other hand, QBO’s default is to record Accounts Receivables (A/R) when you post those revenues.
- Accounts Receivable – Under QBO’s default, whatever you record as revenues for a customer will show up here, but that is not true in the majority of cases; you will have to separately track what you have actually invoiced to your funders! Which means you need to track another thing:
- Deferred Revenues – for a CR grant, this refers to the amounts you have expended under the grant (and therefore recognized as revenue) but have not yet invoiced your funder, which can add up to substantial amounts if you invoice quarterly.
- Grant remainder to draw down – this is the amount that you have available to expend to grant purposes, and outside of using ‘projects,’ I have never seen a good way to account for this within the QBO ecosystem.
I have seen organizations use another set of accounts coded to each grant to track the Deferred Revenues, leaving them to track that last piece outside the ecosystem. Personally I prefer using a spreadsheet that tracks all aspects of the above items, and recommend the same especially to nonprofits who have to undergo a single audit, because the cost of messing things up there can be a noncompliance finding. I also find that having an external document is preferable if it is continually updated, because finding things in QBO can take precious time.
Please contact me if you want a copy of my grant tracking template for your own use, and I am always curious to hear any tips or tricks you may have found to manage all the above! After all, I am posting this because sharing is caring – I want nonprofits to be have the best resources at their disposal to do their work.
