QuickBooks Tip of The Month: How to Use Classes for Painless Grant Writing

"Getting data you need for a grant request all comes down to the setup of your financial systems."

You sit at your laptop staring at the screen. You know that you need to finish this grant request, but you’re stuck. The narrative is coming along, but your roadblock is the financial justification for the grant. You flip through spreadsheets on your computer, you try to read the financials from the last month. But your eyes are crossed – you’re just not seeing what you need to make the case.
 
Grant writing is stressful enough without the added burden of working with bad (or at least useless) financial data. If you are an ED or a development professional who’s tasked with writing grant proposals, you’ve probably thought to yourself: there must be a better way. 
 
And you’re right.
 
Getting data you need for a grant request all comes down to the setup of your financial systems.
 
Most US-based small to medium-sized nonprofits use some version of QuickBooks for their accounting. It has its quirks, but it’s a solid piece of software. One of my favorite features of QuickBooks is chronically unsung and under-utilized. It’s called CLASSES. Prepare to be wowed.
 
In the for-profit world, classes are often used for cost center or location-based tracking of revenue and expenses. Easy example: a retailer with more than 1 store. The management needs to see what stores are profitable, right?
 
Here’s what a (very simplified) profit and loss report using classes might look like in that case: 
 
PROFIT & LOSS BY CLASS (LOCATION) YTD

Being able to analyze income and expenses according to location allows management to make better decisions about where to invest staff, time, and money to ensure profitability and sustainability.
 
Brilliantly, this same classes tool in QuickBooks can be used to track program revenue and expenses. (Can you feel the excitement building?? #nerdalert)
 
Using this method, you can allocate a percentage of staff salaries, general overhead, and direct program costs to each program WITHOUT adding a gazillion lines to your Chart of Accounts.
 
Here’s what that might look like for an environmental education nonprofit:

Do you see the leverage and empowerment that comes with this kind of accounting setup? If you were writing a grant for this organization’s adult programs, you’d be able to easily make the case for shortfall and demonstrate the need, right?
 
On the other hand, if you were writing a grant for the expansion of your K-12 programs, you could evaluate the estimated cost of that expanded reach based on the annual spend in that class.
 
Once you have your accounting system set up in this way, you can budget by class, run regular reports by class, and get valuable insights as to what is/is not sustainable from a revenue perspective. This not only assists with grant writing, but it will also lead you to have deeper and more honest conversations about things like program fees, fundraising goals and campaigns, and program budgets.
 
How game-changing would this type of reporting be for you? Imagine the possibilities.
 
A couple of caveats and words of caution: 

• The use of classes can make reports unwieldy if your Chart of Accounts is large or, for lack of a better term, cluttered.
• Classes as a feature are not available in all versions of QuickBooks. You may have to upgrade to turn that feature on. Call us if you’re not sure what version you need – we can help you sort it out.
• When we onboard new clients, we often see classes in use. Unfortunately, they’re being used incorrectly. As a general rule, class labels and categories should be DIFFERENT from line items in your Chart of Accounts.

 
Does it sound like we know our stuff? We do! The Blue Fox team will help get those financials in order and make grant writing a breeze! 

Is your organization ready to outsource the accounting function (here’s how you know)?
 
If anything, let’s review your chart of accounts and class set up.  We are happy to include that in our free consultation?  Let’s schedule time! Call us at (321) 233-3311 or email hello@yourbluefox.com.