How can you handle donor-restricted funds in QuickBooks?

I’m still working in my 30-day free trial of Non-Profit QuickBooks Online. One of the first challenges I’ve helped churches work through is how you handle all those church funds. I’ve seen two good solutions: 1)Track it all in the Equity section or 2)Track it in Equity AND Other Income. I show you this in the video below.

As an after thought, I wonder if it would work to set them up in the Liability section? Would this be better? It might help the church leaders see the obligation related to holding these funds.

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Unrestricted, Designated, and Restricted Gifts

Are donor-restricted gifts a blessing or a curse? Often they are a blessing…especially when the church’s leadership is trying to raise money for a cause or project. A lot of churches take special offerings for specific missions (e.g. Mission of the Month). Others raise money for capital projects or to retire debt. But what about those gifts with strings attached that we aren’t asking for? What about those strings church boards put on certain unrestricted gifts?

The less strings, the better…as long as you have quality leadership. My general strategy is to use up any funds with strings attached first. The more freedom our leaders have, usually the better. They know the challenges and opportunities more than anyone else. I can already hear someone saying, “But what about accountability?” Donor restricted gifts are trying to control the leadership’s decisions…not hold them responsible (i.e. accountable) for those decisions. You hold them accountable by confronting poor decisions…usually through the Staff-Parish Relations Committee…and maybe voting for them to no longer be in leadership.

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