How to Post a Pledge in QuickBooks
Intuit, the developer of QuickBooks, manufactures several different versions of the accounting software, including a version for nonprofit organizations known as QuickBooks Nonprofit. One feature of QuickBooks Nonprofit is the ability to add pledges to the account. Adding pledges uses the same interface as creating invoices, which includes all of the functionality of the invoice generator. QuickBooks posts the pledge as funds not yet deposited, so that the funds you have are separated from pledged funds.
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Generate a lump sum report to record donations into QuickBooks
Note: In January 2019, we began launching our new integration with QuickBooks Online (see help article).
But if you are not a good candidate for using the new integration with QBO, please continue below for an option of:
Recording details of transactions in your Little Green Light account
Recording lump sum entries in your QuickBooks or other accounting software account
If you just need a listing of entries by Gift Category and Fund, please refer to the first recommended approach in the article Working with Quickbooks and LGL.
If you have more complex requirements to generate your lump sum entries, this article explains how can you can generate a custom report with the lump sum amounts to enter into your accounting software.
Degree of difficulty: medium. The process relies on some post-processing outside of LGL. It does not require a high level of technical skill, but does rely on some familiarity with the concatenate function and pivot tables. For more on these and other spreadsheet functions, see our blog post Top 10 favorite Excel tips for nonprofits.
Background
Gifts should be entered into LGL using a combination of Campaign, Fund, and Gift Category, and the way you categorize gifts in LGL should be somewhat similar to how you do so in your accounting software. For example,
In your accounting software you might have a combination like:
Chart of Accounts Code: Special Events Donations
Class: Scholarship
And the corresponding entry in LGL might be:
Gift Category: Event Donations
Fund: Scholarship
For each unique combination in your accounting software, you’ll need a corresponding combination of gift attributes in LGL.
Running the report in LGL
The easiest place to start is in the Fundraising tab, where by default you will see all your gifts for the current fiscal year.
Selecting gift dates
Change the date range to reflect the dates you want to cover in your report. Depending on how frequently you intend to enter data into your accounting software, the best two options are:
“Last week rel.”
“Last month rel.”
In both cases, the report will return gifts for the period relative to the date you run the report.
“Last week rel.” is defined in LGL to mean the period Monday through Sunday immediately preceding when you run the report.
“Last month rel.” in LGL returns transactions for the month prior to when you run the report.
Gift types
You should filter your report to include only monetary transactions, which means you want to include the gift types of “Gift” and “Other Income”, but exclude the gift types of “Pledge”, “Installment”, “In Kind”, and all of the related gift types (“Soft Credit”, “In honor of”, “In memory of”, and “Matching”).
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Recording the Receipt of a Stock Donation
The end of the year is close and, hopefully, donations are pouring in. Donating stock instead of cash to a nonprofit or church may have an additional benefit for the donor. (Please note, I am not a tax expert and am not giving tax advice. Your donors should seek the advice of their local CPA to see if this could be a benefit to them.) IRS regulations allow for stock donated to be deducted by the donor at the market value instead of the stock price when it was purchased. This means that if a donor has 100 shares of stock he bought 5 years ago at $10 per share, and the stock market value is $50 per share when he transfers it to your organization, he would be able to deduct a charitable contribution of $5000.
In contrast, if he sold the 100 shares of stock, he would have to pay capital gains tax on the $4000 gain. Assuming a 20% tax rate ($800), he would only have $4200 to donate ($5000 less the $800 taxes). If a nonprofit is going to encourage their donors to speak to their tax specialist about this option, there are a couple of things that should be done.
First, the organization needs to have an investment account that stock may be transferred into. Secondly, the governing body should devise a policy about what to do with any stock donated. Will it be sold immediately and the cash invested with other funds, or will the stock be held until the cash is needed for its stated purpose? Who is responsible for investment decisions? Finally, procedures must be put in place to assure the donation is acknowledged on a timely basis and properly in accordance with IRS regulations on donor acknowledgements. For more information on donor acknowledgements, check out Church Accounting-The How-To Guide for Small and Growing Churches.
Now to the nitty-gritty. To record the receipt of stock, you will want to set up an invoice under the donor’s name for the full market value of the stock. If the stock was used to pay a pledge that has already been entered, you can skip this step.
If you are using QuickBooks, go to Receive Payments. Enter the amount as the full market value. If there were brokerage expenses, we will record those later as the donor records need to reflect the value before any transaction expenses. You may add a PMT METHOD called Stock. The value of the stock on the brokerage report may be slightly less than the pledge due to a change in value from the time the donor authorized it to the time it was recorded in your account. If so, QuickBooks will ask if you want to leave as an underpayment or write off the extra amount. If it is a small amount, choose the write off option. Save this payment, and your donor records will be up to date.
Next you will need to go to Make Deposits. Change the Deposit To option to the investment account the stock was transferred into. After selecting the amount from the Payments screen, you can adjust the deposit for any transaction fees. Enter the fee amount as a negative number on the next line. You will also need to assign a general ledger account number to the adjustment under the FROM ACCOUNT. I usually prefer to use the same donation account the invoice/pledge was recorded to in order for the net donation to be correct. Save the deposit.
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