Stop Wasting Time & Money on Multiple Bank Accounts
Are you a nonprofit organization with multiple bank accounts? If you’re using multiple banking accounts or institutions to track the financial aspects of your organization, you may be misusing your time and money.
The downfall to multiple bank accounts
Cost: Maintaining multiple bank accounts can result in unnecessary expenses to your mission. Many bank accounts involve
- setup fees
- monthly service charges
- check ordering fees
These are costs that can add up quickly when you utilize multiple accounts.
Maintenance: Multiple accounts also result in additional accounting work. Instead of just one account that requires routine entries; multiple accounts will require multiple entries. This can lead to:
- accounting errors (such as posting an expense to the wrong accounts)
- multiple reconciliations (making month end a headache)
- grant tracking mistakes (such as putting an expense to the wrong grant)
- tracking difficulties (you’ll have to trace the money back to original deposits)
Instead of multiple accounts
Utilize QuickBooks to properly track your finances. Begin by setting up classes in your chart of accounts. This will allow you to track where all money is coming from/going to.
Typically you will have Classes for:
- Administration (unrestricted funds)
- Fundraising (unrestricted funds)
- Programs (restricted funds)
Under each class, you also have the option to include sub-accounts, for example under Programs you would list “art in the park” or whatever the actual program name may be, so you know what fund the money is restricted to.
When you receive funds from a donor and create a sales receipt, you will then tie that to the class; when you incur an expense, you will create the expense and then tie the expense to the class.
To see the details of income and expenses for a specific class, simply pull a Profit and Loss report, customizing it to show the specific class you want displayed. This report will display all income and expenses tied to the selected class. In addition, the Net Income will display your current balance for that class.
If a grant covers many programs another option is to associate the expense with the specific donor. When you create the sales receipts and expenses you would add the donor so you can track funds that way. You would then run an Income by donor report to see the income and expenses and how much funding is still available.
Multiple accounts can overcomplicate your accounting. There are easier ways to manage your funds. If you utilize the proper accounting tools, multiple accounts become unnecessary. By clearly recording the entrance and exit of your funds, they can be managed with only one bank account.
Note: if the grant you receive requires a separate bank account then create one since that is a stipulation. In most cases though, you can keep all your funds in one bank account.
Renata Poe Massie, Content Writer for Jitasa