I have read countless articles about how nonprofit organizations can adapt QuickBooks Online (QBO) to be their nonprofit accounting software. Most discuss the use of the QBO Class field at length. It is rare, though, to find any discussion about the the QBO Location field and how it might be used. As the name implies, the Location field was designed as a way to track financial activity for different business locations, but functionally it is just another bucket that can be used to categorize transactions. If you’re like most nonprofit organizations and don’t have multiple actual locations that need to be tracked for accounting purposes, with a little creativity you can use the Location field in QBO in other ways, including to track your organization’s funds!
How to Turn on the Location Field
By default the Location field isn’t turned on, so before you use it you’ll have to activate it. Like the Class field, the Location field in QBO is activated in the Accounts and Settings tab, under the Advanced tab. Check the “Track Locations” box, and select whatever label you want to use in the dropdown list below the box. Unfortunately “Fund” isn’t one of the labels, so if you’re going to use the field to track Funds it really doesn’t matter which you choose. To add Locations, click on the gear icon, then click, “All Lists”, then click “Locations” (or whatever label you selected), then click “New”.
How the QBO Location Field Works
After you turn it on, you’ll see Location show up in a dropdown box at the top right of the header portion of nearly all of your QBO transaction forms, including Bills, Invoices, Sales Receipts, etc. Because Location is in the header, that means that you’ll only be able to assign the Location at a transaction level, and not at a line item level. For example, you may enter a Bill that you are able to split between two QBO categories, but you can only choose one Location for the entire bill. While there are times that can be disadvantageous, such as when you have a single bill that relates to two funds, it can also be advantageous because the Location selected is debited and credited for that transaction. Why is that good? Because it allows you to more easily track balance sheet balances, such as cash, receivables and payables, for each fund, and to create a balancing balance sheet for each of your funds. So, if you need that information then you’ll have it at your fingertips!
Issues with Using the Location Field for Funds
While using the Location field can be useful in tracking Funds, it isn’t perfect. As mentioned above, it can’t be used at a line item level, so you can’t assign a single transaction, such a Bill, Invoice or Sales Receipt, to multiple Locations. In addition to that, there are times when the Location that gets charged isn’t what you’d expect. For example, if you pay multiple bills that were originally charged to different Locations, a payment transaction paying both of those bills at one time will only post to one of the Locations, not both. That could leave you with a negative accounts payable balance in one Location that is offset in another Location. Processing Bank Deposits and Journal Entries can cause issues as well. Bank Deposits will only post your transactions to a specific Location if you filter for that Location on the Bank Deposit screen. If you don’t, it won’t specify any Location when the transaction is saved. Journal Entries are the only type of transaction where you can enter more than one Location in a single transaction. While that can help if you need to make a correction resulting from another issue, if you’re not careful you can record a Journal Entry that can leave you with a Balance Sheet that’s out of balance when run for a specific Location.
Using the Location field is not the perfect solution for nonprofit Fund accounting in QuickBooks, but in simpler organizations it may very well be a viable solution. When transactions are processed correctly, you’ll be able to create a full set of financial statements for individual funds, and isn’t that the goal? If you need some help getting things set up, feel free to contact us, we’d be happy to help. Happy accounting!