Classes or Locations for Nonprofit Fund Accounting in Quickbooks Online?

There's no single right answer to whether nonprofit fund accounting in QuickBooks Online should use Classes, Locations, or both - it depends on how many restricted funds you're tracking, whether you need fund-level detail on the Balance Sheet (not just the P&L), and whether costs ever get split across funds on the same transaction. Most single-program nonprofits do fine with Classes alone. Organizations juggling multiple restricted funds or grants often need both.

Why This Isn't a Simple Either/Or

QuickBooks Online doesn't have native fund accounting. Classes and Locations are both workarounds nonprofits repurpose to simulate it, and each comes with a real tradeoff - not a "best practice" that applies to every organization.

How the Two Actually Work

Classes attach at the line-item level. That means a single transaction can be split across multiple classes - useful when one expense (like a shared admin cost) legitimately benefits more than one program.

Locations attach at the transaction header level only. One location per transaction, no splitting. But because Location data is linked to both the header and the line-item detail, it's the one of the two that can filter your Balance Sheet as well as your Profit & Loss. Classes can't do this reliably - header-level accounts, like your bank balance, aren't linked to a class, so a Balance Sheet run "by Class" won't give you accurate fund-level cash or asset balances.

The Objective Questions to Answer First

1. Do you need fund-level detail on the Balance Sheet - not just income and expenses, but actual cash and asset balances broken out by fund? If yes, that layer needs Locations, because Classes can't do it.

2. Do costs ever get split across more than one fund or program on the same transaction? If yes, that layer needs Classes, because Locations forces exactly one per transaction.

3. Are you already using Locations for something else - physical program sites, chapters, regional offices? If so, that dimension is already spoken for, and fund or restriction tracking needs to run through Classes instead.

4. What's your QuickBooks Online subscription tier? Both features require Plus or Advanced.

The Subjective Part

The objective questions narrow the options, but the right setup for a given organization also comes down to how the people using it actually think about the money.

A transaction only being able to carry one Location can be a feature rather than a limitation - specifically for restriction status. A single check or grant payment is almost always either "with donor restrictions" or "without," never both. That built-in exclusivity mirrors how restriction status actually works, and it makes it harder to accidentally misclassify something.

Programs behave differently. They often do share costs - one bookkeeper's fee, one round of rent, benefiting two programs at once - so Classes' ability to split at the line level fits program tracking better than it fits restriction status.

There's also a board-readability factor that's easy to underweight: a small board or a single treasurer may genuinely absorb one dimension of reporting (Classes only) more easily than two, even if a second layer would technically be more complete. Reporting that nobody reads correctly isn't actually more accurate.

Two Setups That Show Up Most Often in Practice

Single program, one fund. Classes alone, tracking the program(s) the organization runs. This is enough when there isn't more than one donor-restricted fund competing for Balance Sheet visibility - the P&L by Class already answers the questions that matter.

Multiple programs and multiple restricted funds. Classes for programs, Locations for restriction status ("with donor restrictions" / "without donor restrictions"). This pairing shows up repeatedly among nonprofit QuickBooks Online users dealing with more complexity, because it delivers Balance Sheet–level restriction reporting without losing the ability to split shared program costs.

The Bottom Line

There isn't a universally "correct" setup - only the setup that matches an organization's actual reporting requirements today. The trigger point to watch for is usually the addition of a second donor-restricted fund: that's typically where a Classes-only setup starts to strain, and where it's worth revisiting whether Locations should join the structure.

Not sure which setup fits your organization? Get in touch.

Richard Roché, QuickBooks Certified ProAdvisor - Advanced Online

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