Your accounting system wasn’t designed to help you raise money.
It was, back in the day, by the tax CPA who’s job is to keep you out of trouble. It wasn’t designed to help you tell your donor story. It’s financial accounting, set up to make it easy to do the 990 tax and get through the audit.
Important? Absolutely.
Helpful when it’s time to tell your story to donors? No.
The opposite. It's manual work for accounting to tell the development team exactly what they need.
But changes when you set up management accounting.
If just hearing the words management accounting makes your eyes glaze over, stay with me. Because what we’re really talking about is “outcome accounting”. It helps you see the cost and total impact of your programs. And once you can see it, so can your donors.
@GivingUSA says only nonprofits using numbers to tell their story, who treat donors like investors, are raising more money right now. Why? Fundraising has never been more competitive. Emotional appeals no longer work.
When a donor gives, they’re not just being generous, they’re making a decision. A deeply personal, values-driven investment decision.
But like any investor, they want to know: What is the Return On this Investment (ROI)?
To answer that question confidently, you need to understand your program economics.
This is where management accounting comes in. It’s not spreadsheets for the sake of spreadsheets. It’s about being able to say, with conviction:
“$125 provides a night of safety for a mother and her child.”
“$50 covers one day of nutritious meals.”
“$500 gives two weeks of support for a victims of domestic violence.
And knowing that those numbers are grounded in truth.
Program drives money - not the other way around. At least that’s the way it should be. How do we make that happen? Figure out which programs help further your mission the most.
Those programs have your best stories. Work backwards from the tangible results of each program and put that on your “Donate Now” page.
Start by defining the three to five MAJOR programs that have the biggest impact.. What are the core services of those programs? What are the main ways they fulfill your mission?
Then make those 3-5 programs your highest level program classes (QB) or dimensions (Intacct). Throw in the two classes for Fundraising and Management & General Expenses (MGE), and you have a big picture financial look at your most important programs and the overhead that supports them.
Keep it simple. Only break programs down into sub-programs where it makes sense. It costs money to do accounting. Add what you need to help tell your story or make a decision. Less is more
For a special needs organizations Vocational Services is often a big bucket. They may want to see economics for therapy services, separate from job skill training programs. A homeless organization would need to see a profit & loss (P&L) for the shelter, for each residential program, and maybe an “academy”.
How do you decide what to track? Work backwards from what story do you want to tell?
What do you want to put on your “Donate Now” page?
That’s what you need as a class or dimension.
The Chart of Accounts is the backbone of your accounting system. Here’s where you make the transformation from getting financial statements to actionable management reports.
For most organizations, QuickBooks was originally set up by the CPA who modified the “EasyStep” QuickBooks interview that’s built around one goal. To fill out the 990 tax return.
That looks like alphabetical accounts that are nearly useless when it’s time to understand the cost of each buddy backpack, therapy session, or seat on the bus.
Payroll is lumped into 3-4 lines. That’s usually 70+% of your money - summarized in one lump sum.
The Program expenses? They are separated. But since payroll’s not broken out, program expenses by themselves are a relatively small, meaningless number.
Here’s the secret: treat your ”direct” program costs like a business - as “cost of goods” sold (COGS).
Every good business knows the cost of delivering each service. That’s because the “direct” costs of serving a customer are tracked in the Cost of Goods Sold Accounts (COGS). The leaves just the “indirect” costs - the overhead, separated as expenses below the Gross Margin line.
Nonprofits need that even more. It's just called Cost of Programs. Then you can see what it costs to deliver each program and compare it to how much you brought in. And it makes it a lot easier to allocate overhead costs so you can see the fully loaded cost per person served.
Add a new COGS account called “Program Labor” and separate the cost of labor that ‘directly’ serves your clients from the indirect overhead costs.
Add a second new COGS account called “Program Expenses” and change your existing program expense accounts to a “COGS” account type under the Program Expense account. That lets you see the supplies and services that 100% directly help your mission in one place.
That’s it. Two new accounts make a world of difference.
Of course, you go do more, and go deeper. But less is usually more in accounting. KISS
The difference between the program income you bring in and the direct cost of each program is your Gross Margin. A positive margin shows the programs covering their direct costs that can help pay for your overhead. A negative margin shows the programs that need help with fundraising.
What’s left - below gross margin - are the “indirect” overhead expenses. That are the “indirect” (overhead) costs. These are the expenses that are not “100% directly” serving your client.
They go into two big buckets - Fundraising and MGE (Management/General) . Nothing more, Nothing less.
All these overhead costs are considered below the line costs because they stay below the gross margin line.
This simple framework that unlocks a powerful insight.
Which of your programs are covering their costs (if any)
Which ones need to be covered by grants, donations, or gross margin from other programs?
When you see it clearly, you can lead more clearly.
Once you know your direct program costs, the last accounting step is to layer in the overhead.
You raise more money if you show “fully-loaded” costs. That’s means adding all the costs that keep the light on your programs. This is where most organizations hesitate, and where clarity really starts to shine.
You are allowed to allocate certain overhead costs to programs, as long as you follow the rules (and yes, there are rules, thank you AICPA/Cima, ASU 2016-14).
Don’t aim for perfection. You are aiming for fair, accurate, and repeatable.
Here are a three simple methods that are allowable:
It doesn’t have to be complicated. It just has to reflect reality.
At the end of each month the spreadsheet math gets turned into a “re-class” entry to move overhead into the right program. You don’t change the expenses you just change the class or dimension.
The entry keeps the same account code, meaning the expenses dont change. You are just moving those costs from the Management & General Expense (MGE) class to the same overhead account under the program class.
This way you can see all the direct and indirect costs on the program P&L.
Now, you’ve got fully loaded program costs, direct plus overhead. The final move?
Divide those costs by the number of people served, meals delivered, nights of shelter provided, whatever your unit of service is.
This is where the magic happens.
Now you can say, with full confidence:
“$125 provides a night of safety for a mother and her child.”
“$50 covers one day of nutritious meals.”
“$250 means 25 victims of domestic violence can call the hotline.
And when your numbers are clear, your story is compelling, and your donors lean in.
You don’t need a finance degree to do this. You just need a mindset shift.
It’s not about chasing perfection or trying to wrangle every micro-detail. It’s about building a system that helps you:
This is what we practice, and teach, every day inside the Fundraising Accountant Community.
If you’re struggling to raise money with numbers that don’t tell the story, its likely because your accounting system was set up for the tax return.
If you’re ready to connect with other like-minded nonprofit leaders looking to make the transformation to your mission and use numbers to tell your message...
Join us.
Our nonprofit is designed to provide the support to help you rebuild your numbers, and your confidence, from the inside out.
This kind of clarity that changes everything.