QuickBooks Classes vs Customers for Grant Tracking

One of the first decisions nonprofits face when setting up QuickBooks Online for grant tracking: should you use Classes or Customers (with Projects)?

Both can work. Neither is perfect. This guide helps you choose the right approach for your organization.

Quick Comparison

Feature	Classes	Customers/Projects
Track income by grant	Yes	Yes
Track expenses by grant	Yes	Yes
Budget tracking	No	Limited (estimates)
Multiple donors per grant	Yes	No (major limitation)
Hierarchy/grouping	Sub-classes	Customer > Project
Time tracking	No	Yes
Profitability reports	Class reports	Project reports
Invoicing	N/A	Yes
Complexity	Simpler	More complex

When to Use Classes

Classes are better when:

• You have multi-donor restricted funds (multiple donors contributing to the same purpose)
• You want simplicity over features
• You don't need to invoice funders through QuickBooks
• You're tracking 10+ grants (Classes scale better)
• You want to use Departments for programs separately

How Classes work for grants:

1. Create a Class for each grant (e.g., "Ford Foundation 2024")
2. Apply the Class to revenue when funds are received
3. Apply the Class to expenses when you spend
4. Run Class reports to see income/expenses per grant

Class hierarchy example:

Foundation Grants (parent)
├── Ford Foundation 2024
├── Kellogg Foundation 2024
└── Gates Foundation 2025

Government Grants (parent)
├── HHS Youth Services
└── DOE Education Grant

Limitations of Classes:

• No budget vs. actual (Classes don't have budgets)
• No remaining balance calculation
• Manual report compilation for funders
• No enforcement—easy to forget the Class

When to Use Customers/Projects

Customers are better when:

• You invoice funders for reimbursement (cost-reimbursable grants)
• You need time tracking against grants
• You want QBO's Project Profitability reports
• Each grant has a single funder (no multi-donor situations)
• You have fewer grants to manage

How Customers/Projects work for grants:

1. Create a Customer for each funder
2. Create a Project under the Customer for each grant
3. Apply the Customer:Project to income and expenses
4. Use Project reports for profitability

Customer/Project structure:

Ford Foundation (Customer)
├── Youth Programs 2024 (Project)
└── Education Initiative 2025 (Project)

Gates Foundation (Customer)
└── Health Access Grant (Project)

Limitations of Customers/Projects:

• One customer per project — Can't have multiple donors on one restricted fund
• Workarounds required for multi-donor grants (Sales Receipts + JEs)
• Projects don't have budget tracking
• More setup complexity

The Multi-Donor Problem

This is often the deciding factor.

Scenario: Three donors each give $10,000 toward your new building fund. In QuickBooks:

With Classes:

• Create one Class: "Building Fund"
• Record three deposits, each tagged with the Building Fund class
• Expenses tagged to Building Fund
• Works fine ✓

With Customers/Projects:

• Create a Project called "Building Fund"
• But under which Customer? Projects require exactly one Customer
• You'd need to create a fake "Building Fund" customer, or
• Use complex workarounds with Sales Receipts and Journal Entries
• Gets messy quickly ✗

If you regularly have grants with multiple donors, Classes are usually the better choice.

Hybrid Approach

Some organizations use both:

• Classes = Grants (funding sources)
• Customers = Actual customers/funders (for invoicing and receivables)
• Departments = Programs (organizational units)

This gives maximum flexibility but adds complexity. Every transaction potentially needs three tags.

Example transaction:

• Expense: $500 office supplies
• Class: Ford Foundation Grant (which grant pays)
• Customer: Ford Foundation (for A/R if needed)
• Department: Youth Services (which program benefits)

Our Recommendation

For most nonprofits, we recommend Classes because:

1. Simpler to set up and maintain
2. Handles multi-donor grants without workarounds
3. Scales better with many grants
4. Leaves Customers available for actual customers/funders
5. Works well with Departments for program tracking

Use Customers/Projects if:

• You invoice funders through QuickBooks
• You need time tracking against grants
• Every grant has exactly one funder
• You have a small number of grants

Beyond Classes and Customers

Regardless of which you choose, QuickBooks Online still lacks:

• Budget vs. actual tracking per grant
• Remaining balance calculations
• Restriction status tracking
• Funder report generation
• Compliance monitoring

If you need these capabilities, consider a grant management tool that integrates with QuickBooks, adding the grant-specific features while keeping your accounting in QBO.

Making the Switch

Already using one approach and want to switch?

Classes to Customers:

• Create new Customer/Project structure
• Going forward, use new structure
• Historical data stays in Classes (for reference)
• Reports will need to combine both for full picture

Customers to Classes:

• Create Class structure
• Create a class for each existing Project
• Going forward, use Classes
• Consider mapping customers to "Funders" in your records

Switching mid-stream is painful. If possible, make the decision before you have significant historical data.

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