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The four Business Central dimensions nearly every nonprofit needs
Restriction
With donor restrictions or without, the two net asset classes the current nonprofit reporting standard requires.
Program
Food pantry, youth mentoring, housing counseling: whatever your board reads results by.
Function
Program services, management and general, and fundraising, the three columns of the statement of functional expenses.
Grant or award
Ties each cost to the funder you bill or report to, alongside a project for the budget.
Releasing nonprofit restricted gifts in Business Central
You record a restricted gift as revenue with donor restrictions. Later, the group spends money on the purpose the donor named, or the time limit passes. At that point, the amount moves to net assets without donor restrictions. Auditors test this release every year.
In Business Central the release is a journal entry between two net asset accounts. It carries the program and grant dimensions of the spending behind it. In Business Central for nonprofits, many teams run it as a recurring journal each month, based on a report of restricted spending. The statement of activities then shows the release on its own line, as readers expect.
The same approach works for board-designated funds. They stay without donor restrictions, but you track them apart because the board chose to set them aside.
A nonprofit grant in Business Central, from award letter to closeout
- 1
Set up the award
Create a project for the grant with its budget by allowable cost category and its period of performance.
- 2
Code the spending
Staff tag bills, card transactions and time to the grant dimension; approval workflows stop unallowable coding before it posts.
- 3
Allocate indirect cost
A recurring journal applies your approved indirect cost rate to direct costs so the grant carries its share of overhead.
- 4
Bill or draw down
You invoice cost-reimbursement grants from project actuals, and track the receivable until the funder pays.
- 5
Close out
Budget against actual per category supports the final financial report. Then you close the project so no late costs land on it.
Nonprofit donor database and Business Central: dividing the work
Honest limits of Business Central for nonprofits
- ✓Nonprofits should know that Business Central does not force every fund to balance on its own. If you need a balance sheet per fund, the design has to include due-to and due-from accounts or reporting rules, agreed with your auditor.
- ✓Also, encumbrance accounting, which reserves budget when you raise a purchase order, is not a standard feature.
- ✓Salary allocation across grants depends on the time or effort data from your payroll provider, because Business Central has no native US payroll.
- ✓Donor management belongs in a CRM. You can shape Dynamics 365 Sales for it. Still, donor platforms often fit small fundraising teams better.
- ✓Very small organizations with one program and few grants may be better served staying on simpler software for now.
- ✓Finally, grant budgets that span fiscal years need care. That is because G/L budgets run by period rather than by the life of an award.
Business Central for nonprofits: finance questions
Does Microsoft offer nonprofit pricing for Business Central?
Microsoft runs a nonprofit program with discounted offers for eligible groups, and it has included Dynamics 365 products. Eligibility checks and the list of included products change over time. Check Microsoft's nonprofit site or a licensing partner for current terms before you budget.
Can Business Central produce our Form 990?
It does not file the return, but it can hand your preparer clean inputs. The function dimension produces the expense columns of Part IX, and program and revenue dimensions support other schedules. So mapping the chart of accounts to 990 lines early saves a lot of year-end rework.
We receive federal awards. Does this support a Single Audit?
Business Central keeps what auditors test: spending by award with supporting documents attached, approvals recorded, and budget against actual per cost category. Whether your policies and controls meet federal requirements is a matter for your auditor and the Uniform Guidance. We set up the records so the evidence is easy to produce.
Can we move from QuickBooks in the middle of our fiscal year?
Yes, although the start of a fiscal year is simpler. A mid-year move brings year-to-date activity by month with dimensions, so the annual statements and 990 come from one system. The scoping call looks at your grant reporting deadlines before picking the date.
We have a foundation and an operating charity. One company or two?
Separate legal entities with separate filings should be separate companies. Business Central handles intercompany grants between them and consolidates for combined statements where your auditor requires them.
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