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The four 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 that will be billed or reported to, alongside a project for the budget.
Releasing restricted gifts, month by month
A restricted gift is recorded as revenue with donor restrictions. When the organization spends money on the purpose the donor named, or the time restriction passes, the amount is released 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, carrying the program and grant dimensions of the spending that satisfied it. Many organizations 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, which stay without donor restrictions but are tracked separately because the board chose to set them aside.
A grant 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
Cost-reimbursement grants are invoiced from project actuals, and the receivable is tracked until the funder pays.
- 5
Close out
Budget against actual per category supports the final financial report, and the project is closed so no late costs land on it.
Donor database and ledger: dividing the work
Honest limits for mission-driven organizations
- ✓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.
- ✓Encumbrance accounting, reserving budget when a purchase order is raised, 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. Dynamics 365 Sales can be shaped for it, and dedicated donor platforms are often a better fit for small development teams.
- ✓Very small organizations with one program and few grants may be better served staying on simpler software for now.
Nonprofit finance questions
Does Microsoft offer nonprofit pricing for Business Central?
Microsoft runs a nonprofit program with discounted offers for eligible organizations, and Dynamics 365 products have been part of it. 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. Mapping the chart of accounts to 990 lines early saves a lot of year-end reclassification.
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.
Talk to us about your project.
Tell us what you run today and what has to change. A senior consultant replies with a written next step.