The finance management of charities is much the same as that of organisations in other sectors. They still need to apply basic accounting principles and keep an eye on where money is coming in from and what their outgoings are. However, a key difference in charity finance is the way in which NFPs account for their funds. Here we look at the two main types of funds charities receive, the challenges associated with fund accounting, and how Microsoft Dynamics 365 Business Central makes this process easier, letting you keep control of all your restricted and unrestricted funds.
Charity funds are categorised as either restricted or unrestricted. When someone donates money and specifies how they’d like it to be spent (e.g., on food parcels or a new building), this is known as a restricted fund. In contrast, unrestricted funds are any type of income received by the charity without any nominated purpose in mind.
The unique nature of restricted and unrestricted donations makes fund accounting a complex process. For example, charities and NFP organisations must have a clear way of reporting the amount of money they’ve received in the form of restricted funds and exactly what it was spent on. It’s also necessary for them to group these funds together at the end of the financial year to adhere to charities’ statement of financial activities and recommended practice (SOFA/SORP).
NFPs may decide to re-distribute fund allocations. These activities are time consuming and, without the right tools can be complex to keep track of. Different finance systems, including finance management through Excel, make transferring sets of data from one place to another open for error.
Because of the challenges stated above, it is important that charities invest in a system that help them provide accurate reports of all the funds they receive. One such solution is Microsoft Dynamics 365 Business Central, which has a range of features to help with finance management. However, TES has gone one step further and configured the NFP Pack to work seamlessly with Microsoft Dynamics 365 Business Central to make fund accounting even easier and more efficient.
For example, it controls how all income and expense transactions are attributed with fund codes as they are entered into the system by:
Using these controls ensures that fund-related data is correct and complete at the point of entry, reducing the time spent in downstream reconciliations. Once posted into the system, the TES fund accounting functionality makes it simple to:
With the fund accounting enhancement of Microsoft Dynamics 365 Business Central by TES, allocating funds and keeping abreast of remaining budget has never been more straightforward. We’ve been delivering Business Central for over a decade, so we are well versed in the common problems NFPs face, whether that’s fund accounting, grant management or something else. Talk to us today about improving your experience of fund accounting and charity finance with Microsoft Dynamics 365 Business Central by TES.
Whether you’d like to arrange an informal chat, a free demo or discuss a potential project, our team of charity and not-for-profit digital transformation experts are always on hand.
