The Fund Accounting Gap in Business Central

Business Central has very deep functionality across most business functions, and its mechanisms such as dimensions can be used to do some amazing things.  It is an extensive application with impressive capabilities, but there are still functional limitations for certain requirements.  One of these gaps is hit when there is a need for fund accounting, and this can be surprising for users switching from other platforms that had native functionality for it. 

Fund Accounting Overview 

As a simple crash course for the uninitiated, funds are encountered often in the not-for-profit world, where there is a need to fully account for funds established for various purposes.  There may be an operating fund for ongoing expenses and other funds established through donor grants.  In these cases, a fully balanced general ledger needs to be maintained for each fund…the fund identifier is far more than just a classification for transactions.  A related core requirement here is automatic posting of due-to / due-from entries between funds when transactions cross fund lines.  As an example, a vendor invoice might be posted into the operating fund, but it might have lines that are allocated against other funds.  When this happens, those other funds will need to legally reimburse the operating fund for the expenses paid on their behalf, which creates the need for the dues entries.   

The Options in Business Central 

So, how can we handle this in Business Central?  It’s easy enough to set up a dimension for FUND, and to set up each fund as a dimension value, but we have the two core requirements above as gaps: 

1. There is no way to enforce G/L balancing by a dimension value, so nothing will keep the general ledger in balance for each fund. 
2. When transactions cross fund (dimension value) lines, there is no automatic mechanism to post the dues entries between them – users would need to do that manually for every transaction that crosses funds. 

This leaves us with three options:

1. Manual user handling – users try to post entries that are balanced by fund, manually adding due-from/due-to entries either during transactions or as adjustments after.  At month end, time is spent reconciling and investigating balancing/dues issues to post corrections. 
2. Customization – Business Central is highly extensible, so custom development can be done to implement the required functionality.  The downside here is complexity and scope.  The effort to customize the application to implement these controls and functionality is very significant and also creates ongoing maintenance work to carry the work forward and support it. 
3. Third party ISV apps – Business Central has a huge marketplace of third-party ISV apps to extend the application functionality for different industries and requirements, including options for fund accounting. 

To those moving forward with option 1, I sincerely wish you the best of luck.  We have seen this approach taken by companies on Business Central and it creates a significant workload for the accounting staff to try to manually manage balancing and dues between funds.  There’s little value in time spent posting entries manually that could be automated, or in sorting out balancing issues within each fund.  The only reason to go this route is to avoid incurring software or services costs…at the expense of higher ongoing labour costs. 

Option 2 is one way to TRY to eliminate manual work, but it is a significant undertaking that would have a very substantial IT or services cost up front that would also introduce ongoing costs to maintain the functionality, support issues that come up and handle updates for future releases of Business Central.  Also, where ISV fund accounting apps (option 3 to follow) may offer extensive functionality outside of the core balancing and dues posting, every bit of functionality in a custom approach would need to be planned out and built.  The likelihood of snowballing scope and costs is high, while the complexity of the core requirement alone makes this a risky initiative. 

This brings us to option 3, which is to leverage the extensive ecosystem of third-party ISV apps for Business Central.  The good news here is that there are options, and we have our own with DimensionPath Fund Accounting.  Our app is focused purely on the financial side of fund accounting, as opposed to other solutions in this space which take a much broader approach in terms of operational functionality for non-profits.  We openly advise prospective customers that if they need functionality to manage things like donors, constituents, etc. they should look at those other options.  Our solution focuses on the core financial requirements, providing a solution at a much lower price than our competitors for this reason.  While DimensionPath does not introduce a lot of operational functionality, it does cover other related financial requirements such as: 

• Balance controls for managing grants (using a dimension) or to protect the principle portion of funds if applicable 

• Commitment/encumbrance management, so that committed amounts on open purchase orders (not yet completed or invoiced by the respective vendors) are recognized and vetted against any applicable balance controls 

• Dimension shortcut codes 

• In the non-profit world, there tend to be several dimensions defined for various purposes, typically tied to budgetary controls 

• DimensionPath’s Dimension Relations provide a mechanism to establish shortcut codes that can populate a defined set of dimension values with one selection 

• Not to confuse matters, but DimensionPath also provides other tools related to dimension streamlining and control, such as our Allowed Dimension Combinations and even a Segmented Chart of Accounts to ease the transition for users coming from an “old school” segmented system

G/L Balancing toggle and Dues Posting Setups in DimensionPath 

Benefits of the Right Design 

When we talk about DimensionPath versus the competition, we also emphasize that our design is much closer to out of the box Business Central.  DimensionPath does not add a lot of additional tables and fields – we don’t even add a hardcoded “Fund No.” anywhere.  The product was built entirely around dimensions and other base BC functionality to fully leverage what is there out of the box without complicating life.  When looking at the app options, it is important to assess whether they come with any limitations (Can you use all base BC reporting and analysis tools for funds?  Are there base functions that cannot be used due to compatibility issues?) and also whether they collide with other ISV apps, requiring special extensions to adapt them.  Two big selling points for DimensionPath are: 

• It breaks NOTHING in base Business Central.  Every part of the base functionality works with DimensionPath with no compromises. 

• Its “clean” design enables it to work very well with almost all other ISV apps.  As I write this, we have only encountered one other ISV app that had a true compatibility issue and required a special extension.  In general, if an ISV app works with Business Central and dimensions, it will typically work with DimensionPath with nothing special to do. 

Closing Remarks 

In summary, Business Central is lacking proper fund accounting functionality out of the box but there are multiple ways to address that gap.  Once that is done, Business Central handles fund accounting beautifully, leveraging its dimension functionality (with our approach anyway) at the core.  So, don’t discount Business Central as a fund accounting platform just because it isn’t there out of the box – it is more than up to the task.  With our DimensionPath app, there is a better path! 

Learn more and download DimensionPath Fund Accounting from AppSource and please visit our Website.