There’s a lot of buzz about *FaceBook’s initial stock offering this Friday, June 18^th (a day that may live in infamy).  FaceBook Founder, Mark Zuckerberg recently laid out his business philosophy, “We don’t build services in order to make money.  We make money in order to build better services.”

If you’ve seen the movie based “The Social Network” which is based on FaceBook’s domination of social media, one thing is for certain, Zuckerberg built a social media platform that he and everyone around him would use.

This is great business advice.  Use the product or service that you sell.  Find out who’s using your product and what they are saying about it.  Sure, surveys and market research can help you plan and provide better services, but just picking up the phone and calling customers to learn about their experience can pay huge dividends.  Not only does it show you care about what your customers think (and you should), but customers frequently have the best ideas for how to improve your product.  Or how to make the giving process easier.  Or how to make your website better (you get my point).

Google established its philosophy  “Ten Things We Know To Be True” in their toddler years.  These 10 easy to read points are key ingredients to their success.  (Among my favorites:  “Fast is better than slow” and “You don’t need to be at your desk to need an answer”).

Will your business become a household name (or better yet a verb)?  Google your organization and find out what’s being said about it.  Does it fit your organization’s philosophy?  Call a few customers and pick their brains about their experience.  Then remember to check out the experience for yourself.

*FaceBook’s IPO is set for Friday, 6/18 with an initial stock offering set at $38/share.  ABC News reports that, “421 millions shares will be sold tonight (the night before) at the offering price to those investors who met the minimum buy-in requirements, which was millions of dollars for institutional investors.”  Who knows what the stock price will be when it actually reaches the general public. What’s your guess?

These additional apps can be found and turned on in the Aplos Store.  Just log in and find the Aplos Store at the bottom of the Home Screen.  All apps are free while in your FREE trial.

Click on the Aplos Store and you’ll see every app Aplos offers. Anything that is currently enabled will be orange.  Any app that you haven’t enabled will be grey.

If you hover over an app, a brief description will pop up.  To enable the app:

• Click on the app and a pop up button will show
• Click “enable” to activate
• Click “Home” to exit the store and start using the app immediately

Our additional apps are:

• Contributions Management – tracking charitable contributions
• People Database – keeping track of your donors and vendors
• Bank Reconciliation – reconciling your bank’s statements to your Aplos records
• Check Printing – printing checks

The best part — apps start at $1.99 and are available immediately upon enabling.

We are always updating our products at Aplos, so if there is a feature or function you’d like to see, I encourage you to let me know at support@aplossoftware.com!

Internal controls are policies designed to protect your assets.  Good internal controls will help your organization avoid fraud and may detect errors in your bookkeeping system.

Implementing internal controls doesn’t have to be expensive or time consuming.  Think of your organization’s assets like a fire.  What?  I thought assets were good.  THEY ARE!  And so is fire.  It’s powerful, necessary, and potentially dangerous (see the correlation to cash, your most liquid asset).

If you want to start a fire in your home, you need a fireplace (you wouldn’t light the couch on fire to keep the family warm).  The same is true for a nonprofit organization.  You want to have the proper measures in place to protect your nonprofit from burning down.  Think of internal controls as your fireplace.

Fire Rule #1

Don’t give any one employee or volunteer too much exposure (because someone or the organization will get burned).  All organizations should employ segregation of duties.

This is another frequently used term in accounting.   Segregation of duties is basically having a system of checks and balances in place.  For example, you don’t want the same person entering the payables, writing and signing the checks and then reconciling the bank statement.  Your office should have different people in charge of the following:

1. Custody of assets (physically in control of checks and mail)
2. Record keeping (entering transactions in accounting program)
3. Authorizing (check signing, purchasing, authorizing journal entries, limiting access)
4. Reconciliation (reconciling bank statement, writing off accounts overdue, creating depreciation schedule)

However, for a small organization, sometimes it’s necessary to combine these functions.

An example of internal controls:

Our Bank Reconciliation report can be printed and should be signed off by someone other than the preparer.  The report should be accompanied with:

• Prior month’s Check Reconciliation report
• Original bank statement
• Printed list of transactions posted to the checking account’s General Ledger for the current month being reconciled (Aplos’s Transactional Report in “View Reports”).

These reports should be viewed together.  Beginning and ending balances should be compared to ensure they are the same from one report to the next.  Transactions that may warrant further investigation by the person signing off on the bank reconciliation are:

• Duplicated transactions
• Payments for the same amount
• Missing check numbers or check numbers out of order

Most accounting software programs (including ours) can be set up to grant different users different permission and views.  For an overview of our permission set ups, check out this blog. It’s easy to let an employee or volunteer sign in with your information, but it’s best to set them up with their own sign-in.  This way you can limit their access to sensitive information and turn off access without any affect to your account.

Stay tuned for our blog series on Internal Controls … and Fire Rule #2

It’s important to set limits on what information your employees and volunteers can access in your financial software.  Our System Management app lists:  User names, emails and their permissions (even if they’re disabled). Limiting information and access to a strictly “need to know” basis is an important step in keeping your financial data secure.

Aplos allows the following “User” permissions:

• Administrator:  This user can do everything in Aplos (to include adding and disabling users and updating credit card information).
• Bookkeeper:  This user has no access to the “System Management” app.  This means bookkeepers cannot see credit card information.  Nor can they add, change or delete users or their permissions.  Bookkeeper can add, delete, and edit entries in all other apps.
• Auditor:  This user can only view entries and print reports in Aplos, but they cannot create, delete or modify any entries.  This is a great permission for a board or finance committee member.  Similar to “Bookkeepers”, the “Auditor” user in Aplos cannot view your credit card information or user setup.  The Auditor cannot access the ‘System Management’ app.
• People Manager: This user can only add people, their contact information, and may create any custom fields in our ‘People Database’ app.  They can also print reports with information only from the People Database.  The People Manager cannot view any financial data or access any other apps.

By having one person entering data and another reviewing your books, you are decreasing your risk of fraud and undetected accounting errors.  The person in the oversight position should not be related to the person entering the data and should have no vested interest in the financial position of your entity.

Watch for our series of blogs on internal controls.  It will start next week.  We will be providing simple, helpful tips for your charitable organization to safeguard it’s assets.

*To add another user to your account, go to “System Management” and click “Users” on the left.  Then click “Add users.”  Add as many users as you want during your free trial.  After your free trial ends, our base product includes one user.  Add up to four more users for $8.00/month.

Since there are a wide variety of nonprofits, likewise there are a wide variety financial ratios that can be used to evaluate the financial aspects of a nonprofit. Depending on the type of nonprofit, some ratios will be more useful measures than others.

Ratios are a tool to help you make financial decisions.  Like any tool it can be misused (when you have a hammer, everything looks like a nail).  Using the proper tools will lead you to the proper strategy and can also assist in improving your nonprofit’s performance.

*It’s important to keep apples to apples.  Unless otherwise noted, use the same measurement of time for both numerator and denominator.  Here are a few financial ratios to get you started:

Defensive Interval (DI)

Cash + marketable securities (investments that can be cashed out NOW) + receivables
AVG monthly expenses

$5,000 cash + $1,000 savings + $2,000 MMA + $2,000 accounts receivable
$2,000 AVG Monthly Expenses

= 5 months of operation

This number will reflect how many months the nonprofit could operate if no additional cash was received.

Savings Indicator

Revenue – Expense
Total Expense

The savings indicators shows you if the nonprofit is putting more money away over time or spending more?  This ratio illustrates whether your nonprofit is adding to its net assets or using them up.  You can do this using monthly, quarterly, or annual numbers.

Revenue Source

To calculate what percentage of your revenues comes from different sources:

Contributions source
Total Revenue

For example, if your grant revenue is $50,000 and your total revenue is $100,000 then 50% of your funding comes from grants.  If your grant expires next year, will the costs associated with those grants disappear as well or does the nonprofit need to start focusing on more grant revenue generation?

Program Service Expense

These are direct expenses associated with fulfilling your mission.  This ratio is widely used to scrutinize the financial stewardship of a nonprofit. The majority of a nonprofit’s funds should be used towards it’s mission (Program Services).

The Better Business Bureau’s has set a standard for this ratio.  BBB says that 65% or more of total expenses should be Program Service expenses.

For example, using the example from our blog on “Categorizing Expenses on Form 990,” if you were an animal shelter, Program Services may include:

Program Service Expense/Total Expenses

Veterinary services $55,000+Animal Shelter $12,000+Contractors (vets) $10,000
Total Expense $100,000 (includes Program Services, General, Adm & Fundraising)
= 77%

Many of the ratios used in “for profit” businesses are not meaningful to nonprofits, which is why we provided just a few common nonprofit ratios.  It’s also a good idea to compare your nonprofit against similar nonprofits.  It can give your nonprofit a benchmark.

GuideStar gives you access to more than 1.8 million nonprofits Form 990 for free (but you need to register).  GuideStar also has a great webpage on when ratios are useful and how to calculate ratios.

As nonprofit organizations become a larger part of our economy, the financial stewardship of these entities is more closely scrutinized.  Not only by board members and finance committees, but potential donors, journalists, and the general public.  These ratios are a great place to start.  Let us know if you have a helpful ratio in your sector.

This blog is informational and should not be viewed as tax or financial advice.

Watch and see how simple Aplos can be:

Check Printing Video

Check Reconciliation Video

These apps are always FREE during your trial!  Be sure to turn them on at the Aplos Store.  Thanks for watching.

Nonprofits track their finances with a method called “fund accounting.”  Fund accounting is a way to track your nonprofit’s resources.  This method of accounting can also demonstrate whether your nonprofit if being a good steward of it’s resources.

There are three main categories of expenses to track as a nonprofit on the Form 990 (many more expense accounts and funds):

1. Program Services
2. Management, General and Administrative
3. Fundraising

Let’s take a look at them one by one.

Program Services  - This is where you track the expenses that directly support your mission (some costs may be allocated over two or more categories).  If for example, your nonprofit is an animal shelter, the types of expenses that would be here are the cost of the veterinary services provided, direct housing of the animals, payments to subcontractors such a veterinarians, etc.

General and Administrative – This may include the management and personnel salaries, conference and meetings, insurance, etc.

Fundraising – These expenses will include the cost of the fundraiser (dinner, set up fees, hall rental) and the cost of advertising the event.  *Even though both of these expenses are for fundraising, they are on two different spots of Form 990.

Which brings us back full circle.  Look over that Form 990 first and life will be much easier next May 15^th!

This blog is informative and not meant as tax advice.

Your nonprofit may be eligible to file the e-Postcard which requires less information than Form 990 or Form 990-EZ.  To find out which Form 990, your nonprofit must file, click here.

If you need more time to file, your nonprofit can file an extension request with Form 8868.

Requirements:  Each request must be for a single organization and must be for a full tax year (not a short year).  In most cases, you will file for an automatic 3-month extension.  If this is the case, you only need to fill out Part 1.  If you need more time, you must fill out Part II of Form 8868 as well.

The extension is simple to complete and is only two pages.  The most difficult part is estimating the tax liability (if your nonprofit has any unrelated business income UBIT).  The IRS only grants an extension for the tax form, any taxes owed are still due by May 15 and Form 990-T must be completed.

Question number 3 requires the preparer to fill in a tentative tax amount less credits.  The difference is the tax due and must be paid by May 15^th.  If the tax due is underestimated, the nonprofit will be charged interest and penalty on the underpayment by the IRS.  You may be saying, “If I knew what the tax was, I wouldn’t need an extension!”  We sympathize.  One way to estimate the tax is to start with last year’s tax due (Form 990-T).  Estimate any difference based on the current year’s activity.  There are many items to consider that could make that estimate greatly vary form the prior year such as higher or lower unrelated business income, higher tax rates, and prepaid tax amounts.

You will need to briefly explain why Form 990 cannot be filed in a timely manner.  The IRS will not approve applications that only list “illness” or “CPA too busy.”  Give a more detailed explanation.

Filing Form 8868 maybe necessary to put the nonprofit’s financial data in order.  If you then properly file the report by the new due date (August 15^th) and pay the balance due by May 15^th, filing for an extension will not jeopardize your nonprofit’s tax exempt status. Remember the quickest way to lose your nonprofit status is by NOT filing your tax forms in a timely manner.

The extension (Form 8868) must be postmarked by the nonprofit’s tax return due date (normally May 15^th). The instructions for this form can be found on Page 3 after the Form 8868.  Don’t forget to sign it and keep a copy for yourself.

This blog is meant to be informative and should not be construed as tax advice.

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Cofounders Dan Kelly & Tim Goetz and Director of Communications, Tracey Scharmann were all at the Exponential Conference in Florida.  Our simple accounting software program will make accounting for your church’s finances easier.  Go here for this exclusive offer to Exponential Conference attendees http://www.aplossoftware.com/gads/expo2012/cp.jsp