How Do You Track and Record Recurring Gifts?
At a recent list serve, someone asked about how best to track initial and subsequent recurring gifts.
There are two ways to do this. Note that your finance/accounting/bookkeeping folks may have a different approach, so it’s important to involve them in any decisions you make about this.
As recurring gifts have no end date, so this is not like your typical major gift pledge where you get big amounts over a limited period.
Recurring gifts are counted when received, so only actual payments are measured in the account system.
Track Actual Payments
If the recurring gift is the result of a direct mail appeal, you’d typically count the first gift toward that appeal.
So, if an appeal generates five new sustainers for a gift of $20 each, you can attribute that $100 directly to the appeal.
Subsequent gifts are ideally tracked by monthly payment codes and added to other ongoing recurring gift payments.
That way you can better track what you receive in terms of active/paying recurring gifts, and you can see trends for all your recurring gifts, no matter which appeal they came out of. It’s a great way to see how monthly gifts grow.
Track Expected Revenue
You can make projections of what you can expect to generate once you know how many new recurring gifts you have.
In addition to recording the new recurring donors as part of the appeal, I like also making a note of the annualized revenue. Especially if you’re sending out a special appeal to generate new monthly donors, that will look much more impressive. The reality is that some of your monthly donors will stay with you for multiple years so annualizing that revenue is a safe bet and just easy to calculate.
Say, your sustainer appeal generates 20 new monthly donors at an average gift of $20, that’s $400 in immediate revenue received.
You can project to generate an annualized revenue of $4,800 from these 20 monthly donors. In addition, you can expect some one-time revenue as well, which usually more than pays for the overall appeal. A win-win.
Regardless how you report on the recurring gifts, you’ll always take the gift when the payments are received. Then subsequent payments will go into carryover.
Additional (not regular monthly) gifts from existing sustainers when asked for special projects or extra appeals should be attributed to the appeal they respond to.
As your recurring donor program grows, I suspect you’ll probably have to start making more intricate cash-flow projections of how many sustainers will go into next year and retention rates will come into play.
The recurring payment types play a huge role here. For example, if you have a high number of credit cards and electronic bank transfer donors, you can project a 90% retention rate for your recurring donors to start off the new year.
If you’re creating a budget for expected revenue, I recommend then simply to have a one liner of sustainer revenue coming into the new fiscal year and one line that flows out into next fiscal year (after you take projected new, lapsing and retained/reactivated recurring donors into account).
And as you grow further, you’ll have to add the upgraded amount to the mix as well.
But if you’re just starting out, keep it simple. Process the payment when received.
Then sit down with your finance/accounting folks to find out how they’d like to see it moving forward.
Also, remember that recurring gifts are typically unrestricted.
If your recurring donors were acquired for a restricted purpose, you will have to make sure that all subsequent monthly payments are restricted as well. It’s basically a pledge paid out over so many months.
If your project is done, you can reach out and ask if monthly donors want to continue with their recurring gifts to support your overall mission. At that point, you can make their subsequent payments unrestricted also.
Ideally though, start by asking for recurring gifts for the overall mission. Once they become a monthly donor, you can always ask for an extra gift to support a restricted project. You’ll be amazed at how many will do just that. One thing doesn’t preclude the other.
Erica Waasdorp is one of the leading experts on monthly giving. She is author of the book "Monthly Giving. The Sleeping Giant." She is the president of A Direct Solution, a company serving nonprofit organizations with fundraising and direct marketing needs, with a focus on monthly giving and appeals.
She just co-authored the "Monthly Giving Starter and Marketing Kit" with Donor Perfect, and she’s working on her next book called "Monthly Giving Made Easy." She regularly blogs and presents on fundraising, appeals and monthly giving—in person and through webinars. She is happy to answer any questions you may have about this great way of improving retention rates for your donors.
Erica has over 30 years of experience in nonprofits and direct response. She helped the nonprofits she works with raise millions of dollars through monthly giving programs. She is also very actively supports organizations with annual fund planning and execution, ranging from copywriting, creative, lists, print and mail execution.
When she’s not working or writing, Erica can be found on the golf course (she’s a straight shooter) or quietly reading a book. And if there’s an event with a live band, she and her husband, Patrick, can be found on the dance floor. She also loves watching British drama on PBS. Erica and Patrick have two step sons and cat, Mientje.
You can reach Erica at email@example.com or by phone at (508) 776-1224.