When and How Do You Record Monthly Gifts Financially?
This question also came up at the recent sustainer workshop, and I know it’s something people struggle with, especially when you talk with your treasurers or finance folks.
Monthly gifts are different from the major gift pledges most organizations are used to. Those pledges are typically set up for a specific purpose with an end date. And to make it even more confusing, some donor CRM systems use the word “pledges” for monthly gifts as well.
Technically, monthly gifts are indeed pledges. They’re promises to give, BUT monthly gifts are unrestricted, and there is NO END DATE. These gifts keep coming until the donor stops or because of the organization eventually stops it due to a credit card issue.
So, here are some typical questions your finance folks may ask:
- When should we record the payment?
- What do we do with payments that move into the next fiscal year?
- How do we account for monthly gifts if they come as a result of a special campaign/attribute to that campaign?
- Do we need to write off the gift if the monthly gift stops?
- What do we do with campaigns that start late in the fiscal year, so revenue looks small?
Of course, every organization is different, so here are some recommendations, knowing that I always recommend keeping things simple as much as possible. Don’t overthink it.
1. Record a payment for a monthly gift when you receive the payment. You can consolidate bank and credit card statements, so that’s all real revenue received.
2. Annualize your monthly gifts and make your projections of expected revenue for the next fiscal year. If you’ve had a monthly giving program for a while, you could use a retention percentage there to make your best estimate of what’s expected; then record that as part of your budget moving forward into the next fiscal year.
3. Take the cost when you send out your campaign. Yes, that may mean that you only get one month of income for the fiscal year if you do your campaign in May, but so be it.
As a fundraiser you’ll know that you’ll get the annualized revenue moving into next fiscal year. So, when you evaluate your results on a campaign basis, you’ll be able to build that into your projections. Just make sure you note everywhere that the expense was for a sustainer campaign.
If you get one-time gifts as a result of a monthly donor campaign, you’ll record those, of course, when you receive them. In most cases, they will pay for the campaign.
4. If you’re asking for monthly gifts through a tick box on a campaign appeal, you may get a few. And because you want to show the total campaign results, I recommend simply taking the remaining period of the year to project their value. (Do remember that monthly gifts are unrestricted). You’ll be able to then take the full-year projections for next year’s campaign.
5. If you only record the payments when they come in, I don’t see a need for a “write-off” process for monthly gifts.
You should already be actively tracking monthly donor drop-offs and retention rates, and implement a plan for monthly donor retention and reactivation, which will help you with any projection adjustments you need to make moving forward.
But that’s a story for another day. We’d love to hear from you if you have other monthly donor financial considerations or questions.
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 firstname.lastname@example.org or by phone at (508) 776-1224.