How to Create a Monthly Giving Program for Your Nonprofit

Monthly Giving Provides Path to Fundraising Success

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Would you like to reduce your fundraising costs, increase the lifetime value of your donors, while making it as easy as possible for your donors to give on a regular basis? It may seem too good to be true, but by creating a successful preauthorized gift program, you really can achieve all these benefits for your organization.

What are Preauthorized Gifts?

Preauthorized gifts (also called recurring, monthly, sustaining or regular giving) are just pledges for which the donor has authorized your organization to automatically collect a specific amount each month (or other cycle).

The authorization could be for a specific length of time, or preferably could be for an indefinite period (e.g. perpetually until the donor elects to discontinue it). This, of course, means that your donors never have to make another decision whether or not to give.

Preauthorized gifts can be collected by several forms of electronic funds transfer (EFT), including payments by credit card or by a direct debit to the donor’s checking or savings account.

Although credit card payments tend to be more popular with donors, bank drafts (often known as ACH transactions because they are processed through the Federal Reserve’s Automated Clearing House (ACH) system) offer their own set of unique advantages, such as lower costs and no expiration dates.

Why Setup a Preauthorized Giving Program?

There are many benefits to developing a preauthorized giving program, according to Harvey McKinnon, author of Hidden Gold and a leading authority on monthly giving programs.

His book provides the following list of some compelling advantages.

  • Dramatically increase your annual income
  • Build a better relationship with your donors
  • Donors will keep giving longer
  • Monthly giving revenue is predictable
  • Lower your fundraising costs
  • Income will grow over time
  • Monthly giving is convenient

    According to research sponsored by MasterCard International, only 3% of donors report using credit cards to make automatic donations, but 28% say they would probably or definitely consider making recurring donations if it were offered to them by their selected charitable organization.

    The untapped potential in offering a preauthorized giving option is demonstrated by the success of organizations that have begun programs. Peace Action, for instance, currently processes thousands of preauthorized donations each month, averaging $30,000-$40,000 in gifts.

    How to Implement a Recurring Donation Program

    Establishing a successful program will require several steps:

    • Educating your staff and donors about recurring donations via EFT.
    • Developing solicitation methods to recruit recurring donations.
    • Ensure you have the technology to easily manage & process recurring gifts.
    • Testing of processes and procedures.

    The Role of Technology

    Perhaps the most important tool in creating and maintaining a successful recurring gift program is having what Harvey McKinnon calls an "efficient and responsive back-end system." This consists of a donor management system and EFT and credit card transaction processing.

    Donor Management System

    A good donor management system is much more than simply a database of donors and prospects.

    It must provide you the tools that make it quick and easy to handle the many tasks associated with your preauthorized gift program (as well as your other fundraising efforts), such as:

    • Maintain complete donor/constituent information
    • Track complete giving history with automatic calculation of gift summary by year
    • Solicitation Generation/Tracking
    • Gift/Pledge Management
    • Reporting

    EFT Transaction Processing

    Although many nonprofits have begun to accept credit cards for either online or one-time donations, it is important to recognize that preauthorized recurring transactions are typically processed as a batch and therefore they have some unique attributes. You certainly don’t want to waste time and increase the chances of error by entering credit card numbers and amounts into a credit card terminal each month.

    As we have also noted, you will probably want to offer the option of payments by direct debit (ACH), which require a different type of processing account.

    Beware of EFT processing solutions that do not integrate with your donor management system. Although they may allow you to automate the process of generating and collecting the transactions, you are likely to be giving up several important benefits.

    Conclusion

    A recurring donations program is a great way to increase the lifetime value of your donors while reducing fundraising costs and efforts. Developing an effective recurring donation program requires you to properly educate staff and donors, carefully target and test solicitations to attract participants, and ensure that you have efficient and responsive back-end systems (donor management and transaction processing) to minimize administrative effort. Although success may take time and effort, the end result is well worth it.

    This article has been provided by DonorPerfect.