Recurring Payments: An Important Fundraising Tool for Charities

    July 31, 2003

As a nation, we have always derived great benefit from the charitable impulses of philanthropists – individuals who felt a strong sense of obligation to their fellow man, sharing their financial resources in an all-out effort to help others. During times of tragedy, such as the September 11th incident, charitable giving notably increases to help assuage our collective suffering.

However, there are times of ebb and flow when it comes to donations, and, it is during those times when resources are low that organizations’ survival is at stake – jeopardizing their agenda and the beneficial ideals and objectives that have been set.

What do agencies typically do to combat a “financial crunch?” Many double their efforts organizing and running fund-raising drives. Others appeal to the masses for charitable donations via a variety of techniques: mass media exposure, telemarketing, canvassing, person-to-person, and letters of appeal are all used with great frequency to publicize the word that funds are needed. In fact, donors are besieged with pleas for their philanthropy on a daily basis.

As there exists a plethora of organizations that request financial assistance in the midst of dismal economic times – as individuals are facing their own cash flow problems – it behooves each agency to utilize effective means to maximize revenue. Indeed, it is the responsibility of each charity, religious organization or non-profit to separate itself from others. Yes, worthwhile organizations actually “compete” for the almighty dollar. Consequently, each agency must emphasize the importance of its goals and, what is not readily considered, make it as easy as possible and less “self-sacrificing” for a donor to give.

To reflect and determine how to best attract donors and deal with the aforementioned concerns (i.e., ease and degree of sacrifice), an organization must consider the following questions:

Are donors encouraged to give a single, large gift or can they extend their charity over a period of time?

Are donors asked to make out a check, pay postage and mail the donation or is there a quicker, less inconvenient system in place for payment to be received?

Are donors told to pay only with credit cards (as people generally give more with this payment option) or are they encouraged to access their checking account?

Finally, are donors contributing to pay, in part, for the organization’s administration or are they giving charity earmarked for the programs, and not so much for administration?

When these questions are fully examined, the answer becomes clear as to the best mechanism for an organization to use to maximize financial reserves via charity. Pre-authorized Payments (PAP) provides a win-win proposition for both donor and agency. PAP is a system where the donor authorizes payments that can be timed monthly, quarterly, semi-annually or even annually (or any specified length of duration). Each payment is automatically transferred from the donor’s checking account to the organization’s account.

Let’s take a specific example to highlight the benefits of such a process.

Mr. Smith has decided to sign up for PAP and give $25/month (equivalent to $300/year) to his favorite charity as he feels a sense of satisfaction and fulfillment offering this type of assistance. Look at his other points of view:

a) He is spared the financial hardship of giving $300 all at once; he simply spreads payments out over the course of the year;
b) He no longer has to remember to write and mail checks; even if he goes on vacation, the charity still receives his contribution.
c) He is also pleased knowing that no credit card company can take part of his donation with processing fees. (He knows that credit card providers typically take at least 2% of each payment.); and finally
d) He feels reassured that this type of contribution is less costly to administer, and thus, his donation goes primarily to fund his chosen program.

All he has to do is sign authorization to make consistent payments so funds may be transferred automatically to his charity of choice. It is simple to implement, and with payments that are spread out, Mr. Smith is getting the biggest bang for his contribution buck.

How do charities, religious organizations and non-profits view PAP? Convenience, efficiency and cost-effectiveness are the watchwords. Since the funds are automatically deposited into their account, with no delay, cash flow accelerates. In addition, they do not have to solely rely on the labor-intensive and the costly administrative process of securing donors; they already have a steady stream of revenue from the “regulars” who automatically contribute. These reliable and consistent receivables can easily get the organization through the “tough times.”

Furthermore, PAP encourages new donors as they are attracted by the ease of making donations. And these donors generally sign up for an unlimited duration, or, at the very least, for a year. Again, the day-to-day functioning of an agency becomes more likely when they receive consistent largesse for the minimum of a year.

Based on the bevy of advantages derived from PAP, it appears that this should generate great interest, and spearhead any fundraising endeavor. It may be the most efficient way of doing business and maximizing funds for needed and valuable programs. As more and more organizations are hit with a budget crisis, they should avail themselves to easy solutions that work. PAP just may be the savings grace that can ensure an organization’s survival.

Author, William Hamilton, owns a payment processing company, IntelliCollect, and their services are listed at: His company offers tremendous assistance to new and veteran business owners who need an effective solution to accept credit cards and checks.