Top Eight Reasons Why Your Charitable Organization Needs Recurring Payments

    July 31, 2003

Benevolence, good will and philanthropy are honorable principles to adhere to and run by, but when bills start amassing, a charitable organization will not be excused from payment despite its inherent noble ideals and objectives.

To make certain that all expenses will be paid – to ensure that its programs and services will remain in operation indefinitely – any charitable and/or nonprofit group must raise revenues on a consistent basis. Indeed, fundraising is so important that organizations often contract with professional fundraising firms to best determine how to continuously fill their coffers.

In Post-September 11th America, the task of obtaining financial support has grown increasingly more difficult. As our economy remains in flux – as so many of our citizens continue to experience personal money woes – the act of providing largesse itself becomes jeopardized.

Moreover, with so much of the charity now slated to New York-based, “ground zero” organizations, other charities are affected and receive less support. Resources have never been equitably distributed, and it behooves any charity to set itself apart as perhaps the “most worthy” – at least the charity of choice in a donor’s mind. (It is a sad reality that charities do compete with one another for scarce resources.)

Consequently, charities and nonprofit organizations must be business-savvy to maximize funds. Marketing may be pursued to increase income as prospective donors may learn of the group through a variety of sources: media, telemarketing, special events, and direct mail may be coordinated and utilized to “spread the word.” From these efforts, people pledge and give financial assistance, building a donor base.

However, it is interesting to note that most donors give a one-time payment and that usually represents a lifetime contribution. Some organizations do not even call donors back at a later juncture to ask for more money, eliminating good prospects and additional revenue. Indeed, it is clear that it is imperative for an organization to establish regular dialogue with former donors. However, what is not apparent and regularly practiced is to design a pledge program where individuals may contribute on a consistent basis (e.g., every month).

Regular donations may be received with a Pre-Authorized Payment (PAP) as individuals authorize the organization to deduct money from their bank accounts at certain time intervals. For example, an individual can specify that he/she wants to give $100 every month, to be deducted automatically. The funds will be transferred from the donor’s account to the organization’s account, typically via an electronic fund transfer (EFT). In the aforementioned example, the organization will have collected $1,200 at the end of the year.

The monthly pledge program (the time frame can be altered) offers a multitude of advantages. The following gives eight great reasons why a charity and/or nonprofit should implement it as soon as possible:

1. Explosive income potential – Simply ask and you may receive. Donors may very well contribute if a direct request is made. Instead of only receiving a one-time payment, an organization may, for example, receive 12 payments per year. Moreover, donors are likely to give more if their total donation can be subdivided over the course of the year.

2. Convenience – New donors are attracted by the ease of making donations. They do not have to sign and forward a check but just merely provide authorization for automatic deductions.

3. Better rapport – The connection between the organization and donor grows closer over time. Donors feel that they have an even more “personal stake” in the organization’s welfare, and are more apt to volunteer time to participate in special events and other fundraising activities.

4. Increases retention rate – Donors are more likely to stay with the program. Long-term value studies reveal that those on PAP will be contributing to the organization long-term, many until their death. One person contributing $100/month for twenty years can result in $24,000 for the charity and/or nonprofit group!

5. Reliable source of revenue – The organization is guaranteed income every month, which can cover a variety of monthly expenses (e.g., electric bills, telephone costs, etc.). The agency can budget its cash flow accordingly.

6. Savings – Administrative costs are dramatically reduced as there is much less paperwork. One person in the agency can easily oversee and manage the PAP plan. Also, less money needs to be allocated on marketing, particularly direct mail packages which can get very expensive. Overall costs of processing and acquiring donations go down so more money can be slated towards the services, and not to the operation itself.

7. Claiming Share of Resources – An organization that wishes to stake its claim to limited resources and financial reserves must make certain that individuals join its PAP, rather than one for a competitor. If donors participate in another agency’s PAP, they may not be willing or able to join that organization’s program.

8. Simplicity – It is very easy to establish a PAP arrangement. A donor fills out a simple form stipulating that he/she authorizes a transfer of money to an organization on a monthly basis. An electronic fund transfer then takes place with the assistance of a payment processing company.

In light of the numerous advantages of PAP, the operative question does not center on whether a charity or nonprofit should adopt it, but “Why have they not done so thus far?” Any organization that is in the business of fundraising (which applies to all charities and nonprofit groups) must avail itself to PAP and pledge to do so with expedience!

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.