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.
Preauthorized gifts (also called recurring, monthly, sustaining or regular giving) just pledges for which the donor has authorized your organization to automatically collect a specific amount each month (or other cycles). The authorization could be in a particular 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 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 sets of unique advantages, such as lower costs and no expiration dates.
Setting Up 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, 7.5 percent of donations are now done (2017) with credit cards. That number has more than doubled in the last ten years. The untapped potential in offering a recurring giving option seems obvious.
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 manage & process recurring gifts efficiently.
- Testing of processes and procedures.
The Role of Technology
Perhaps the most critical 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 merely a database of donors and prospects. It must provide you with 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 full giving history with automatic calculation of gift summary by year
- Solicitation Generation/Tracking
- Gift/Pledge Management
EFT Transaction Processing
Although many nonprofits have begun to accept credit cards for either online or one-time donations, it is essential 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. You will probably want to offer the option of payments by direct debit (ACH), which require a different type of processing account and recurring payments by credit card.
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 essential benefits.
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 to minimize administrative effort. Although success may take time and effort, the result is well worth it.