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Maximizing Nonprofit Revenue with Recurring Payments

Although benevolence, goodwill, and philanthropy are admirable principles, nonprofit and charitable organizations cannot avoid paying bills despite their noble objectives. To ensure the sustainability of their programs and services, fundraising is crucial. In fact, many organizations hire professional fundraising firms to help them generate consistent revenue.

In Post-September 11th America, obtaining financial support has become more challenging due to the unstable economy and personal financial struggles faced by many citizens, which in turn threatens the ability to provide generous support.

In times of tragedy, such as the 9/11 terrorist attack or Hurricane Katrina, donations tend to be directed towards "ground zero organizations" and other groups providing immediate relief. This can leave other nonprofits and charities with less support, as resources are not distributed equally. As a result, it is important for agencies to differentiate themselves as the most deserving of support from donors. Unfortunately, organizations relying on public donations must compete for limited resources.

Nonprofit and charitable organizations must prioritize business acumen to effectively utilize funds. To attract potential donors through various channels such as media, telemarketing, special events, and direct mail, marketing strategies must be implemented. By successfully implementing such efforts, these organizations can build a strong donor base and receive financial support.

It's worth noting that many donors make a single contribution that is considered a lifetime donation. Unfortunately, some organizations miss out on potential revenue by not reaching out to donors for additional contributions. It's important for organizations to establish ongoing communication with past donors and consider implementing a pledge program for recurring donations.

Individuals can authorize organizations to deduct regular donations from their bank accounts at specific time intervals through preauthorized payments. For instance, a donor may choose to give $100 every month, which will be automatically deducted. The funds are transferred from the donor's account to the organization's account through electronic fund transfer. At the end of the year, the organization will have received $1,200 in the given example.

The monthly pledge program, which allows for flexibility in the time frame, provides numerous benefits. Below are eight compelling reasons why nonprofit organizations and charities should adopt it promptly:

  1. Explosive income potential - By simply making a direct request, donors may be willing to contribute. Rather than receiving a single payment, organizations can receive multiple payments throughout the year, resulting in a potentially higher total donation. Additionally, donors may be more inclined to give if their donation is divided into smaller amounts.

  2. Convenience - The convenience of authorizing automatic deductions appeals to new donors, eliminating the need for traditional check-signing and forwarding.

  3. Better rapport - As time passes, the relationship between the organization and its donors becomes stronger. This can result in donors feeling a stronger sense of ownership and investment in the organization's success, leading to increased participation in fundraising activities and special events as volunteers.

  4. Increases retention rate - Donors who opt for preauthorized payments tend to stay committed to the program for the long term. Studies on long-term value indicate that such donors continue contributing to the organization even until their death. For instance, an individual contributing $100/month for twenty years can generate up to $24,000 for a nonprofit or charitable group.

  5. Reliable source of revenue - The organization receives a guaranteed monthly income that can be allocated to cover various expenses such as electricity and telephone bills. This allows the agency to effectively manage its cash flow.

  6. Savings - Cutting down on paperwork significantly reduces administrative costs, and one person in the agency can efficiently oversee and manage a recurring payment plan.

  7. Claiming Share of Resources - To secure limited resources and financial reserves, an organization must ensure that individuals enroll in its preauthorized payment plan, rather than in a competitor's. Donors who participate in another agency's recurring payment plan may be unable or unwilling to join your program's plan.

  8. Simplicity - Setting up a preauthorized plan arrangement is a straightforward process. The donor only needs to complete a simple form, authorizing a monthly money transfer to the organization. The payment processing company then facilitates an electronic fund transfer.

Given the multitude of benefits associated with recurring payment plans, the relevant inquiry is not whether nonprofits and charities should implement them, but rather, why they have yet to do so. Any organization that engages in fundraising, including all nonprofit and charitable entities, should promptly embrace preauthorized payments as a means of facilitating donations.


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