’Tis the season of giving! In fact, last year, Americans donated a record $471 billion to charities. Organizations have gone through yet another difficult year and faced the adversity of the pandemic — and the financial impacts that came with it. Furthermore, there are many tax-exempt organizations nationwide in a state of confusion on future government funding and what will be available for support in the new year.
With governmental funding being unpredictable and costs increasing significantly in the current climate, more and more tax-exempt organizations are ramping up their fundraising efforts, thus increasing the competition for contributions. Therefore, donations and financial contributions from donors have never been more critical.
Significance of donors and fundraising for tax-exempt organizations
Donors are the backbone of every tax-exempt organization. Tax-exempt organizations can rally donors by connecting an organization’s mission to the community or inspiring a personal approach to their giving. Donors choose to support organizations for numerous reasons, including believing in an organization’s mission, being personally impacted by an organization, or wanting to make a difference.
To attract donors, an organization can spotlight the community’s needs and what it is doing to fulfill those needs, showing potential donors why their assistance is needed. It is important for organizations to tell their story through visual tools such as charts and graphs to highlight the organization’s progress over time. Testimonials are equally as important and powerful to demonstrate your organization’s impact. Put a face to your mission by highlighting the successes of the individuals your organization serves.
Steps to carry out an effective fundraisingcampaign
This holiday season, and throughout the year, it is crucial that tax-exempt organizations and their accountants have a strong strategy in place for fundraising campaigns. The more successful fundraising is, the more good organizations can create and fulfill. With that, tax-exempt and other nonprofit organizations should keep these following tips in mind:
1. Make it simple to donate. It is crucial to ensure an organization’s website is properly set up and functioning to accept online donations. Clear and concise design of a donation landing page should make it easy for visitors to quickly navigate to a “donate” button. Studies have shown pop-ups on an organization’s website can significantly increase donations.
2. Recognize and celebrate donors. Donor relations is key to a successful long-term relationship with donors. One of the best ways to engage existing donors and turn them into loyal recurring donors is by showing gratitude. Donors greatly appreciate timely and personal acknowledgement of their donation. Take this time to share the successes of the organization, reminding donors how their contributions directly contribute to the goals and successes of the organization. If using a fundraising software, consider sending a simple handwritten thank-you note on the letter head of the organization, or have an executive — like a CEO — personally sign the letters. Personal touches can go a long way in creating meaningful and life-long donors. Another consideration is a donor recognition program to call attention, both publicly and privately, to the people who help the organization achieve its mission. Donors, especially major donors, appreciate being recognized for their philanthropic efforts.
3. Tax deductibility of donations. Tax deductions for donors are another factor to keep in mind when it comes to donations and fundraising. Each donor's situation is unique and will affect how much, if any, of the donation the person can deduct. Therefore, an organization will want to ensure there is not a blanket statement in fundraising solicitations or thank-you letters such as "your contribution is tax deductible." Instead, consider language such as “consult with your tax advisers on the tax deductibility of your contribution.”
4. Track usage of donations. An organization needs to track how donations are used to be able to report back to donors, especially if the donation is restricted for a particular purpose. Demonstrating how funds were spent offers transparency between an organization and donors and builds trust. This trust among donors and supporters invites them to give again in the future. Tracking donations may be accomplished with fundraising software, a spreadsheet, or your general ledger. Each organization needs to find what works best for them.
5. Key performance indicators and benchmarking. It is important to evaluate and celebrate the success of fundraising efforts. Helpful key performance indicators and benchmarks organizations should monitor including cost per dollar raised, conversion rates, number of gifts secured and average gift size. These KPIs all help successfully measure and evaluate the success of a fundraising campaign.
Proper fundraising can be complicated and takes significant staffing resources. Fundraising takes time and persistence but is very beneficial, especially in these times where future governmental funding is so uncertain.
