Apr 14 2022

Why Nonprofits Need to Restructure Around Recurring Payments

Charitable donations in the form of a few dollars a month could prove more impactful than larger gifts at the end of the year — if your nonprofit is structured to support recurring donations.

When it comes to donations, flexibility is increasingly shaping how nonprofits work, and that includes nonprofit technology.

A rise in mobile donations and growing interest in cryptocurrency is leading organizations to dip their toes into areas like nonfungible tokens. As a result, many nonprofits are having to adapt their approaches to the way that donors interact with the world, rather than the other way around.

Nonprofits must meet their consumers where they are. And increasingly, those consumers are interested in recurring payments, in part because of the model’s popularity in for-profit use cases. As a report from PaymentsJournal notes, nearly 60 percent of Americans use online subscription services for use cases such as video and music streaming services, along with software applications.

There’s a lot of reason to think that this approach might be palatable for nonprofit donors that generally interact with an organization just once per year.

MORE FROM BIZTECH: Check out the technology that will be trending for nonprofits in 2022.

Per research from the Public Interest Registry and Nonprofit Tech for Good, 45 percent of respondents were enrolled in a monthly giving program of some sort — an impressive total, given that, per the same study, 46 percent of respondents hadn’t heard of Giving Tuesday, an important event in the nonprofit calendar cycle.

And with monthly donors having a retention rate of 90 percent — double the amount of average donors and nearly four times that of first-time donors — building a base of donors who support you every month, rather than every year, can ultimately prove more valuable over time.

Seeing the value in recurring donations is the easy part. Reshaping your organization to handle year-round donations effectively might be a bit more complicated.

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Infrastructure Considerations for Recurring Donations

A key factor around accepting donations, recurring or otherwise, is the need to create an adaptable infrastructure that can reach potential donors on a regular, rather than periodic, basis.

A good comparison point within the nonprofit space is the dues associations must accept from their members, which are often annual in nature, and tend to be focused on the convenience of the organization.

Unlike associations, charitable nonprofits lean into donations rather than annual membership dues. Molly Boncaro, a senior vice president with the United Way, notes in a Salesforce blog post that annual donation strategies often leave donors in the dark.

“In an annual campaign environment, donors are cut off from the specific actions nonprofits are taking throughout the year in that specific location,” Boncaro writes. “Donors receive a request to donate to an organization, and they may have no real insight into what that organization is doing or has done throughout the year. Instead, the request is tied to the donor’s general perception of what the nonprofit does, such as feeding the hungry or providing relief after a disaster.”

With recurring donations, organizations are no longer working up to the “big ask” — instead, they deal with consistent charges coming in on a regular basis — and that might require a rethink of applications and processes. For example, your accounting and finance software might need an upgrade, but so too might customer relationship management (CRM) tools such as Microsoft Dynamics 365. And you might need to send a lot more emails throughout the year.

RELATED: Find out how a CRM system can benefit your nonprofit organization.

Building Around Conversion

It’s one thing to support recurring donations; it’s another to bring those donors into the fold.

Many organizations choose to use marketing messages that target potential long-term donors. One potential target area for such messaging? The one-time donors that your organization pulls in during its end-of-year donation strategies, especially those around Giving Tuesday.

By leveraging the data you have around them through business intelligence or analytics, you can uncover ways to make an effective messaging case for recurring donations over time. A notification, social media post or an email sent at just the right time could be the right spark to building a long-term relationship.

As Sam Bassett, business development manager for CDW’s nonprofit practice, noted last fall, recurring donations often end up being more valuable to an organization in the long run, even if the impact feels smaller to the donor.

“Let’s say somebody gives me $100, or $10 a month,” he said. “I’d rather have $10 a month, because that person’s buying into my organization. I can have them give more later, mention it to a friend — plus, over the course of a year, it’s $120.”

Sam Bassett
Let’s say somebody gives me $100, or $10 a month. I’d rather have $10 a month, because that person’s buying into my organization.”

Sam Bassett Business Development Director for Nonprofit Practice, CDW

How the Right Infrastructure Can Support Long-Term Donations

There is still room to further convert monthly donors, and even to increase their individual value. For example, you may be able to convince regular donors to move away from credit card payments, which come with a fee, and toward methods such as automated clearing house (ACH) payments, which are less costly, meaning that you get more out of your donor dollar.

However, if you want to build around upgrades, you need a flexible system, something noted by NonProfitPRO columnist Erica Waasdorp, an expert on recurring donations, in a column earlier this year.

“The sustainer upgrade process can be a bit cumbersome with some systems,” she writes. “In most of them, you’ll have to stop the old monthly gift and start a new one, which sometimes is a manual process.”

Having an understanding of how your systems work and where they might be holding you back is essential. By bringing in a partner like CDW AmplifiedTM Services, your nonprofit can ensure that when an opportunity shows itself, you’re ready to take it on.

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