16 Dec Handling Year-End Giving
If you’re like most non-profit fundraisers, you are looking forward to opening the mail the first few days in January. You may even be busy right now getting that last appeal out to help your members make a decision in your favor during the last few days of 2009. But as nice as it might be from an income standpoint, these gifts pose problems from an analytical standpoint.
First, donors who give one year in December and then “renew” 13 months later in January look on paper as if they did not renew for the calendar year in between. Usually this is not a problem when the skipped month does not fall at the end of the calendar or fiscal year. When it does, they will throw your renewal analysis off.
Second, a donor who gives $100 in January and “renews” the following December looks on paper like they gave $200 that year. That information may affect how fast you try to upgrade their membership unless you realize how the information came to be.
And third, calculating projections of income from membership in a given calendar year can be tricky, because you can’t accurately guess how much will be written on 31 December and arrive in January. It even matters what day of the week 31 December falls on!
In past years, organizations with whom I have worked have simply figured that everything would work out in the end, and experienced eyes tend to look for that January entry and “interpret” it as a fall campaign gift. But there’s a better way. There is an elegant solution I learned from an accountant I once worked with that will work for both your accounting system and your membership systems.
When you receive a gift in the first 10 days of January that was obviously intended as a year-end gift, enter a 31 December pledge first, and then enter the January gift as a payment on the pledge.
Why 10 days? Because in years where New Years Day lands on a Saturday, 10 days gives the post office a full week and a weekend to get the mail to you.
It will help you with your accountant if your Board passes a resolution adopting your general accounting practices, and if your intent to process January gifts in this manner is clearly spelled out in the practices statement. Try language like this:
It is_____________ standard financial practice to book donations arriving in the first 10 days of January as payments on year-end pledges dated for 31 December, unless there is specific written instruction from the donor not to do so.
As always, your comments, responses, and questions are welcomed here and by email at firstname.lastname@example.org