5 How can you make it easy for people to be generous?

People often want to be generous, but feel limited by their financial situation. If you can help them find ways to give more generously, they may be grateful. Several techniques have been used for this:

• Spread a donation over several years instead of a single lump sum, or monthly instead of an annual lump sum.
• Make monthly payments automatic through credit cards or pre-authorized chequing.
• Use life insurance, wills and bequests to increase the total donation, reduce taxes and make a larger donation.
• Arrange donations of goods or services.
• Arrange matching grants, usually from the donor's employer.

Let's explore each of these.

Spread a donation over several years instead of a single lump sum, or monthly instead of an annual lump sum.

Many donors are prepared to commit themselves to making donations over several years. An advantage for your nonprofit group is that it enables you to plan ahead. It also means you don't have to go back to the same donor each year. Instead, you can visit more people.

Donors like this option too. It allows them to plan their payments according to their own cash flow. In addition, many donors can give more over an extended period of time than they could possibly give in a single donation.

Large donations are routinely pledged over three to five years. This allows the donor to take advantage of the maximum tax credits for charitable gifts. It also provides the nonprofit with security for future budgeting.

For smaller amounts, donors may prefer to spread payments out over a year, paying quarterly or monthly. Someone who would not dream of writing a single cheque for $500 may be quite comfortable with monthly payments of $40 or $50. For example:

• The donor may like the idea of sponsoring a particular piece of your work. Let's say you need the money for equipment, such as a $25,000 van, a $2500 computer, or a $250 shelf of books. The prospective donor may want to buy that for you — but not have the money. If the donor pledged annual payments for five years of $5000 (or $500 or $50), you could proceed. You get the equipment, and the donor gets the honour.
• The donor may want the honour of being a member of a giving club you create, such as the President's Circle, the Founders' Society, or the Friends of the Great Horned Owl. The entry level for the clubs might be a donation of $25,000, $2500 or $250. Donors who can't give the whole amount at once might join the club through an annual pledge for five years of $5000, $500 or $50, respectively.

Since you don't get all the cash up front, you may have to lease the equipment. Alternatively, you could get a bank loan based on the donor's pledge.

In order to cement this relationship, it is a good idea to create a pledge commitment form.

Action: Develop pledge commitment forms.

Pledge commitment forms are not used as legal documents. They are the donors' statements of what they intend to do if they can. It is highly unusual (and not recommended) for a nonprofit to use one to pressure a donor who chooses to withdraw support, or who is unable to keep making payments.

Prepare pledge forms for the donors to complete. Each form should show the donor's name and address, the total amount of the pledge, when payments will be made, and the amount of each pledge.

It is common to ask the donor to sign it, to demonstrate agreement.

Note that you should not normally leave the form with the donor in the hope that she or he will fill it in and mail it to you later. That mistake may lead to the donor pledging much less than you hoped for. You are likely to raise more money if the donor completes the form during a conversation, where you can answer questions, build excitement, and, yes, sometimes exercise a little persuasion.

Action: Set up a pledge reminder system.

Donors who pledge to pay a little at a time over an extended period may need reminders. This is not a dunning letter, but rather a gentle suggestion that another season has rolled around and it is time to make a payment.

The sad truth is that not all donors make full payment on their pledges. Fundraisers routinely discount the total amount pledged, assuming they may actually receive as little as half the amount promised. That is a lot of money to lose because of neglect, inactivity, or overwhelming pressure from other work. With proper pledge reminders you can collect 80 to 100%.

One nonprofit was thrilled when a well known benefactor pledged $5000 a year for ten years.

Everything went well for three years without a reminder.

In the fourth year, however, the cheque did not arrive. Since the executive director had heard that the donor was having a poor year in business, the board decided not to bother him.

The year after, the donor was in the middle of a divorce; again, no cheque came, and no reminder was sent.

By the sixth year, it was difficult to find a way to contact the donor. He had originally been deeply committed, but no one knew how he now felt. The nonprofit desperately needed the money.

They never did get another cent.

Continuing friendly communication would have prevented this problem. The donor might still have had to skip a year or two — but the bond would have remained strong.

Develop a pledge reminder package to send the donor before each payment date. For top donors this ought to be personal visits. For most, a personal letter will do. “Avoid form letters like the plague”, as one millionaire put it.

For monthly donors, some organizations send a stack of envelopes once a year. This is not recommended. Frequent contact is more likely to produce payment in full.

The pledge reminder package should contain a letter, a reply envelope, and a reply form. It is not an invoice or a demand for payment, but just a reminder.

The letter should thank the donor for past gifts. It may also provide news of your group's successes, to reinforce the donor's commitment. For larger donations, it should be personalized, by computer or by hand.

The package should also include a reply envelope, to make it convenient for the donor to respond. This should be a postage-paid envelope, so the donor does not have to find a stamp. For many people, the inconvenience of finding a stamp at home can lead to delayed or missed payments. For more information on business reply envelopes (BRE's), contact Canada Post, or refer to Everything You Need To Know To Get Started in Direct Mail Fundraising.

The reply form should include the donor's name, address and personal file number. This makes it easier for the nonprofit organization to keep track of donations. The form should also show the amount due at this time. It can also mention the total.

Add a few well chosen words and an illustration to reinforce the donor's desire to continue contributing. Each pledge form must perform the `sales job' all over again.

It is difficult — but necessary — to politely request donors to make up missed payments. Prepare polite reminder letters. Send these quickly, especially if the donor has always been on time in the past. Inquire if there is a problem, or if this was simply an oversight. Offer to extend the payment period if the donor prefers.

Do not, under any circumstances, simply ignore the missed payment deadline and hope the donor will catch up later. The longer you delay communication, the harder it becomes.

A recession can hurt pledge collection. How should you handle fundraising in bad economic times? Offer to let donors spread contributions over pledge periods of up to five years. Allow them to delay the initial payment date if necessary. If a donor faces difficulty in meeting his or her pledge commitments, offer to renegotiate the payment schedule or the amount of the gift.⁶⁸

Of course, if the donors cannot or do not want to continue making payments, you would not put pressure on them.

Make monthly payments automatic through credit cards or pre-authorized chequing.

Many organizations arrange to bill smaller payments to donors' credit cards, or deduct them from their chequing accounts through pre-authorized payments.

Such arrangements are frequently used in the business world for monthly payments on mortgages, cars, insurance and other large purchases. Not enough nonprofit groups use this system for their donors.

Some donors are even happy to continue making small payments on an ongoing basis. This is referred to as a negative option. That means the money goes to the nonprofit until the donor says to stop. This may go on for a long time. Some donors at OXFAM-Canada;, for example, have donated monthly through pre-authorized payments for over 15 years. Some of these generous people have signed up for an `Inflation Protection Plan', which automatically increases their donation by a specified percentage every year.

Action: Set up credit card payment options.

If your nonprofit does not currently accept donations by credit card, visit a bank, credit union or trust company to make arrangements. They have simple procedures and will guide you smoothly through the process.

There are minor costs involved:

• Credit card companies charge a commission for their services. This is based on a percentage of all the transactions using their card. For a new customer, they will usually request a 5% fee.
• The credit card company will likely require a small deposit for the card-impression machine.
• They may also request that the organization set up a special clearing account for deposits, keeping a minimum balance in the account at all times. In recent years, the security deposit has grown larger, as credit card companies protect themselves from fraud. If your organization is new or not well known, you may be asked to keep large sums on deposit.

These fees and security deposits are negotiable. In most cases the local manager has authorization to reduce the charge considerably. Most nonprofit groups and registered charities have arranged fees of 3% to 1.5% or less. Ask a volunteer to lead these negotiations. The ideal person is a respected business leader who has a large account at that financial institution.

Donors can authorize your organization to deduct from their accounts regularly. Set up a simple system for routine debits.

Use a `Bring Forward' (BF) file with slots for each month. Put a reminder in the appropriate slots for each donation the person has approved.

Fill in one credit card slip for each donation. It is not necessary to have access to the donor's card to make an impression. The credit card number, expiry date, and the donor's name can all be written in by hand. In the spot for signature, fill in `MO' for Mail Order, `PO' for Phone Order, or `SOF' for Signature On File. Deposit it as the credit card company instructs.

Send the donors regular letters to remind them that you appreciate their support. This becomes more important if the donor gives quarterly or less often, in case she or he has forgotten the pledge and wonders about the amount on the credit card bill.

Action: Set up a pre-authorized chequing option.

Pre-authorized chequing (PAC) allows donations to be deducted from the donors' chequing accounts as if they had written cheques.

It is better than post-dated cheques. The donor won't slow down as writer's cramp sets in from making out so many cheques. The sheer act of preparing 12 or more cheques can daunt and depress a donor. In addition, PAC can continue indefinitely without you having to remind the donor or request more cheques.

It is better than credit cards, because all credit cards expire, and the donor must renew the pledge.

However, the occasional bounced cheque for insufficient funds is more common with PAC than with credit cards.

Major banks have established procedures to set up PAC management on behalf of corporations and nonprofits. They will be pleased to outline their plan to you.

Minimum monthly charges and service fees do apply. Because of these, it may be cheaper for a small organization to concentrate on credit card plans at first. PAC can be introduced once volume becomes large enough to justify the administration costs.

Use life insurance, wills and bequests to increase the total donation, reduce taxes and make a larger donation.

Many donors can give far more to a nonprofit through planned giving than they can in cash or pledge. This involves wills, special life insurance policies, and annuity programmes.

Prospects often respond well to carefully prepared face-to-face discussions about these ways to help. Many of them are delighted to discover they can do more then they had ever dreamed.

Life insurance and annuities, for example, have several attractions. They may mean that the donor will actually have more cash available now, through tax credits and proper investments. At the same time the donor can give more than before to charity.

Some donors look forward to achieving a kind of immortality by arranging to be memorialized through gifts.

Such requests are best made to people who have long since been among your best donors. Those who have been supporting your group for years, or who have given unusually large donations, will be the most interested in these complex arrangements. It is less productive to contact a prospect for the first time and try to move directly to a discussion of planned giving.

Action: Research planned giving.

It is beyond the scope of this manual to explain how to set up these planned giving techniques. However, some familiarization will be helpful at this stage.

Churches and universities have produced a variety of excellent material on planned giving. Contact one or two for samples of the brochures they send to interested people.

Insurance companies will also provide background on their own products for planned giving. Not all agents are experts in this unusual field; be sure you talk to someone who fully understands the area. Some insurance agents will suggest that you provide your donor list to them and they will do the rest, contacting prospects on your behalf. This is seldom a good idea. It is far better for you to initiate contact, and to have an insurance expert available to explain the technical details.⁶⁹

Arrange donations of goods or services. Some donors may prefer to make contributions with goods or services instead of cash.

• A business owner, for example, may find it easier to give you building materials, a computer, or merchandise to use or resell.
• An art-lover may wish to give you a work of art.
• A landowner may offer property.
• A skilled person may offer services, from accounting to photography to painting walls.
• A manager may have staff do your printing, repair your organization's roof, or create an advertising campaign.
• A prospect concerned about capital gains taxes may be able to make a larger donation by giving your group stocks, bonds or property directly instead of selling them and giving you the cash.⁷⁰

All these are referred to as `gifts in kind'. The goods may be brand-new, or well used but recyclable.

Gifts in kind are sometimes a great boon to a nonprofit. You may well receive quality goods and services that you could not otherwise afford to buy. Some rare items may not be on the market at all.

In addition, a donor may develop a stronger bond with your organization by providing goods and services than by donating mere money.

Action: Develop a shopping list of gifts in kind.

Review your organization's needs with an eye to in-kind donations. What goods and services are you paying for now that could be donated? What might you need in future? For each item, list what you would normally have to pay. Depending on the value, you may find it more economical to buy some items rather than spend time arranging donations.

Later on, this list can be matched to potential donors to see what opportunities you may have.

Action: Review the limits of in-kind gifts.

Gifts in kind can present problems as well as opportunities.

Are you being offered services you can't use? If you have no immediate use for goods donated in kind, will the donor be offended if you resell them? This problem can arise when a donor gives artwork or land, but what you need is cash flow.

If you are not going to resell them, can you store them adequately to prevent damage? Will you have to pay large fees for insurance, transportation, or legal work for an item you don't really want?

Specific rules also apply affecting which in-kind donations can be considered for a tax credit. The following summary provides general information only. The author is not a lawyer or an accountant, and is not a representative of the government. Please consult Revenue Canada for complete and up-to-date regulations.

You Have More Freedom if No Tax Credit Is Issued

Donors can contribute in any way they wish, if no tax credit is issued.

Some individuals and businesses do not require a tax receipt. They may deduct their support as a promotional expense, instead of as a charitable donation. They may be donating goods that have already been written off for maximum tax deductions. They may have used up their maximum allowable charitable tax credit. Or they may be among those who believe that donations should be made to do good work, not to get tax incentives.

Many nonprofits are not registered charities, and therefore cannot issue official tax receipts at all. The following rules do not apply to them.

Whatever the reason, if no tax receipt is issued, Revenue Canada's charitable rules do not apply.

Charities Can Give a Tax Credit if Given Gifts of Goods

A donation of goods is eligible for a charitable tax receipt, just as if it were cash. However, a few rules apply. These are the rules that are in effect as of the time of publication, but they may change. For the latest regulations, please consult Revenue Canada or a lawyer who specializes in charity tax law.

Gifts of goods of no real market value, such as used clothes, are not eligible for receipts.

Gifts of goods can be receipted at fair market value, regardless of the price originally paid. A donor who bought supplies at wholesale prices can receive a tax receipt for them at full retail value. If the goods are worth more than when purchased, the donor may claim the current value. However, capital gains taxes may apply. On the other hand, if the goods are now worth less than when purchased, the donor is only eligible for a tax receipt at the current market value.

Gifts of goods cannot be double-deducted. If a donor has already deducted the cost of the goods for business purposes, a second deduction cannot be claimed for donating them to charity. However, it is not the responsibility of the charity to determine if the donor has already claimed the goods. The charity may issue a tax receipt in good faith. It is the responsibility of the donor to follow the tax laws.

Gifts of art, antiques and other unusual goods may be hard to evaluate for fair market value. The services of one or more licensed appraisers should be employed to determine the real current value. Rare cultural artifacts may also have restrictions on resale outside Canada.

How to Handle Gifts of Services

Services are never eligible for a tax receipt, according to Revenue Canada. However, it is legal to arrange a cheque exchange. In an exchange, the charity pays the donor for services rendered, and the donor then donates the money back to the charity for a tax receipt.

While this is legal, it is seldom worth the trouble. The donor, having been paid for a service, legally must declare the payment as taxable income. In most cases, the taxes paid on the income wipe out the benefits of the tax credit.

There is sometimes difficulty in determining what are services and what are goods. Computer programming, for example, is a service, according to Revenue Canada, and therefore not eligible for a tax credit. However, a gift of a computer programme that is sold in stores comes under the heading of goods and is eligible.

Information on Revenue Canada regulations concerning gifts in kind:

·Revenue Canada    (800) 267-2384

Ask for the following free publications:

• Gifts in Kind (P113)
• Gifts in Kind to Charity (IT-297R2)
• Deductible Gifts and Official Donation Receipts (IT-11OR2)

How can you arrange matching grants?

Many companies will match their employees' donations to charities and nonprofit groups. Usually the company gives a dollar for each dollar the employee donates, up to a fixed limit.

This is most commonly done for universities and other schools, and sometimes for arts groups or other nonprofits. It may not apply to you.

For a list of companies that provide matching grants, ask any university fundraising or alumni department.

Even easier, ask your prospects to contact their employers directly to see if they will match the donations. This is usually handled by the personnel department or the payroll office. If in doubt, ask the chief executive officer of the company (or his or her secretary).

6 With all this information, how do you decide?

You have now done everything possible to make it easy for a sympathetic prospect to be exceptionally generous. You have also acquired a great deal of useful information to help you make a decision about the prospect's likely gift.

But how much should the amount be? The rule of thumb is: If in doubt, ask big.

Decide on the appropriate range based on the prospect's level of interest, ability to give, and giving history.

A sophisticated and effective system to rate the potential gift has been spelled out by Kent Dove. He recommends a confidential meeting to discuss each prospect's potential to give. If that's not possible, he suggests having individuals rate the prospects. The ratings should be done by knowledgeable volunteers, such as “bankers, lawyers, investment counselors, insurance executives, the socially prominent, and those actively involved in organized philanthropy…”

The rating includes the prospects' potential to give (what they would give if the institution were their number one philanthropic cause and they wanted to make the biggest gift of their lives) and a probable gift size (a gift they could pledge over the next eighteen months, without much solicitation, that would be payable over the next three to five years).
For an individual, figure the potential gift as 3-5% of the person's total assets outside of personal real estate and life insurance.
To determine the probable gift, look at the prospect's giving history (including the largest previous gift), other obligations, financial health, type of investments, rate of return, family obligations (parents, children), attitude toward giving, the strength of ties to the institutions, and `conspicuous consumption' — the visible signs of wealth: private schools, estates, vacation homes, and so forth.⁷¹

This may be too complex for a grassroots group.

Realistically, if the donor gave you double the largest donation he or she had previously given you, you would probably be satisfied — even if they were actually capable of giving you far more. Tripling it would be really impressive. (Unless this is a once-in-a-lifetime fundraising campaign, you can always ask the donor for more next year or the year after.)

If the prospects haven't given to you before, base the proposed gift on the amount your research shows they've given to a similar nonprofit.

On this basis, if their last gift was $500 a year, the challenge might be $1000 to $1500.

Ask them to pledge over a 3- to 5-year period. Thus, if the person's last gift was $500, you could ask for a gift in the range of $3000 to $5000 ($1000 a year) or $4500 to $7500 ($1500 a year). Start with the larger amount.

Emphasize that this can be paid monthly, so you're really only asking $125 a month (or less than $30 a week).

Don't be overly limited by the prospect's last gift. Adapt the range you suggest according to what you know of the person's situation.

If you have reason to believe they really like your work, ask for 10% of their annual income (the biblical tithe). But put it in terms of a specific dollar range, based on your best estimate of their income.⁷²

If the amount you name is too much, they'll let you know. If you ask for too little, however, they are unlikely to try to talk you into accepting more.

People are often flattered rather than offended at a request for a substantial gift. They may make light of the amount initially. Do not be discouraged or embarrassed. Don't immediately name a lower amount. You have effectively established the level of giving they will consider. Give them time to think it through.

Naturally, some people will fall back to a lesser amount. These people may make a larger gift in future, however.

How you present this to the prospect is important, of course. More on this will be present in the chapter on the right approach.

Assess Capability, Not Probability

Consider what a prospect is capable of giving and ask appropriately. Don't ask for a low amount that you think they may end up giving. That is their decision to make.

Ask big. Your cause is important. The people you help are worth it.

Here is another form to help you record your decisions:

Prospect's name:

What is the hoped-for gift this time?
(If there are more details than will fit here, attach them.)

__ Cash: range from $_____ to $______

__ Goods in kind or services of: _______

Terms of payment to suggest:
__ One immediate donation
__ Pledge of $ payable: __Monthly __Quarterly __Yearly __Other

Why was this target gift chosen?

Is a matching grant possible from the company where the prospect works? __No __Yes __Prospect will check. __We should check.

Spouse's business/personal interests:

Other related business/personal interests: