Protecting Nonprofit Donations – Part One

Last week, I presented the first session in a three-part Nonprofit Finance Series, hosted by the Arlington Chamber of Commerce. The Series covers topics near and dear to nonprofits – protecting donations, avoiding hidden costs of grant management, and talking finances with the Board.

In the session about protecting donations, I shared tips and best practices for nonprofits to fulfill their fiduciary responsibility for donor funds. I described cost-effective processes to control and verify funds that nonprofits work so hard to raise.

I can’t fit everything I talked about in one post, so this week is Part One — a cost-efficient approach to protecting donations. Next week, I’ll cover the rest in Part Two – best practices for protecting donations.

The approach I suggest for protecting donations starts with these three steps:

1. Identify How Donations Come In

Figure out which methods you use to bring in donations, such as direct mail, online, events, or walk-ins at your location(s). Approximate the percentage of total donations that you usually get from each method. Estimate the average donation amount for each method.

2. Examine Donation Process and Cost

Outline the steps and who performs them for each donation method from #1. Break down each donation method into its steps to identify areas that need protection, where issues can occur. This step helps to estimate the cost of each donation method, including the approximate cost of staff or volunteer time. (Remember, volunteers aren’t entirely free.)

3. Balance Costs and Protections

Donation protections have a cost. Prioritize you protection activities on donation methods that bring in the larger percentages of total dollars. Review and add protections for each method, one by one. As much as possible, encourage donors to use less expensive, well-protected donation methods.

Attendees at last week’s Nonprofit Finance Series left with tips that they could implement immediately. Next week, my blog post will feature best practices for protecting the donations nonprofits work so hard to raise.