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Donation Management Best Practices for Nonprofits

Take a moment to think about all the ways donations funnel into your nonprofit.

Chances are, you’re collecting donations both online and offline at fundraising events, through your website’s donation page, peer-to-peer fundraising campaigns, and so on. Someone may drop off a check at your office one day, and the next, you get an electronic transfer into your organization’s PayPal account.

It’s a lot to manage. And those donations are just the tip of the iceberg, especially if you plan on expanding your donor base in the coming years.

donation management

Whether you work at a small nonprofit with an operating budget of $30,000, or you’re raising millions annually, it’s vitally important to know exactly how much money you are, for lack of a better term, “working with.”

A great way to keep your donation information current–and help keep you sane while handling all those transactions, is to use a donation management system.

Let’s break down donation management best practices to help you manage all your incoming donations.

What Is Donation Management?

Donation management is the process you use to organize all the donations received at your organization. For most nonprofits today, this includes donations collected in-person and online.

There are many systems out there to help you manage a potentially massive number of donations, and they range in size and scope depending on the needs of your organization. For small nonprofits, a simple spreadsheet may do the trick. However, if you hope to grow your donor base through engagement and retention strategies, then a larger, more holistic system may be more beneficial in the long-term.

In almost all cases, donation management systems function alongside donor management systems, and even the most basic platforms can track donation amounts, donor data, gift options, and more.

Why Is Managing Donations Important?

Before we jump ahead, let’s tackle that burning question you’re thinking right about now: “Why?” Your plate is already quite full, why add another system or process to the mix?

Donation management is there to make your work-life easier and your donor’s experience that much better. It’s a win-win for everyone. And that, fellow fundraisers, is the beauty of donation management.

Let’s break down some of the most important reasons why donation management is necessary.

  1. Donation Methods Are Changing & Expanding

According to the 2017 Global Trends in Giving Report, 61% of donor prefer to give online. Next in popularity are direct mail and fundraising events. Throw in mobile giving and workplace giving, and it’s evident how diverse the average nonprofit’s donation pool is.

As donors continue to diversify the ways they choose to give, the need for a comprehensive system to organize these various avenues grows.

  1. Donation Data Is Necessary For Growth

Donation data is invaluable for a nonprofit. Once you collect one campaign’s worth of data, you can use that information to learn about your average donor and best cater your fundraising efforts to match their specific needs. This data, which is built up over time, is great if you want to share your supporter’s donation-based return on investment, calculate your average donation amount, and determine the times of the year when you receive the most donations.

All of this data can help you grow your donation base and, as a result, expand your programming.

  1. Management Leads to Retention

Data is helpful in the short-term, but it also aids in your long-term donor retention efforts. Again, the key is to take the donation information you gather and do something with it, not just collect it. Use your data to learn about your donors, how they choose to give, and what prompted the donation. Then develop your fundraising calendar around what you learn

Which Essential Donation Data Should You Collect?

There’s virtually an unlimited amount of data for you to collect regarding donors and donations, but let’s narrow our focus to just donation management practices. What donation data should you collect to 1. Cover all the avenues donors give through, 2. Grow your nonprofit, and 3. Retain your donors? Here’s are the must-have data essentials:

Gift Amount: This is the total gift amount you receive per donation (also called a one-time gift) from a donor.

Gift Frequency: How often a donor gives. Many nonprofits choose to look at this data point on a monthly or annual basis.

Influence Value: This amount includes the money given by a donor, in addition to the donations they’ve influenced through methods like peer-to-peer fundraising and advocacy.

Source: The avenue a donor uses to give, such as in-person at a special event, online peer-to-peer campaign, or donation form.

Payment Method: How a donor chooses to make a payment, including cash, check, PayPal, direct withdrawal, and credit card.

Optional Criteria/Extras: This includes any additional information you want to collect for accurate record-keeping. Some donation management extras include:

  • Gift match amount
  • Donation tipping (donor covering any processing fees)
  • Recurring or monthly giving
  • Membership status
  • Donor incentive received

Using Your Data: Metrics To Track & Monitor

You can collect all the data in the world, but if you don’t do something with it, it’s practically useless. So, what can you do with your donation data? As you see below, there’s a lot of details to extract to help improve your fundraising efforts, maximize your efficiency, and best reach your donors.

These include:

Average One-Time Donations

Total $ donated over course of campaign/# of donors

Helps you narrow down your pledge/donation form donation tiers for a particular type of campaign

Average Annual Donation Per Donor

Total $ donated over 12-month period/# of donors

Helps you know how many gifts you can expect your donors to make so you can budget appropriately

Donation Retention

$ year two from returning donors/$ year one

Helps you determine how much income is new versus coming from retained donors

Types Of Gifts

monthly, one-time, major, etc.

Helps you see how the majority of your donors are giving and where to put your future efforts

Return On Investment (ROI)

Fundraising revenue/expenses

Helps you see how much you’re spending to raise funds and which expenditures yielded the most donations

Monthly Donations

Total raised per month

Helps you learn the months you’re more likely to receive donations and see trends in donations compared to campaigns and seasonal influences

Donor Lifetime Value

Average total donation per donor/churn rate

Helps you determine how much to expect over the course of your relationship per donor

Donation Management Systems + 5 Criteria To Look For In One

Donation management isn’t possible without a system to organize all your data. However, there is no one-size-fits-all system for all nonprofits and charities. When looking for a donation management system, consider the following criteria:

  1. Functionality

Choose a donation management system that has the functions you need to track donations and any other pertinent donor and administration-related data. Some common functions for software and cloud-based systems include donor management, donation and pledge tracking, and event management.

  1. Integrations

In our tech-rich world, you’re using many different systems to run your nonprofit, including email services, accounting, analytics trackers, etc. If you find these systems invaluable (hint-you probably do!) then look for a system that allows for multiple app and platform integrations.

  1. Reporting

Data reports help you analyze your information and adapt your donation processes to meet the needs of your donors. Systems should have a user-friendly and secure way to pull data (also known as “data mining”) onto spreadsheets or documents.

  1. Room for Expansion

Although you may process 1,000 donations a year right now, there’s always a chance that number will increase. When choosing a system, look for one that allows for expansion as your donation transactions increase.

  1. Support

Learning a new system is difficult and takes time. Find a donation management system that offers a resource center and live support system to help ease any pressure and guarantee an easy transition.

Best Practices

Finally, always follow best practices when attempting to manage your donations.

Use One Dedicated Place: Scattered data is inefficient and unhelpful, so always keep your donation information in one secure place where anyone who needs to can access it.

Designate A Staff Person: Donation management systems are helpful, but they also require frequent updates and reviews. To ensure the right data is going to the correct places and that everything is up-to-date, designate a staff person responsible for its management.

Create A Plan (& Stick To It): Decide what data you want to track, where you plan to track it, and what you want to do with it once it’s been captured. Just like you’d set goals and create plans around a fundraising campaign, use the same techniques to manage your donations.

Review Your Management Practices On A Regular Basis: Over time, you may find that some donation data is more important or helpful than others, which is why frequent reviews of your donation management process and system are vital. Set a schedule for review and follow it.

Managing your donations helps organize your donation data, streamline your processes, and provide an optimized donor experience. So instead of just tracking your donations without a plan or purpose, find one system that works for you and use it religiously. Over time, what was once just a bit of data can turn into a gold mine to help you create a more efficient and effective donation experience.

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