Understand the Difference Between a Pledge and a Donation
As of Wednesday, February 16, 2022, foreign governments and international financial institutions had pledged $600 million in immediate and long-term aid to help Haiti’s cash-starved government launch a four-year plan to assist devastated communities along with its southern peninsula recover and rebuild after the deadly earthquake last August.
To begin, here are a few definitions:
- One of the most common meanings of the word “pledge” is “promise to pay.” For instance, a donor may pledge $2,400 to be paid over four years at a rate of $50 per month in monthly increments of that amount. A pledge might be “conditional,” meaning payment is due only if certain conditions are met, or “unconditional,” meaning that there are no strings associated with a specific pledge.
- An open-ended timetable with no explicit commitment from the giver characterizes a recurring donation. The donor has the option of paying for an indefinite period of time or ending the arrangement at any time.
Accountancy: how will it be handled by bookkeeping
There is a big difference between pledges and traditional donations when it comes to accounting. Like monetary gifts, recurring donations are treated as revenue as soon as they are received. Unconditional pledges count as revenue on the date they are pledged, even if you don’t have any money in hand!
Whereas unconditional pledges count as income once the requirements of the pledge are completed, and your donors’ pledge payments are tax-free in the year they are made, conditional pledges constitute revenue for your organization.
As a result of the commitment, the donor is obligated to repay the money, but it appears in your budget as if it had already been committed. However, it also necessitates a set of guidelines for when to write off a donor’s debt. Calculations linked to projected write-offs, amortized discount… assistance! Where’s my accountant! There are no accounting responsibilities… or promised cash flow benefits… with recurring gifts.
You should contact your accountant to determine which option best suits your financial objectives because there is a huge difference in bookkeeping.
Fundraising pledges and charitable donations are fundamentally different.
Traditional donations and pledges are both presents from supporters who believe in your purpose and campaign goals. However, the strategies you employ to organize your campaigns and elicit the various types of donations differ significantly.
Let’s take a closer look at these differences:
Pledges:
- Are promised financial assistance that will be paid and processed at a later date.
- Can be made in cash; however, online transactions are increasingly the most prevalent.
- Require pledge campaigns that include timeframes and conditions must be carefully established.
As a result, the techniques and goals that work well with these fundraising styles are greatly influenced by the distinctions between them.
Traditional Donations:
- Are instantly accepted.
- Cash, in-kind items, and internet or credit payments are accepted.
- As long as the campaign has clearly specified goals, it can be accepted at any moment.
The most effective campaigns and initiatives for each type of donation
Organization of your campaign in the best way possible will make the task of generating money just a little easier! Each type of campaign or cause necessitates a different approach to fundraising, and promises and standard donations are two of the most effective methods.
Your campaign may benefit from asking for pledged support if any of the following apply:
- Disaster aid is the driving force behind it.
- Working to raise awareness of a particular social or political issue
- Nonprofits can encounter unexpected or critical costs, such as relocating charges.
- To raise money on an annual basis.
Fundraising promises are employed in cases where your aims are urgent, with the exception of annual fund drives, which can be incredibly successful. It’s more effective to address urgent or particularly relevant topics.
When it comes to raising money, traditional methods work best:
- Traditional methods of obtaining money to support your programs and the work you do.
- Almost all sorts of internet fundraising efforts, including peer-to-peer Donation collections in person.
- Giving back to the community through a corporate match or another kind of philanthropy has a significant impact.
- Donations can be received sooner rather than later in any other fundraising scenario.
For traditional fundraising campaigns as well as pledge campaigns, planning and strategy are critical components. Tools, engagement methods, events, and online components all play a role in a campaign’s ability to succeed.
Assembling a convincing argument for support.
The requirement to make a compelling case for support is common to both fundraising promises and standard donations. Your donors must be emotionally driven to help you, either through a promise or a direct donation, in order for them to do so.
While this applies to all types of campaigns, it’s more critical for those that ask for pledges. It is imperative that you retain vigor and forward motion to quickly gather pledges of support. Your pledge campaigns will go to the next level if your objective is emotionally or socially compelling. A pledge drive for your yearly fund, for example, could take advantage of the strong feelings your supporters have with your organization.
Your nonprofit’s objective, the project you’re seeking money for, your fundraising goals, and time restrictions will all play a role in developing your campaign’s pledge platform. Create engaging pledge conditions by utilizing them to incite a sense of urgency in your audience.
A distinct technique for traditional fundraising campaigns is needed to persuade potential donors to donate directly. There is undoubtedly a need for urgency and emotion, but not as much as there is for pledge drives. For a traditional campaign to succeed, you need to have a strong emotional, rational, and empirical foundation. Every fund-raising effort is unique, of course. Let your project’s specifications influence the development process.
Pledge and traditional donation mechanisms that work.
Every organization, regardless of its goals or method of fundraising, needs the necessary tools in order to get the job done. Some typical fundraising tools and gift processing platforms, like these, are presumably already familiar to you:
- Donation forms that can be filled out online.
- Campaign pages for crowdsourcing and peer-to-peer financing.
- Text-to-give services are offered by companies.
When it comes to accepting traditional donations, these are three of the most typical digital platforms for NGOs to use.
Look for these key features in online and mobile pledge fundraising tools.
- An online or mobile pledge tool may not be familiar to you if this is your first time doing a pledge campaign. When conducting your study, keep speed, simplicity, and adaptability at the top of your list of considerations.
- Momentum is everything when it comes to raising money for a good cause! Make the process of pledging as simple as possible for your supporters. In reality, all you need from them is their names, addresses, and amounts pledged. The more convoluted your campaign becomes, the more likely your donors will abandon it!
- Pledge tools that put the user’s experience first, like Snowball’s mobile fundraising tool, are a wonderful illustration of this. This pledge tool, which is built on the lightning-fast 2-click text-to-give platform of the Snowball suite, helps you swiftly gain financial support for your cause. In addition to that, it makes it easy for donors to finish their pledges later on!
Don’t launch a promising campaign without a clear knowledge of the differences between pledges and standard donations.
Solicitation techniques and digital tools can be greatly affected by the distinctions between the two approaches. Focus on what you want to achieve when you build your pledge campaign. Your chances of success will increase as a result of this strategy! The most effective campaigns and initiatives for each type of donation
Donors have already committed to helping Haiti recover from natural disasters, but whether they follow through on their commitments will be the actual test of their dedication. Donors at a convention in New York rushed to declare their pledges to help rebuild the country following the 2010 earthquake. According to a report released by Dr. Paul Farmer, the former special assistant to U.N. Secretary-General Ban Ki-moon, there were still billions of dollars in commitments unaccounted for ten years after the quake. Even less flowed directly to Haitian enterprises and organizations and even less to the country’s government. It was highlighted that unlike in 2010, the Haitian government was driving the meeting and that the U.N. provided aid; those involved in the conference on February 16, 2022, claim they are not aiming to repeat past mistakes.
There were still concerns in the room about Haiti’s use of aid when donors declared that funds would go through U.N. agencies, international relief organizations, and non-governmental organizations. A donor trust fund will manage the rest of the funds. The European Union indicated that its current contribution of 30.4 million euros could be increased if progress is made on the political front.
Now that you know the difference between pledged and regular donations, what’s next?
Source:
Fundraising Pledges vs. Donations | What’s the Difference? (snowballfundraising.com)