New to nonprofit accounting? No problem!
Our goal for this course is to provide you with the backbone techniques and principles to start tracking your nonprofit’s or church’s financials while keeping them as actionable and succinct as possible. Sign up here and we will send you the entire course through email.
We’re going to discuss how to track your contributions to keep your supporters happy.
Your supporters are the foundation upon which your organization operates and exists. Managing them, stewarding them, and accounting for their gifts within the fund accounting framework requires time and organization. The fact is it is also one of the most unique things about managing the finances of a nonprofit that can also be one of the biggest headaches if you aren’t prepared with a good system.
How do you track contributions separate from other income?
Many nonprofits and churches think that all income received is considered tax-deductible, but there are often a number of forms of income that they may receive that shouldn’t show up on the annual contribution statement for donors. If the donor receives goods or services in exchange for the income, such as member dues or a meal at an event, then it is important for your accounting system to also note that those transactions or portions of a transaction should not appear on contribution statements as tax-deductible. If your accounting software does not enable you to produce reports for tax-deductible and non-tax deductible income by person, it may be necessary to keep a separate log of your donations in Excel that notes the donor name, date, amount, and purpose of the donation.
Pro tip: You may also receive in-kind gifts that may be sold for silent auction items or put into use. You can read this Academy lesson to see how to account for these in-kind gifts in your accounting.
What are you required to provide to donors?
Donors that gave contributions of $250 or more must receive a written statement from the church or nonprofit to make a tax deduction. Typically, the nonprofit sends this annually by January 31st so donors have time to file their tax returns. That being said, there is value in sending a statement to even your smallest donor to help them know their gift is appreciated and to keep in touch.
The contribution statement must include the organization’s name, the contributor’s name, the date(s) of the donation(s), and the amount(s). It must include an explanation about whether the charity provided any goods or services to the donor for the donation. For example, include a statement such as the following: “You did not receive any goods or services in connection with these contributions other than intangible religious benefits”.
While annual is required, many organizations find that actually sending monthly or quarterly statements can boost giving, when they are partnered with dynamic content that really showcases the value of your mission. Check out this recorded webinar for some ideas on how to take the stale donor receipts and uses them to your advantage.
Also a good idea? Saying thank you
Sure, it seems obvious, but when life gets busy it can easily get forgotten. If you want some tips on how to thank your donors, you can also check out these sample thank you letters.
Want to see more? Sign up here and we will send you the entire course through email. We’ll delve deeper into the subject! We’ll talk on how to set up your chart of accounts, what to manage in your accounting on a day to day basis, and so much more!
If you are dreading the headache of creating contribution statements for the new fiscal year, you don’t need to wait to finish this course. Go ahead and start a free trial of Aplos Accounting to get it done faster.