Pros and Cons of Donation Installment Plans

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In a donation installment plan a donor agrees to give a certain amount on a recurring basis, often monthly. Often described as “sustainer” programs, installment plans offer donors with an option to give at a level that they might find easier to budget for than a single, larger gift. They can also give the nonprofit an important source of revenue. But there are costs associated with such plans that need to be considered.

Donation installment plans are popular for a reason. They offer a number of important features that many nonprofits will appreciate. From the nonprofit’s perspective, recurring donations can provide an important source of reliable revenue. Donors get the benefit of flexibility, helping them to fit giving into their budgets while also encouraging greater giving over time. Such plans also have a meaningful role in deepening the nonprofit’s relationship with its highly motivated donor base. :

Installment plans are not without costs. Proper administration requires each recurring gift to be treated as a separate donation, with its attendant obligations of bookkeeping,  acknowledgement, and tax receipt. A system needs to be adopted that will allow donors to cancel or change the amount of their gift, and make changes to how the gifts are made. The system also needs to be able to handle problems as well, such as if a donor’s source account lacks the necessary funds. Some organizations opt to outsource the management of their installment programs to avoid needing to develop the required expertise in-house.

The relative complexity of installment programs requires careful planning. Like any important process, an installment plan needs to be reduced to writing. Internally, the organization needs to have a policy in place that addresses all aspects of plan administration. Donors will also need to be presented with the plan’s details, including their payment options, methods of cancellation, and so on.

The program also needs to be integrated into the broader fundraising strategy of the organization. Fundraisers need to be trained on how it works so they can accurately communicate details of the program to potential donors. Existing materials may need to be updated to reflect the new program.

The Church Law Center of California can help your nonprofit draft policies and procedures for running an installment donation plan. If outsourcing the work to a third party is desired, we can assist you with negotiating the service agreement to protect the organization’s interests. To make an appointment, call us at (949) 892-1221 or reach out through our contact page.

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