Financial Management Advanced
Course Code: FM3
Financial Management Advanced
Throughout this course you will improve your skills in budgeting, accounting and reporting either in financial terms and in a non financial dimension that takes into account sustainability and accountability aspects, increasingly important in volunteering. Furthermore some advanced fundraising techniques and methodologies that may increase the financial capabilities of your organisation are presented.
Duration: 1 h.
Author/Source: Sandra De Thomasis, Piero Stanchi, CSV
Tags: financial management, courses, training, volunteering
Starting: 21/11/2012 Ending: 01/01/2014
Project partners´ participation in the budgeting process
Stakeholders´ participation in annual and multi-year planning
The budget of a project is a document that reveals an organisation’s ‘real strategy’ to achieve certain goals, despite what may be written in the work plan or other project documents. Indeed the budget is a tangible expression of what the organisation’s real priorities are.
The budget of a project identifies the resources needed to produce the set results within the identified timeframe. Resources are one of the three main elements of a project (together with time and results).
A project’s budget should be drafted after defining all the other elements of the project: results (qualitative and quantitative); duration; work break down structure; roles and responsibilities of the various entities and individuals involved. All these elements affect the definition of a correct budget.
The identification of the partner organisations usually goes hand in hand with the definition of the project that takes place during the meeting between the workers and volunteers.
The exchange of ideas among the team members in charge of project planning should identify partner organisations who could play a strategic role in the project. To help understand the contribution that each partner can bring to the project, you need to consider the following questions: what if we involve this organisation; would the impact of the project increase; and if they join the project would it be easier to promote the project.
Preliminary reviews of potential partners can help identify the type of partners to be involved (a school, a research institute, etc.). Then you consider whether potential partners that meet the specific criteria, such as the knowledge and experience gained in the project field, the desire to share our same goals, the ability to build on the success and the impact of your intervention.
The potential partners that could join the partnership should be contacted well in advance before the project submission deadline, in order to give them plenty of time to consider the benefits and obligations of the proposal and to discuss in detail their involvement with the other members of their organization. Furthermore, the responsibilities and tasks allocated to each partner should be clear in the formulation of the work plan and therefore in project budget.
By the term “stakeholder” we mean any group or individual that may influence or be influenced by the achievement of an organisation’s aims. Stakeholders often associated with a non-profit organisation include its fellow members, volunteers, collaborators, donors, users, families, public administrations, local community, other organisations, etc.
Identifying an organisation’s stakeholders requires an analytical process that clarifies the relationships tying them to the organisation itself; the above-mentioned analysis acquires significant importance not only for corporate social reporting activities, but also for a proper strategic communication management within the organisation.
An essential step is considering stakeholders not only as mere communication recipients, but also as subjects to involve in the elaboration process of annual and multi-year planning.
Stakeholders’ participation in conceiving and building annual and multi-year planning can take place through local meeting with stakeholders and data gathering questionnaires.
A planning activity involving stakeholders can be structured – for instance – according to a “focus group” methodology, as follows:
1. Sharing of the annual and multi-year planning elaboration process;
2. Needs Analysis;
3. Guidelines sharing;
4. Programme definition.
Accounting and record keeping
The accounting process
The accounting process entails a series of activities that begins with a transaction and ends with the closing of the books. Because this process is repeated each reporting period, it is referred to as the accounting cycle and includes the major steps described below.
Part 1: steps performed throughout the accounting period as transactions occur
1.1 Identify the transaction or other recognisable event.
1.2 Prepare the transaction´s source document such as an invoice or a payslip.
The source document is the original record of a transaction. During an audit, source documents are used as evidence that a particular transaction occurred. For instance, source documents include:
- Cash receipts
- Credit card receipts
- Cash register tapes
- Cancelled checks
- Supplier invoices
- Purchase orders
- Time cards
- Deposit slips
Each source document should include at least the date, the amount and a description of the transaction. In addition, often source documents contain the name and address of the other party of the transaction.
When a source document does not exist (e.g. when a cash receipt is not provided by a supplier or is misplaced) a document should be generated as soon as possible after the transaction, using other documents such as bank statements to support the information on the generated source document.
Once a transaction has been recorded, the source document should be filed and made retrievable so that transactions can be verified at a later date.
1.3 Analyse and classify the transaction. This step involves quantifying the transaction in monetary terms (e.g. Euro and cents) as well as identifying the accounts that are affected and whether those accounts are to be debited or credited.
1.4 Record the transaction by making entries in the general journal (or petty cash journal).
Transactions should be recorded in a journal in chronological order, showing an explanation of each transaction, the accounts affected, whether those accounts have increased or decreased, and by what amount.
A general journal entry takes the following form:
Example: this is the general journal of a small charity active in the public health sector
The above transactions are entered as simple journal entries, each debiting one account and crediting another.
In this example, there are no account numbers. In practice, account numbers or codes may be included in the journal entries to allow each account to be positively identified with no confusion between similar accounts.
The journal entry is the first entry of a transaction in the accounting system. Before the entry is made, the following decisions must be made:
- which accounts are affected by the transaction, and
- which account will be debited and which will be credited.
Once entered in the journal, the transactions may be posted to the appropriate T-accounts (see below) of the general ledger, which is a purely mechanical process.
1.5 Post general journal entries to the ledger accounts.
While the general journal is a collection of an organisation´s accounts simply organized according to the chronological record of transactions, the general ledger is organized by account. The accounts of the general ledger often take the form of simple two-column (or T-accounts).
To explain the posting of transactions in the general ledger, consider the following transactions taken from the above example on general journal entries:
The above journal entries affect a total of seven different accounts and would be posted to the T-accounts of the general ledger as follows:
General ledger (T-Accounts)
While this posting of journalised transactions in the general ledger at first may appear to be redundant since the transactions already are recorded in the general journal, the general ledger serves an important function: it allows one to view the activity and balance of each account at a glance. Because the posting to the ledger is simply a rearrangement of information requiring no additional decisions, it is easily performed by accounting software, either when the journal entry is made or as a batch process, for example, at the end of the day or week.
Part 2: steps performed at the end of the accounting period:
2.1 Prepare the trial balance to make sure that debits equal credits.
The trial balance is a listing of all of the ledger accounts, with debits in the left column and credits in the right column. At this point no adjusting entries have been made. The actual sum of each column is not meaningful; what is important is that the sums are equal. Note that while out-of-balance columns indicate a recording error, balanced columns do not guarantee that there are no errors. For example, not recording a transaction or recording it in the wrong account would not cause an imbalance.
If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit side is referred to as the trial balance.
To calculate the trial balance, first determine the balance of each general ledger account as shown in the following example:
Once the account balances are known, the trial balance can be calculated as shown:
In this example, the debits and credits balance. This result does not guarantee that there are no errors. For example, the trial balance would not catch the following types of error:
- Transactions that were not recorded in the journal
- Transactions recorded in the wrong accounts
- Transactions for which the debit and credit were transposed
- Neglecting to post a journal entry to the ledger
The more often that the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculations narrow the time frame in which an error might have occurred, resulting in fewer transactions through which to search.
2.2 Correct any discrepancies in the trial balance.
If the columns are not in balance, look for math errors, posting errors, and recording errors. Posting errors include:
- posting of the wrong amount,
- omitting a posting,
- posting in the wrong column, or
- posting more than once.
2.3 Prepare adjusting entries to record accrued, deferred and estimated amounts.
Adjusting entries are journal entries made at the end of the accounting period to allocate revenue and expenses to the period in which they actually are applicable. Adjusting entries are required because normal journal entries are based on actual transactions, and the date on which these transactions occur may not be the date required to fulfill the matching principle of accrual accounting.
The two major types of adjusting entries are:
- Accruals: for revenues and expenses that are matched to dates before the transaction has been recorded.
- Deferrals: for revenues and expenses that are matched to dates after the transaction has been recorded.
2.4 Post adjusting entries to the ledger accounts and prepare the adjusted trial balance.
This step is similar to the preparation of the unadjusted trial balance, but this time the adjusting entries are included. Correct any errors that may be found.
2.5 Prepare the financial statements.
- Income statement (referred also as ‘Statement on activities’): prepared from the revenue, expenses, gains and losses.
- Balance sheet (referred also as ‘Statement on financial position’): prepared from the assets, liabilities and equity accounts.
- Cash flow statement: derived from the other financial statements using either the direct or indirect method.
2.6 Prepare closing journal entries that close temporary accounts such as revenues, expenses, gains and losses.
These accounts are closed to a temporary income summary account, from which the balance is transferred to the capital account (net assets).
2.7 Post closing entries to the ledger accounts.
2.8 Prepare the after-closing trial balance to make sure that debits equal credits.
At this point, only the permanent accounts appear since the temporary ones have been closed. Correct any errors.
2.9 Prepare reversing journal entries (optional).
Sometimes reversing journal entries are used when there has been an accrual or deferral that was recorded as an adjusting entry on the last day of the accounting period. By reversing the adjusting entry, one avoids double counting the amount when the transaction occurs in the next period. A reversing journal entry is recorded on the first day of the new period.
It is also possible to close the journal entries before preparing the financial statements, using a temporary income summary account to collect the balances of the temporary ledger accounts (revenues, expenses, gains, losses, etc.) when they are closed. The temporary income summary account then would be closed when preparing the financial statements.
Whereas financial accounting is just concerned with financial and economic actions of an organisation, social accounting is concerned with measuring an organisation’s impact on people, communities and the environment. It can be difficult to accurately measure such social impacts and the related actions and events of an organisation. Below is a brief introduction on how to do so.
A central step is to develop a set of indicators that can be used to measure the impact of the organisation against.
Indicators must be:
- Significant, being relevant to the characteristics of the organisation and its stakeholders;
- Shared by the group and the organisation’s members;
- Measurable, namely capable of quantifying the observed events;
- Standardised, to enable the comparison with similar organisations in space and time.
As a consequence, according to one of their main principles, corporate social reporting systems build upon numbers as well as words.
Customarily, a sustainability report requires a huge variety of data, coming from the organisation itself and other stakeholders. Therefore you will need to identify all internal and external information sources in order to gradually build a social accounting system capable of collecting and making available the data you need for your social reporting activities.
In this sense, a key role is the need for an adequate connection among social accounting systems, management control ones, general accounting and the financial statement.
Financial statement analysis: economic and financial indicators
By the expression “financial statement analysis” we mean the analysis of an organisation’s operating results through the process of reading and analysing its balance sheets together with extra accounting data. This kind of analysis aims to ensure and increase control over an organisation’s balance.
Economic and financial analysis of management activities through financial statements is characterised by the following operating steps:
1. Review of the organisation’s financial statements and other extra accounting information relevant to the analysis; data can be extrapolated from documents coming from the organisation itself (financial statements, official documents, acts) and from the outside;
2. Balance sheet review and identification of the evaluation criteria used for its drafting;
3. Reclassification of the asset and liability statement and profit and loss account on the basis of specific criteria supporting the analysis’ aims. Reclassifying the financial statement allows the organisation to re-elaborate and present its balance sheet through a set of schemes extremely useful for its economic and financial analysis;
4. Calculation of indexes. There are two different index types, sometimes used alternatively, at other times combined in a complementary way:
- The Location Quotient Technique, that studies the enterprise’s economic situation by making use of arithmetic ratios between balance sheet values;
- The Cash Flow Technique, that represents financial dynamics through “subtractions”.
5. Proper interpretation of the above-mentioned quotients.
Here below you will find some economic and financial indicators that you should develop in order to carry out a comparative analysis starting from your forecasts at the beginning of the period at issue. The following indicators synthetically describe:
- The degree of dependency on a specific sponsor and/or a limited number of sponsors;
- The percentage of resources actually raised and used during the accounting period;
- The incidence of the charges destined to each management and activity area;
- The efficiency of fundraising activities;
- The efficiency of any possible accessory activities;
- The incidence of general support charges.
1. Degree of dependency on institutional bodies: (%) incomes from institutional bodies/total income;
2. Degree of dependency on public corporations: (%) proceeds from public corporations/total proceeds;
3. Degree of dependency on private corporations: (%) proceeds from private corporations/total proceeds;
4. Degree of dependency on single private corporations: (%) proceeds from single private corporations/total proceeds;
5. Degree of use of resources raised: (%) used resources/raised resources;
6. Degree of incidence of core activities charges: (%) core activities charges/total charges;
7. Degree of incidence of fundraising activities charges: (%) fundraising activities charges/total charges;
8. Degree of incidence of general support charges: (%) general support charges/total charges.
In governance, accountability has expanded beyond the basic definition of "being called to account for one´s actions". It is frequently described as an account-giving relationship between individuals. Accountability cannot exist without proper accounting practices; in other words, an absence of accounting means an absence of accountability.
A sustainable global economy should combine long term profitability with social justice and environmental care. In this way, for organizations, sustainability covers the key areas of economic, environmental, social and governance performance.
By reporting transparently and with accountability, organizations can increase the trust that stakeholders have in them and in the global economy. Sustainability reporting enables all companies and organizations to measure and report their sustainability performance.
A sustainability report is an organisational report that gives information about economic, environmental, social and governance performance. For companies and organizations, sustainability – the capacity to endure, or be maintained – is based on performance in these four key areas.
An increasing number of companies and organisations want to make their operations sustainable. Establishing a sustainability reporting process helps them to set goals, measure performance, and manage change. A sustainability report is the key platform for communicating positive and negative impacts.
To produce a regular sustainability report, organizations set up a reporting cycle – a program of data collection, communication and responses. This means that their sustainability performance is monitored on an ongoing basis. Data can be provided regularly to senior decision makers to shape company strategy and policy, and improve performance.
Sustainability reporting is therefore a vital step for managing change towards a sustainable global economy – one that combines long term profitability with social justice and environmental care.
The sustainability statements are synthesis documents that – focusing both on an organisation’s financial statement and programmes – account for its mission, the strategies followed, the activities carried out, the results produced and the effects caused, taking into consideration the organisation’s stakeholders together with the economic, social and environmental dimension.
Consequently, Social Statements provide the proper representation of an organisation’s reality, meeting its stakeholders’ fundamental informative needs and allowing them to formulate a personal and motivated judgement on its conduct.
A social sustainability statement - in order to actually become an innovative tool, capable of serving its “accountability” function and acquiring a significant management and communicative role – must be the result of a well-structured process involving a variety of subjects/entities.
Here below you can find a typical reporting process structure, which is made up of six different steps:
- Preparation and planning;
- Analysis and modelling;
- Data collection;
- Drafting and validation;
As highlighted in the graphic representation of the above-mentioned process, the “fine-tuning” step can be deemed both the final step of the process and the starting point of the following reporting cycle.
Below you will find the typical structure and content of a social sustainability report:
- Presentation and methodological note;
- Government and Human Resources;
- Economic and financial resources and patrimonial endowment;
- Pursuit of the mission;
- Instrumental activities;
- Other issues significant to stakeholders.
A mission statement and the social sustainability report generally starts with a concise presentation, which is signed by the Chairman. There are two key purposes of this:
- Explaining the mission statement and social report’s aims and the role they acquire in governing and managing the organisation;
- Highlighting the basic elements characterising the accounting period at issue and providing information on the main commitments/problems/challenges for the future.
A financial statement and a social report must include a methodological note providing significant information on how it has been drafted.
General profile: a brief presentation of the organisation, allowing the reader to broadly get a sense of its characteristics.
Reference context: a short presentation – also from an evolutionary perspective – of the most significant characteristics of the reference context, to better explain and consequently understand the organisation’s action and conduct, its role, its potentiality and limits, its development plans.
History: a synthetic description pinpointing in broad terms the milestones of the organisation’s life.
Mission: this section represents the fundamental identity statement of the organisation, expressing the overall meaning of its action and its vital commitment to its main interlocutors.
Stakeholders: identification of the Mission’s stakeholders.
Strategic planning: presentation of the organisation’s strategic planning.
GOVERNMENT AND HUMAN RESOURCES
Team composition: shape of the operating team and its dynamics over the last few years.
System of government: vital information on the organisation’s system of government and its control over members’ participation in the organisation’s life.
Organisational structure: general description of the organisational structure:
- Organigram and function chart;
- Tasks and responsibilities assigned to different organisational units.
People operating within the organisation: information on the people operating within the organisation.
ECONOMIC AND FINANCIAL RESOURCES
It is vitally important that this section provides substantial and concise information on the economic, patrimonial and financial data highlighted in the annual financial statement. It also has to illustrate which kind of accounting system has been adopted (financial and/or economic and patrimonial accounting) in order to make the information already available within the organisation even clearer.
PURSUIT OF THE MISSION
Reporting on institutional activities must allow the stakeholders involved to assess an organisation’s engagement and the objectives achieved in pursuing its mission.
This is the most significant section of the whole document, for its mission is an organisation’s core and reason for existence.
This section focuses on the activities carried out in order to reach instrumental objectives with regard to the pursuit of an organisation’s institutional aims.
OTHER ISSUES RELEVANT TO STAKEHOLDERS
Aspects concerning the relationship with providers and sponsors, the organisation’s behaviour in the environmental framework, and any problems that it might have caused through its conduct and action to subjects of different nature.
Profit and non-profit: cooperation strategies
Mailing in fundraising
“What are you willing to pay in order to live in the kind of society that you want to live in?”
Many companies donate to non-profit organisations in various ways. The donation from business sector plays an increasingly important role in the overall program of fundraising.
But why are business companies interested in the non-profit sector?
According to the statistics over 80% of consumers prefer a brand associated with a good cause; 70% funded at least one social initiative or has created advertising with some social value; more than 60% engage in sponsorship and development of Cause Related Marketing initiatives .
Before looking to engage potential funders from the for-profit world, non-profit organisations should:
1. ESTABLISH RULES:
- Which companies do we want to cooperate with? It would be quite difficult for an organisation that cares about animal rights to work with a company from the fur fashion sector.
- Which companies must we be careful with? What is the public opinion about this company? How does the company treat its employees?
- Which companies should we prefer?
2. UNDERSTAND BUSINESS MECHANISMS:
- Companies aim to make profit;
- Usually they do not donate for generic purposes;
- For-profit companies wish their donations improve their corporate image
3. SPEAK THEIR LANGUAGE
4. ALWAYS MAKE A COOPERATION AGREEMENT
Whatever collaboration strategy you choose, always develop an agreement that defines the obligations of the company (value of the donation, payment modalities, policies on the use of logo and communication) and those of the non-profit organisation (use of funds for specific projects, availability of information and documentation showing the use of funds, progress reports, communication policies and use of company’s logo, etc.)
There are different types of donations from for-profit companies to non-profit organisation:
- PHILANTROPIC DONATION
This is a pure charitable donation (in cash or goods) by a company to a non-profit organisation and often it is bound by an agreement on the aims of the financed activity.
- JOINT PROMOTION
Companies do not support the cause of a non-profit organisation through a direct financial contribution; rather they offer their support to the visibility of the message to promote fundraising and awareness campaigns. For example: a bank places advertising material of a non-profit organisation in the envelopes they send to clients.
When it comes to check-out, clients of the hotel can add one Euro that will be donated to UNICEF programmes
|FOR (TARGET) |
CHECK OUT FOR CHILDREN
Sponsorship is the support provided to a non-profit organisation in terms of resources (financial, organizational, managerial) for the implementation of an initiative.
A sponsorship creates an indirect link with the cause.
For example: A company sponsors a football match organized to raise funds for a local mental hospital.
How do we calculate the value of the sponsorship we need?
What visibility can we offer to the company in terms of contacts?
We give a monetary value to our contact (Cost per contact). Cost contact varies from country to country and on average it is between 0.1 and 0.5 €.
The banner has a low cost per contact: it reaches a very large target with a very low cost.
You can easily understand the interest of a company towards this kind of sponsorship. How much would it cost them to contact the number of people like those attending a football match? So when we ask for a sponsorship we have to be ready to provide these details: number of contacts on the web site; number of contacts via mailings, event attendees, etc.
We will not say to the company that we will put their logo on our website. Rather we say that on our website we have 1000 visitors a day.
INITIATIVES WITH EMPLOYEES
A company acts as a intermediary, collecting the offerings of employees who choose to donate part of the wage to a non-profit organisation.
A company matches and doubles the amount donated by its employees.
- Volunteer programme A company encourages its employees to spend a few hours of work to volunteering, still remunerating working hours donated.
- Loyalty card scheme
A company may offer club-card holders the possibility to substitute their prize with a donation to an non-profit organisation.
|WHO is committed |
Supermarket ‘Amazing Shopping’
Customers of the supermarket that are club card holders can choose to substitute the prize they obtained with a school kit for the project ‘Cambodia….’
|FOR (TARGET) |
School supply for children in Cambodia
CAUSE RELATED MARKETING (CRM)
This is a marketing activity that involves a partnership between a company and a non-profit organisation. The company is committed to donate a specific amount towards a social cause for each product or service sold.
- It’s a tool that aims to promote sales
- It uses marketing techniques
- It provides a donation subject to a transaction. (You donate only if you buy)
- It involves the participation of consumers
HOW TO DETERMINE THE VALUE OF THE GIFT
1. The entire revenue of a particular period of time
2. Increasing the price of the product to give a larger amount
3. Percentage or fixed amount on sales
It is important to establish a guaranteed minimum because the non-profit organisation should not take the risk of a product that goes wrong in the market. For this reason it is preferable to avoid the CRM on new products.
HOW TO COMMUNICATE:
- Include the organisation logo on the product: if a label is visible on the packaging, people are led to think that there is a greater support;
- It is better to express the value of the donation in absolute terms instead of a percentage.
CONCLUSIONS: 10 rules for effective alliance
- Sharing objectives with partners is essential;
- There must be a strong connection and consistency between the values of the non-profit organisation and those of the business company;
- Non-profit organisations should have specific expertise (e.g. marketing) for the partnership management;
- The development of the alliance must be supported by the organisation’s and company’s
- It is necessary to establish a dedicated project team;
- It would be worth to actively involve the staff of the company;
- The value of the donation to support the project and the social cause should be agreed between the parties balancing social needs with business needs;
- Communication activities must be coherent with each other and implemented in an integrated manner, allowing the generation of a strong synergistic action;
- External communication from the partnership must be truthful, transparent and consistent with the effective engagement of the business company;
- The partnership should be characterized by an evolutionary process, aimed at improving and renewing the collaborative actions undertaken.
OBSERVE WHAT YOUR COMPETITORS DO.
SEE HOW THEY COMMUNICATE WITH THEIR DONORS.
GOOD IDEAS ARE NEVER TO BE DISCARDED.
Mailing is a written request for donations that is distributed and delivered by mail. It is the most effective method to build a broad base of donors and in doing so increase revenue.
You need to use some fundamental notions and strategies according to the situation of your organization.
Mailing concerns three main areas:
1. Potential donors: acquire new donors
2. Renewals: renewal or increase current donations
3. Extraordinary appeals: seek donations for extraordinary purposes.
Construction and enlargement of donors data base
Creating a data base of potential donors
Enlargement of constituents (members)
Paper and printing
- Using an existing one
Postage costs for the answers
Creative staff related costs
WHO SHOULD I WRITE TO?
Mailing is financially challenging, but is an appropriate fundraising activity, not only for large organisations but also small organisations
Please note: THE CHOICE OF LIST AFFECTS SUCCESSFUL MAILING UP TO 70-80%.
WHAT (AND HOW) SHOULD YOU WRITE IN A LETTER?
When preparing a program of mailing, the letter itself is only a part (although the most important!) of the process.
Before writing you should develop the idea of the whole packaging: you have to decide the envelope, the colour of the envelope, the envelope size, the kind of paper of the letter, donation form, leaflet (if any), brochure or other material to reinforce what is written in the letter.
In mailing, words are not enough to attract a potential donor. You need to choose right pictures, right colours, right colour tones in relation to the type of message you send and the organisation’s brand.
Words + colour + images must be able to make it clear to potential donors that in the package there is something to see, a story to listen or someone to help.
What do they expect from you, from your non-profit organization? How can you let them know your organization and your projects? The potential donor will not read the letter at once, but he/she will ‘scan’ it looking for interesting content- maybe in bold, a particular paragraph, and a compelling image.
The letter is the heart of the package: it contains the message and it must be the donation request.
In the letter you have to tell a story to make the reader to imagine. You have to focus on a single project, and of that project you have to tell a story. Avoid paragraphs that are too dense, with little punctuation. Remember that there are dozens of similar cases to yours. You have to stand out.
The more communication is personalized and tailor-made to the individual, the more it is effective.
Which of these possible incipit do you think is more effective for an email or a letter?
- Dear Kate, ‘Save the world’ has been working for years to bring a smile to many people who unfortunately ....
- Hello Joseph, you may be wondering how do we know each other? Your friend John, who for many years has been cooperating with us decided to share with you ...
- Hello Sandra, surprise! I am your dear friend Mark. Did you know that I have been working for years with ‘Save the world’? I think that together we can ...
No doubt: the last two are more effective! Regardless of the text (of course these examples are intended to amplify the effect), the key lies in the customization that allows to mention the organization directly as the object of a dialogue between two friends, as in the second example given.
- Propose a solution to the problem
- Explain how the potential donor can help
- Ask a donation today. Specify the required amount
- Add a postscript: it pushes the reader to act and therefore it has a strong emotional effect.
Please note that usually readers read the first two sentences and they go directly to the end of the letter.
Finally: re-read the letter aloud, always! And read it to a colleague, friend, relative. Hear their reactions, listen to their views. There is no better marketing expert that your potential donor!
Other tips (for small organisations):
Handwrite the address on the outer envelope. Avoid placing labels.
Customize thanks. Give thanks with a written note or with a phone call.
HOW OFTEN TO MAIL?
Most organizations can, and should, mail more than once a year. You can mail at least four times a year asking for money. Here’s the easiest system:
1. Mail in November for year-end/holiday mailing
2. Send your annual report in January or February
3. Ask members to renew their memberships or increase their annual gifts ten months after the date they first gave
4. Mail a letter relating specifically to your issues or to a date connected to your cause.
If you want to mail more than four times a year, simply plan for each mailing to highlight different issues or needs. Fundraising mailings can be planned so that they coincide with a regular newsletter. After two months, analyze what worked, and send the final results to each volunteer with another thank-you note.
Even the smallest group can send at least one mailing a year during the holidays. According to the statistics, November is the most profitable month for mailers, proving once again the benefits of competition. Ask all the board members and key volunteers to bring in lists of names in the summer, and then enter them in to computer database. Meanwhile, ask the staff to compile statistics on the organization’s results and recruit volunteers to take photographs, write, and design your package. Proofread everything out loud twice. Print the letter and envelopes in early September, and then organize addressing parties in early October, so the mailing can go to the post office in late October.
Be sure you code each return so you know which list to use again next year and which one to replace. The easiest system is to stack the reply cards and run a wide felt marker down the side of the stacks. Use a different colour for each list. It will leave a faint line of color on one edge of card; most readers will never notice it.
As the mail comes in, record the contributions, send a receipt and a thank-you note, then notify.
HOW MUCH DOES A PROGRAM OF MAILING COST?
Costs vary significantly depending on the kind of recipient list.
In the case of cold lists, the costs are inevitably higher; It might be more worthwhile to gather the names yourself.
Collect them at any occasion. You can contact smaller organisations and ask them for local directories. Ask your members if they are members as well of other organisation types, like:
- professional groups
- political organisations
- political parties.
and ask for names!
It is also possible to outsource the mailing to companies that will fill, stamp and deliver all mails at a post office.
How much do we get from mailing?
To assess or estimate the revenues of your mailing program use three formulas:
A) AVERAGE DONATION = total revenue / number donations
eg. 100.000 euro / 5000 donations = 20 € AVERAGE DONATION
B) RETURN RATE = letters / number donations
eg. 100.000 letters / 5000 donations = 5% RETURN
C) EFFICIENCY = expenditure incurred for each euro received = total expenditure / total revenue
Eg. Total expenses = €20.000
Total Revenue = € 100.000
Efficiency = 0,20
The efficiency calculation can also be used to compare two fundraising activities, for example by comparing the efficiency of a special event and that of a mailing program.
The feasibility of a mailing program should not be judged on the basis of a single mailing operation. Mailing is a cumulative and continuous programme which must be maintained for several years. It can take three or four years before the program reaches the balance.
Its basic components are:
- The acquisition of new donors
- The renewal and extraordinary appeals
Combining these two components overtime will produce a list of reliable donors, increasing the number of donors and the quality of donations.
Donations come only if you ask for them!
The World Wide Web is a great resource for those who carry out communication activities within non-profit organisations – including those related to fundraising campaigns. Even though online fundraising represents on average 2% of total fundraising activities, it is worth creating and carrying out “DONATE NOW” CAMPAIGNS.
An organisation’s fundraisers must pay sound attention to this aspect, by working hand in hand with webmasters in order to make sure that their website is constantly updated and builds upon the principles of communication for fundraising- “the Rule of Three P”( People donate to People helping other People). An organisation’s website must tell stories!
What must occupy a prominent position in its HOME PAGE is:
WHO WE ARE, WHAT WE DO (and HOW), WHAT YOU CAN DO.
A “DONATE NOW” landing page is the page on your website where donors enter their credit card information. Online donors arrive on this page by directly clicking a “donate Now” button on your website or blog or from a status update or tweet.
Don’t underestimate the importance of this page: it will make or break your fundraising campaigns.
WHICH CHARACTERISTICS SHOULD YOUR “DONATE NOW” LANDING PAGE HAVE?
1. Your organization’s branding
Your “DONATE NOW” landing page should have the branding of your website, not PayPal or Google’s branding
2. Opt-in Option for an E-newsletter
Your e-newsletter is your most important tool to get your supporters to donate again.
Make sure you give donors the ability to check or uncheck a box to subscribe to your e-newsletter near the e-mail address field.
3. Option to give monthly or quarterly
On average, 10 percent of online donors will sign up to automatically donate a set amount at regular intervals, usually monthly.
The ability to sign up for recurring donations simply requires checking a box and the selecting monthly, quarterly or annually from a pop-down menu located just below the donation amount filed on your “Donate Now” landing page.
4. Option to give in someone else’ name
Your vendor should offer the capability to make a donation in someone else’s name directly from the “Donate Now” landing page. Donors then enter the e-mail address of the gift recipient and a brief message, and a gift notification is then e-mailed to the gift recipient.
5. It is designed for expediency
The donation process should begin and end on your “Donate Now” landing page. Keep it as simple as possible, and require only fields that are absolutely necessary to process a donation.
1. Large buttons: Use large “Donate now” buttons: it will help you collect larger donations.
2. Colours play an important role: different colours produce a different impact on donations, since colours arouse emotions and feelings, consequently driving people to act.
For instance, according to some tests, a light green “Donate now” button appealed to more donors than a red or blue one.
The colour pink – symbol of femininity – has now officially become the colour related to the fight against breast cancer. The combination of red and green shades immediately let us think of Christmas.
Here below you can find a short list of colours associated with their respective meaning:
- Black – authority and power
- White – innocence, purity, cleanliness
- Red – intensity and love
- Blue – peace, calmness and, sometimes, solitude, cold, depression
- Green – nature
- Yellow – happiness
Translating this information into fundraising practice:
- Black correspondence envelopes are charming. When used properly, they can achieve an excellent result.
- The colour red draws the interlocutor’s attention. When a page is made up of writings of different colour, the red notice is always the first to catch the reader’s attention. As demonstrated in several studies, the colour red accelerates the heartbeat and breath and drive people to perform an action. Excellent for urgent calls.
- The colour yellow stands for amusement and happiness, but it is difficult to read. You can not use it always: on the contrary, it must be chosen with caution and, of course, always test it. !
3. Ask only for the information you need: eliminate the excess fields from the personal information that donors are asked for. It will help you obtain better results.
4. Kindly remind people why you want them to donate: a “gentle” call asking for donations – without being demanding– will make your organisation achieve better results. Always remember what fundraising is in Henry Rosso’s opinion: “The gentle art of teaching the joy of giving”.
5. Always test your tools and choices: as done through the studies carried out by Amnesty USA, which tested three different landing pages of its website, namely three pages that donors “get to” through Google or online promotional messages. Each of the three pages taken into consideration is characterised by slight differences (a different text, “Donate now” buttons of different colour or size) tested on the basis of how many donations are collected.
THANK YOU PAGE / THANK YOU FOR YOUR DONATION
After an online donor completes the online giving process, she/he should land on a ‘thank you’ page where she/he is thanked for her donation, but also informed that she/he can stay keep updated on the progress of your nonprofit through facebook, twitter, YouTube channel, and so on. Then ADD A FACEBOOK, TWITTER, YOUTUBE, OR OTHER PITCH TO YOUR “THANKYOU” LANDING PAGE.
Similarly, add a facebook, twitter, youtube, or other pitch to your “thank you for your donation” follow-up e-mail. The primary purpose of this e-mail is to confirm the donation and provide donors with a record for tax purposes. It’s also important to ensure that this e-mail is sent to all donors who give to your nonprofit through giving portals.
‘DONATE NOW’ CAMPAIGNS
Donate Now technology first became available to the non-profit sector in 1999.The early adopters of “Donate Now” buttons in the non-profit community were convinced that the technology would revolutionise philanthropy.
Today Donate Now technology is finally starting to achieve its potential and is transforming fundraising and giving. The result is that online giving is growing consistently and rapidly with each passing year. The most important decision will be what vendor you select to empower your Donate Now campaigns. There are over 100 Donate Now providers available and you can easily be overwhelmed by the number of choices offered by each.
1. Network for good
You can simply link to this page, known as the vendor’s basic service, directly from your website.
There is a fee based on a per cent quota of the donation processing. You get a monthly donor report, recurring donation capability, automatic e-mail receipts for donors and the ability to have your funds electronically transferred each month.
2. Just give.org
The difference between Network for good and Just give.org is that the latter is cheaper. If you are on a 0 budget, this is a better option. The biggest drawback is that donors have to create an account to donate and, even if it’s simple, for some online donors, that’s enough to turn them away.
3. Pay Pal
Many non-profits use PayPal to process their online donations because PayPal’s fees are low compared to those of most other Donate Now vendors. Unfortunately, this decision could be costing these non-profits a lot of money per year in lost revenue because some online donors simply refuse to donate through PayPal. The brutal truth is that the decision to use PayPal sends the message to many donors that you are a small-time organization.
PayPal is great for business end e-commerce, but it does not provide some key technological features that are necessary if you are to implement successful Donate Now campaigns.
There are two exceptions when it comes to PayPal and the non-profits sector: 1. Most donors who give to non-profits in developing nations know this and are willing to give through PayPal; 2. PayPal is innovating mobile payments. Individuals can send your non-profit fund using PayPal’s mobile website or smartphone apps. If your non-profit wants to accept payments on your smartphone anywhere, anytime, then PayPal could be a good choice for your non-profit.
This is the concept of empowering supporters to raise funds for your non-profit. In the last five years peer to peer fundraising has became web-enabled, primarily through “fundraising pages”.
Peer to peer fundraising is not for every non-profit, but at the very least you should experiment by launching a peer to peer fundraising campaign that informs and enables your supporters to create fundraising pages to solicit online donation on behalf of your non-profit in lieu of birthday or holidays gift, or for wedding registries.
When deciding what vendor to use, you want to make sure that its design is modern and that it offer basic custom branding.
Successful peer-to-peer fundraising does require that you:
1. Clearly explain to your fundraisers how the tools work
Write a guide with useful fundraising tips and best practices
2. Consistently thank and feature your top fundraisers
You should manage a group e-mail list of your fundraisers to keep them engaged and informed, but occasional personal “Thank you” e-mails have a strong positive impact.
3. Host friendly competitions for those who raise the most funds.
Competitions, such as the “fundraiser of the month” campaign, can help to incentivise fundraisers to raise more funds.
4. Encourage fundraisers to set realistic fundraising goals
Set goals that are attainable so that more people are inspired to give and so that fundraisers experience success
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