Improving Pledge Collections Through Active Communication
Time can get away from us quickly. This is especially true when it comes to pledges receivable. Nonprofit organizations invest a lot of time and effort in acquiring new pledges. In the rush to bring in new pledges, we sometimes relegate oversight of existing pledges to the back burner. Pledges will be less impactful if collection performance is poor. The key to success is to be thoughtful with management of pledge collections and maintain active and fresh communication with existing pledgors.
A thoughtful plan to stay active with pledgor communication will enhance: (1) donor relations and sentiment; (2) donor management systems; and (3) financial reporting and compliance. Together, these improvements will pay big dividends with regard to pledge management and collection performance.
Donor relations and sentiment must be the number one priority. A donor who feels unappreciated and forgotten will not be motivated to fulfill their pledge commitment. Active and fresh communication with pledgors is the best implementation strategy. The word “active” accentuates the significance of staying in touch with pledgors and avoiding prolonged periods of lost connections. “Fresh” emphasizes that the communications must be thoughtful, personal, and caring. A donor who receives an automated pledge reminder letter will become quickly disillusioned and equate pledge payments with paying bills. The goal is to keep donors excited and eager to fulfill their pledges and proud to support the organization and the mission. The communications must be thoughtful and unique to the donor to convey a message of appreciation and caring for donor interests.
Robust donor management systems that track, support, and encourage regular contact with donors will facilitate recurring communications. Use your donor management system to chart a course for engaging with pledgors. The system should include a contact calendar, key compliance and anniversary dates, progress reports, and opportunities for meet-and-greets. Make sure the system highlights donor interests and network connections so you can align the communications with the donor’s vision for your organization and leverage the donor’s sphere of influence. This information is vital to generating positive donor impressions while also encouraging fulfillment of pledge obligations and continued support for the organization.
Active communication will also improve pledges receivable financial reporting and compliance. Add to your pledges receivable schedule separate columns for notes documenting recent donor communications. These notes will help allay auditor concerns related to pledge collection activities, discounting of pledges, and pledge write-offs. This information will also help management with reporting to the Board and the development committee and assist the finance department with pledge performance reporting and preparing forecasts for pledge collections.
Planning Tip – Send pledges receivable schedules and performance reports to auditors early before the fiscal year-end. It is best to get the auditors familiar with changes to pledges and pledge collection performance before the audit starts. This gives nonprofits more time to clarify pledge receivable performance, document proactive pledge management, and donor communication. If auditors become aware of changing pledge collection performance late in the audit process, they are less likely to support management positions.
Lastly, make sure your communication plans also include increased opportunities for the development department to share information with the finance department and vice versa. This will improve pledge management and collection performance by keeping both departments up to date with current donor activities and future donor intent. Poor information-sharing can lead to errors such as the development department sending out notices of past due pledges when the finance department has already received pledge collections, and the finance department under-reporting pledges receivable because the development department did not report timely new pledges or changes to existing pledges.
