Pledge vs. donation: Should nonprofits focus on future promise or immediate impact?

Apr 22, 2024
Sage Avarda

Pledges and donations each play an important part in helping nonprofits advance their goals. This post examines the benefits of pledges and donations, how they differ, and how nonprofits can use technology to optimize pledge and donation management.

Pledge vs. donation: understanding the essentials

Pledges and donations may seem similar, but there are key differences that make each unique.

Pledges: the future promise

A pledge is a promise for future support, often in the form of financial aid or goods, and it represents a commitment rather than an immediate transaction. There are two types of pledges:

  • Unconditional pledges — straightforward promises for a predefined time
    • Example: $2,000, billed in four quarterly installments
  • Conditional pledges — dependent on future events or specific objectives
    • Example: $25,000, payable upon completion of a building’s construction

This commitment to pay later not only provides donors the time to accumulate the promised sum but also offers the option to pledge in a way that works best for the donor (monthly, quarterly, or annual installments, for example).

Unlike recurring donations, which are open-ended, pledge installments end once the total pledge is fulfilled.

Donations: the direct lifeline

Donations are immediate transfers of support, whether monetary or otherwise, to a nonprofit organization. They provide resources that allow nonprofits to respond swiftly to needs and fund projects.

Donors may make a single donation or agree to recurring donations. In some cases, a person who starts out as a donor can eventually become a pledge supporter, as they become more personally invested in a nonprofit’s work.

Bookkeeping implications for pledges vs. donations

Donations count as revenue as they’re received, but conditional pledges don’t count as revenue until the terms of the pledge are fulfilled. Unconditional pledges do count as revenue on the date of the pledge, and that means a nonprofit may be reporting revenue that it hasn’t received.

What motivates donors to choose between pledges and donations?

Both psychological and financial factors play a role in influencing donors’ decisions about whether to pledge vs. donate. Those factors include:

  • Emotional connections to a cause
  • Personal values
  • A desire for impact
  • Financial incentives
  • Ease of contribution

A recurring donor who’s passionate about a major long-term project may prefer to pledge, tying their gift to the completion of the project. That benefactor may also focus their philanthropy on a single cause by making a major gift.

Donations come in many sizes, but most individual donors make gifts that are smaller than pledges, and they may support several nonprofits. While they may still expect to know how their donations advance a nonprofit’s mission, donors may be slightly less engaged than pledges who are following the progression of a project.

When it comes to easy transactions, donations are the clear winner — whether donors are one-time or recurring supporters, they are not obligated to continue supporting a nonprofit. A pledge agreement is a contract that obligates donors to follow through on their promise.

Maximizing nonprofit fundraising with pledges

Pledges can offer financial stability and predictability for nonprofits, making them a valuable part of a fundraising strategy. By committing to a future donation, pledges can provide a consistent stream of support over a specified period, allowing nonprofits to:

  • Plan and budget more effectively
  • Fund long-term projects and initiatives
  • Secure funding for ongoing programs and services
  • Build relationships with donors and foster a sense of loyalty and commitment

Tracking pledges for long-term success

Establishing a system that tracks all donations and pledges is essential. Nonprofits need to track the receipt of pledges, the total number of payments remaining, and whether a donor has missed a scheduled pledge payment.

Note that when payments are attached to a debit or credit card, a missed payment might be due to an expired card. With the right fundraising software, nonprofits can automatically verify card details for expired cards and prevent declined payments.

Pledge campaigns: a roadmap

Pledges are particularly effective for long-term projects like capital campaigns and specific initiatives such as disaster relief. Clear goals, deadlines, and conditions can enhance engagement and interactions between nonprofits and donors.

Donations may offer more flexibility than pledges

One-time gifts make up a significant portion of donations, but they can be inconsistent. Recurring donations provide a consistent stream of support, and the easiest way to boost recurring donations is to upsell one-time donors. The opportunity to upsell is unique to donations — pledges are set in the initial agreement, but donation amounts can change at any time.

Integrating pledges and donations in fundraising

By integrating both pledges and donations into their fundraising strategies, nonprofits can ensure a consistent revenue stream. The key is to think about what motivates people to pledge or donate, personalizing communication, and removing friction from the donation process.

Impact stories

Supporters want to know how their contributions make a difference, and that’s what impact stories are for. With storytelling, nonprofits can engage and retain donors. For pledge campaigns seeking support for a long-term project, storytelling can include additional details about the need for the project, the timeline for completion, and how it will serve people once it’s complete.

Payment preferences

Some donor segments may appreciate direct mail campaigns with pledge forms or cards, whereas a younger demographic is more likely to respond to a digital campaign with a streamlined donation checkout.

Nonprofits may need to test several strategies for their campaigns to see what gets the best results.

Leveraging technology for effective pledge and donation management

Technology can streamline the management of pledges and donations. Modern donor management software can track donations and pledges, segment donor data, and provide detailed data that helps improve conversion rate optimization.

Fundraise Up goes a step further with an intelligent upsell feature powered by machine learning. Based on numerous data points, Fundraise Up can gauge which one-time donors would be most receptive to a recurring donation upsell, as well as generate suggested donation amounts that align with donor demographics.

Fundraise Up’s AI suggests donation amounts based on a donor’s device, wireless provider, city, and other factors.

Organizations like Community FoodBank of New Jersey, World Hope International, and The Salvation Army have partnered with Fundraise Up to enhance their fundraising campaigns. Combined, these organizations have seen:

  • Improved donor engagement
  • Unprecedented online fundraising success
  • A significant increase in donations due to personalized upsells

These success stories underscore the effectiveness of Fundraise Up in enhancing the management of pledges and donations.

A single interface for donor management

Both pledges and donations play essential roles in nonprofit fundraising. While pledges offer future financial stability, donations offer immediate support. Relying exclusively on either pledges or donations just wouldn’t make sense for nonprofits that are balancing immediate priorities and long-term objectives.

Fundraise Up includes all the features nonprofits need to manage donations and pledges, amplify engagement with donors, and continuously improve fundraising strategies. With an intuitive interface that turns nonprofit websites into revenue engines, Fundraise Up is helping nonprofits move forward without straining team resources. See how it works.

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