In the nonprofit space, Giving Tuesday is one of the most important times of the year in terms of receiving charitable contributions. Those who are not familiar with the innerworkings of the nonprofit community may not truly understand the level of impact this day has on nonprofit organizations.
What is Giving Tuesday?
During the holiday season, there are many who participate in gift giving by taking full advantage of the great deals extended on items throughout the season. However, Giving Tuesday adds a unique dimension to the season of giving for nonprofits and their supporters.
Giving Tuesday, the day that launches the “giving season,” aims to attract donors as they prepare for their traditional annual holiday shopping spree.
Much like both Black Friday and Small Business Saturday, Giving Tuesday encourages the community to focus on the act of giving. While Black Friday and Small Business Saturday target the commercial aspects of the holidays, making it attractive for individuals to get great deals on items and services to purchase as gifts for loved ones, Giving Tuesday focuses instead on the act of giving by making donations to those in need.
While iPads, new skis, or that pair of UGGs are always welcome, Giving Tuesday provides a more meaningful way for everyone to celebrate the holiday season by helping others.
How does an organization manage the donations it receives on Giving Tuesday?
As with any donation made to the organization, it is important to determine in advance what type of donation the nonprofit organization receives and how it should be categorized in the financial statements.
There are many ways for donors to support a nonprofit on Giving Tuesday, from restricted and unrestricted funds to donor advised funds and other options as well, all based on the donor’s preferences and goals.
Some donors feel extremely passionate about how their donation should be spent. This may mean that their donation is considered as restricted funds. When a nonprofit organization receives restricted funding, it is required to spend those funds according to the donor’s original request.
Getting a donor to give an unrestricted donation, enables the most flexibility in spending. Thus, the donation can be utilized where it will be most effective. The nonprofit leaders can suggest having a frank and open conversation between themselves and the donor, explaining the limitations of restricted funding. During this discussion, the nonprofit and the donor can explore the options of unrestricted funding versus restricted funding.
Another alternative is donor advised funds. A donor-advised fund is just like an investment account. Instead of an investment account used for retirement, a donor-advised fund is used as a charitable investment account. When an individual uses a donor-advised fund, their charitable donations are properly managed by professionals. When invested in a donor-advised fund, an individual can create a plan and decide which nonprofit organizations they wish to donate to. This plan can be specialized to their unique financial and philanthropic situations. Included in the benefits for the donor, their participation in a donor-advised fund may be beneficial regarding tax deductions.
Be Alert When Using Technology on Giving Tuesday
As Giving Tuesday has grown in popularity, it also attracts significant online donations through various platforms. The challenge is that this is where cyberattacks can, and will, happen. It is essential that all nonprofits prepare for, and address, the cybersecurity risks that are often associated with the large volume of donations that occur during a time when donors are more inclined to contribute as the holiday season officially begins.
Both the donors and the nonprofit organizations command access to critical information required to protect the integrity of the giving process. As in any internet scam, if a donor accidentally makes an error and falls victim to an online fraudulent scheme when attempting to donate to a nonprofit organization, the results can be disastrous. The website traffic is higher than usual on Giving Tuesday and the stakes are high as well. Every nonprofit must work hard to build donor confidence by having key safeguards in place to monitor online transactions. It is important that you take the necessary steps to properly account for any donations received.
Engage With Your Donors
Giving Tuesday is the perfect way to kick off the holiday season. Be sure to encourage your friends and supporters to make donations to your organization a top priority on their gift giving list. If you have any questions or would like advice regarding the information provided above, please feel free to contact SobelCo and we will be sure to respond in a timely manner. More information regarding Giving Tuesday can be found at GivingTuesday.org