Using finance to build trust with your donors

A transparent charity is one where information about finances, activities, and impact is available and accessible, according to recent research from the Charity Commission. 

The research, which asked focus groups across England and Wales to discuss what they thought about charity transparency, found that these three factors helped people to understand “where their ‘hard-earned money’ was going when they decided whether to support a charity or not”.  

Research during COVID-19 from the Public Library of Science showed a strong connection between financial fairness and donor intention. If a non-profit was shown to be financially fair, have robust financial procedures, and be financially transparent, this would have a positive impact on whether donors were likely to donate to them. 

While the charity sector is recovering from the financial impact of COVID-19, further economic pressures remain. The cost-of-living crisis has thrown up many fundraising challenges for charities, with many concerned about their supporters having less funds to give and supporters themselves being reluctant to ask their friends, family, and colleagues for donations due to the ongoing uncertainty. 

Yet as demand for charity services has also increased as a result of the rising cost-of-living, charities must find a way to meet this challenge. They need to ensure that their fundraising is sustainable.  

It is crucial that charities are prepared to meet this challenge. More prepared charities are better able to keep delivering impact to their communities even amid economic pressure. They are able to rely on an engaged donor base that trusts them and, as a result, reliably returns to support them.  

Using transparency to build a consistent donor base allows charities more freedom to navigate financially challenging times, such as the climate we are experiencing today.  

However, it is difficult to talk about your impact and remain efficient with your resources if you’re not keeping an eye on the data.  

“When your finance team is in survival mode, you just try to produce the basic reports that are needed today, this week, or this month,” says the Nonprofit Financial Team Survival Guide from Sage Intacct. “Everything happens in a crunch...Today, non-profits need access to more and better information than yesterday’s news.”  

Having accurate up-to-date information can tell you more quickly the areas of income that are working and those that need more attention. It tells you how many donors are stopping donations, in which case you might be able to implement flexible fundraising instead, allowing supporters to pause their giving, rather than stop it altogether.  

It tells you how much revenue is brought in per donor, so you can double down on demographics that are likely to give more or attract a higher volume of the donors who are giving less.  

Being thorough with your data builds strong foundations for your fundraising strategy, allowing you to adapt to problems more quickly and make better decisions. Cutting these corners only slows you down in the future.  

Prioritise your donors 

In the cost-of-living crisis, it is particularly difficult for charities to rely on their donor base to continue fundraising for them as they have done in the past.  

The research on the matter is mixed. In April 2022, one in 25 people (4%) reported that they had already cancelled a regular donation to charity, while 13% of people were considering cutting back on donations to charity to help them manage their bills.  

Another report found that more than three in five (64%) charities increased or maintained their fundraising income throughout 2022 – though 29% also said their income was lower than 2021.  

How your donors behave can tell you a lot about your fundraising. If donors are falling off at a faster rate than usual, you need to remove the barriers that are causing them to, which is likely financial pressure from other areas in this climate. 

Charities need to find ways of keeping donors engaged, rather than losing them entirely, if they want to remain financially sustainable. This means finding ways to make donating easier for them, whether that’s allowing them to sign up for regular giving with an option to pause or offering them different ways to donate generally, such as through text or a lottery. 

Your key donors are essential for your sustainability. Tell them honestly about the challenges you’re facing, ensure that you understand that they are also facing challenges, and create an open and fruitful dialogue. That form of personal engagement, that basic form of interactive conversation, will allow you to keep relationships in the long-term.