The end of the year is a busy time for nonprofits. Not only are you wrapping your organization around Giving Tuesday campaigns, but you are also trying to wrap up any loose ends financially. A big part of that is actually sending out donation receipts to your donors.
Donation receipts can be a bit confusing, especially for smaller nonprofits. There are a few rules you have to abide by, and various things that your receipts must include in order for them to be compliant.
So, let’s break down everything you need to know about donation receipts to make it easier for you.
What is a donation receipt?
Donation receipts are written records that acknowledge a gift to an organization with a proper legal status. Some of those organizations include: Registered Charities (CA), Registered 501 (c)(3) Organization (US), Registered 501 (c)(3) Non-profit (US), Charity or Registered Nonprofit with an ABN # (AUS), Charity registered with ACNC with DGR status (AUS). There are different rules to follow about what to include on a donation receipt, depending on where you live. For this explanation, we will be looking at Canada, United States and Australia.
It is important to note that these rules and regulations can change — it is always best to go directly to the government websites to check for the exhaustive list. Here is some more information for Canada, USA, and Australia.
What does a donation receipt look like?
Donation receipts can look a bit different depending on your organization. What is important is to include the elements that your country requires. Let’s take a look at some Canadian examples.
The following is an example of a donation receipt for a cash donation. It includes elements such as Charity name, Unique Donation ID and Signatures from signing authorities. This is an example of one possible layout for your receipt.
Things can change a bit depending on the type of gift you receive. For example, if you receive a gift with an advantage attached to it, and only want to issue a receipt for an amount that is eligible for the gift, you should add other fields. Some of those fields include: Total Dollars received, Value of Advantage, Description of Advantage, and the Eligible Amount. Here is an example of how to incorporate these into your donation receipt.
Why are donation receipts important?
Donation receipts are official records that can prove a charitable donation was made. This is particularly important for individuals and businesses who donate. Often, donations can reduce income tax levels for a given year, so there is added incentive to be charitable. Donation receipts are records of those transactions and can be used for claims.
Many fund development staff use the ability to issue donation receipts as another tool to encourage individuals to donate. So donor receipts translate into a lot of great things for your organization. But it can also take up some time.
How long does it take to issue a donation receipt?
Every organization is different. Some have templates, some have strict processes, some just wing it whenever a donation comes in. So the timing varies. It can take as little as a few seconds, or stretch to a couple of hours. If you don’t have automation in place, you might be stuck with some manual processes, which includes waiting for signing authorities to be out of meetings and free to sign off on donation receipts. Those receipts then have to be mailed out.
Automation with templates and integrated tools can make this process move much smoother, and happen almost instantly. We will be talking about how Keela can help you automate donation receipts later on.
What are some donation receipt best practices?
Since we’re not lawyers or government officials, we can’t tell you definitively what you should and should not include in your donation receipt — for that, we ask you to refer to your country’s donation receipt rules.
But something we can do is tell you some best practices we’ve learned from being part of the nonprofit sector for so long.
Store copies of donation receipts
It’s important to have your own system for files at your nonprofit. Keeping track of the donation receipts you’ve issued just makes good sense, and keeps everything in order. It doesn’t matter whether you store these records physically, digitally or in both places. The most important part is that these records are kept and that you know how to navigate through them in case you have to look up a receipt or re-issue one in the future.
Pro Tip: If you are storing your donation receipts on a cloud-based system, download the records onto a physical hard drive at regular intervals (monthly, quarterly, or annually).
Use a unique serial number or a Donation ID
Giving each donation a unique serial number or donation ID is an important way to keep your records organized. It also helps you find donation receipts much faster. Keela actually creates both of these for you to make sure your donations are compliant.
Keep formatting consistent
Whether you issue a donation receipt online or in-person, make sure that the format of the receipt is consistent. Consider building templates from your online receipts and then printing them out. This will make it easier for your to reconcile files later on. You won’t have to deal with multiple formats or random sheets of paper. You also reduce the risk of missing out on information that would otherwise be important for your organization to have.
Send a “Thank You” with your receipt
Receipts are very transactional. When you are building strong relationships with your donors, you want to avoid being transactional, and look for every opportunity to be relational. By sending a Thank You letter or note along with the donation receipt, you are able to do just that. You are able to transform an administrative necessity, into an opportunity to build further goodwill.
Be clear about what is tax deductible
The rules about what gifts can be tax deductible are strict for each country (once again, if you’re not sure about the rules for you, check out the government websites. Here are links for the USA, Canada and Australia). But something you should try to avoid is putting a line on your tax receipts that says that the gift will be tax deductible. Often, donation receipt templates will have these lines added to the bottom of them, and this is problematic when you inevitably come across a gift that is not tax deductible.
Leave this line off, and have this conversation with the donor in person after you’ve had an opportunity to do the research. Save yourself a headache down the line.
When should my nonprofit issue donation receipts?
There are basically two schools of thought when it comes to issuing donation receipts. The first says to issue them right away, immediately after the donation takes place. The other says to issue them at the end of the year, in a cumulative receipt. Both options are effective and have their pros and cons.
Issuing donation receipts right away
When you issue donation receipts right away, you can help make the donor feel a bit more engaged. They are reminded of the gift immediately which is an important step for reasking in the future. The immediacy of your response with the receipt will also give the donor the impression that your nonprofit is truly on top of things, and responsive — both great things when building strong relationships.
Issuing donation receipts at the end of the year
When you issue donations at the end of the year, you can potentially reduce the amount of admin work your accountant has to do at the end of the year. Every donation for an individual within a given year is consolidated into one record, and this makes it easier to organize and account for down the line. The same holds true for the donors — things are a bit more organized for them, and there is less worry of them losing receipts that were issued to them at some point in the year.
Pro Tip: You can automate the donation receipt process to ensure you don’t double issue a receipt due to human error.
Another option for issuing donation receipts
Another option for issuing donation receipts is to issue receipts for one-time donations at the end of the year. For instance, one of your donors could have made a donation in February of the current year, and not receive a receipt until the end of the year. While there is nothing wrong with this option, it can often be a frustrating experience for donors — especially the ones that are especially keen for record-keeping for tax purposes. It leave the donor in limbo.
How can I make issuing donation receipts easier?
Knowing what is expected of your organization when it comes to issuing donation receipts in your country is the biggest step towards making this process easier. Familiarize yourself with these rules, and if you’re not sure– look it up! There are tons of resources that make it easy for you.
The next big step is to automate the process as much as you can.
With Keela, you can automate donation receipts. Once a donation comes in through an online donation form, the receipt is automatically generated with Donation ID, Serial Number, Organization Name and Address, and Signatures. Keela is also able to pull information from the actual gift like: Donor name and address, Dates for Donation and Receipt, Location the receipt was issued and the Total amount of the donation.
The receipt is also automatically emailed to the donor immediately after they have made the donation. Alternatively, the donor could opt to receive a cumulative receipt at the end of the year (if they are making a recurring gift).
The best part is that these donations receipts are also linked to each individual’s profile — giving you a full picture of their giving history, tracked in an intuitive CRM.
This automation is more than just a cool trick. It’s a time-saver, a stress-saver, and ensures that you don’t make human errors while issuing receipts. And while this may seem trivial for one donation, and one receipt — this time saved compounds over time. When you have extremely successful campaigns with multiple donors, and multiple situations, Keela’s system will be able to save you tons of hours each week.
Donation receipts can be confusing, but they are an important part of your work. And the best part is that there are a ton of resources to help make it easier.
Ensure that you familiarize yourself with the rules surrounding issuing donation receipts for your country. Then do your best to find tools, like Keela, that automate those processes.
This will free up your time to continue building and stewarding important relationships with donors.
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