Charities need resources that help them plan their programmes and commitments, rather than simply meet needs as they arise. Some costs recur every month, while some programmes need ongoing funding to maintain their quality and continuity. Regular giving can help a charity estimate part of its income in advance.
However, recurring donations do not make income guaranteed. A donor may stop giving, a payment may fail temporarily, or the amount received may differ from what was expected. The value of regular giving for financial planning therefore depends on collection and retention data, not simply on the number of registered donors.
What are regular donations?
Regular donations are contributions that a donor chooses to make on a recurring schedule, such as monthly or quarterly. They are usually managed through a platform, payment system or other arrangement approved by the charity.
Unlike a one-off donation, regular giving can provide a recurring pattern that the charity can measure and forecast. It is not a fixed funding contract, though: donors may stop giving, payments may fail, and circumstances may change.
How can regular giving support planning?
Data on regular donations gives a charity a better basis for estimating future cash flow. It can help the charity to:
- Forecast part of its monthly income.
- Identify funding gaps earlier.
- Spread some costs across the year.
- Reduce reliance on a single seasonal campaign.
The charity should not, however, link all its fixed commitments to an optimistic forecast. The harder a commitment is to postpone, the more important it is to use a cautious estimate and maintain suitable alternatives.
Donor numbers are not the same as money collected
Suppose a charity has 500 regular donors, each giving an average of SAR 100 a month. The theoretical income is SAR 50,000, but this does not mean that the full amount will arrive. Some donations may stop, payments may fail, and collection fees may be deducted.
To illustrate, this is a hypothetical example for training purposes, not a benchmark for charities. We assume that the charity receives no new regular donors during the three months and compare a base forecast with a cautious one:
| Month | Active donors: base forecast | Expected collection: base | Active donors: cautious forecast | Expected collection: cautious |
|---|---|---|---|---|
| 1 | 500 | SAR 44,000 | 500 | SAR 40,000 |
| 2 | 490 | SAR 43,120 | 480 | SAR 38,400 |
| 3 | 480 | SAR 42,240 | 461 | SAR 36,880 |
The base forecast assumes that 88% of the amount due is collected, and that 2% of active donors stop giving each month. The cautious forecast assumes an 80% collection rate and a monthly cancellation rate of 4%. These are illustrative assumptions only; they are not standard rates for charities.
The figures do not include payment fees or administrative costs. The example also assumes that failed payments are not recovered. Each charity should replace these assumptions with its own data and update its forecasts as more information becomes available.
Distinguish cancellations from failed payments
There is a difference between a donor who has cancelled a regular donation and one whose donation is still active but whose payment failed in a particular month. The first is an actual cessation; the second may be temporary, for example because a card has expired or there were insufficient funds.
A failed payment should not automatically be recorded as a lost donor. It is better to track three things separately:
- Active donor: someone who has not cancelled their regular donation as at the measurement date, even if one payment has failed.
- Cancellation rate: the number or proportion of donors who stopped giving during a defined period.
- Collection rate: the value collected compared with the value due during that period.
The charity may be able to recover some failed payments by contacting the donor appropriately. Any follow-up should respect the donor’s preferences and must not pressure them to resume giving.
Measures that support a realistic forecast
A charity does not need dozens of measures to begin with. It can track a small, clearly defined set:
- Number of active donors: donors who have not cancelled their donations.
- Collection rate: the value collected compared with the value due during the period.
- Cancellation rate: donors who cancelled during the period, compared with the number active at the start.
- Retention by starting group: the proportion of donors who began giving in a particular month and remained active after 3, 6 or 12 months.
- Net receipts: the amount received after deducting collection fees and related costs.
Measuring retention by starting group helps a charity understand whether new donors continue giving, rather than relying only on the total number of donors in a single month. The Association of Fundraising Professionals’ guidance on building a regular giving programme recommends using donor data to develop and review the programme, with attention to retention. afpglobal.org
Can regular donations fund recurring costs?
Regular donations may contribute towards recurring costs, but before linking them to those costs, a charity should answer two questions:
- How much income arrives regularly after collection costs?
- What proportion is available for this purpose, given donors’ intentions and any conditions attached to the donations?
Some donations may be restricted to a particular programme or group, so the charity should not assume that they can be used for salaries or general expenditure. It should distinguish between donations restricted to a stated purpose and donations that can be used across its general charitable purposes, and review the relevant terms, policies and local requirements. Fundraising guidance in England and Wales, for example, emphasises the importance of using donations in line with the purpose stated in an appeal; legal requirements vary by country. www.fundraisingregulator.org.uk
Regular giving does not remove the need for reserves or diversified income
Even with a strong base of regular donors, a charity may experience lower collections, higher costs or delays in other funding. It therefore needs a reserves policy that reflects its commitments and risks, setting out what the reserves cover, when they may be used and how they will be replenished.
Regular giving should also be considered as part of the charity’s wider funding mix. Grants may fund defined projects, regular donations may support some recurring needs, and other sources may cover different costs. If a charity relies on a grant that ends in a few months, regular donations may help diversify its income, but they will not automatically replace the grant.
Regular giving also requires donor relationship management
Managing regular donations is about more than making sure a payment goes through. Donors need to know that their contribution has arrived and receive clear information about the work it supports. The charity also needs a process for handling failed payments, updating donation details where necessary, and allowing donors to change or stop their contributions.
This follow-up cannot guarantee that every donor will continue giving; the decision remains theirs. It can, however, help the charity provide a reliable and respectful experience, while giving it better information about its donor base.
The role of platforms and digital systems
Platforms and payment systems can make it easier to set up recurring donations, monitor collections and produce reports, where these services are available under their terms. Before relying on a tool, the charity should identify the data it needs, the fees charged, when funds are transferred and whether its reports distinguish between active, cancelled and failed payments.
A recurring donation option does not guarantee regular income. It can help manage transactions; the charity’s forecast still depends on analysing its own data.
Practical steps to get started
- Record active regular donations, their values and any restrictions on their use.
- Review amounts due and amounts collected over several months.
- Separate cancellations from temporary payment failures.
- Calculate net receipts after fees and other collection costs.
- Prepare a base forecast and a cautious forecast, and update both regularly.
- Match available income to commitments that reflect its level of stability, rather than its theoretical value.
- Review the results alongside the charity’s reserves and wider funding mix.
Conclusion
Regular donations can help charities forecast income more effectively and distribute resources across the year, but they do not guarantee a fixed amount. Their value depends on what is actually collected, how long donors continue giving, the cost of collection and any restrictions on how donations may be used.
Charities should therefore assess this income by its net receipts and retention, update forecasts regularly, and maintain suitable reserves and alternative funding sources. This makes regular giving a basis for more realistic planning, rather than an assumption behind commitments the charity may not be able to meet.
