Donations vs Memberships
This tutorial/article will help differentiate between a donation and a membership, and how to handle donations that result in a complimentary membership. Within Fundly CRM, Donations and Memberships are distinct and separate, and are not automatically tied to each other.
A Donation is any case where a contact gives to your organization, but receives no ongoing, tangible benefits for their generosity. A Donation may be a single fixed amount, or it may be part of a recurring or automated donation schedule. In all cases, however, the donor’s main benefit is that they may write off the amount from their taxes. If the donor does receive a onetime gift for their contribution, such as a shirt or other token, the transaction would still be recorded as a Donation, as there is no ongoing benefit received for their generosity. However, in such a case the tax-deductible value of the donation would be reduced by the value of the item received.
A Membership, on the other hand, does have ongoing, tangible benefits, and most often those benefits are dependent upon continued payments to your organization from the Contact. Often the benefits will take the form of ongoing admittance to a facility, or discounts on products, purchases or services. These benefits will often have a fixed time frame in which they are available, at which time a new payment is required to maintain the benefits. As with a Donation, the cost of a membership may be tax-deductible, less the value of any one time benefits received.
For many organizations, donations and membership have a clear and dividing line. For other organizations donations and membership have similar slightly less clear definitions. The two most common cases are: when an organization gives a membership to a contact that has donated a certain amount and when all donations result in memberships or are considered interchangeable. Both of these present their own complications.
In both cases the first issue is how to record the membership within NonProfitEasy. If not recorded correctly it will create a case where money is being counted twice and will cause accounting confussion. The easiest solution to this problem is to record the membership as a “Complimentary” membership, meaning that the membership is free to the Contact because your organization has gifted the membership to the contact. However, be aware that doing this could result in a reduction of the tax-deductible value of the donation, equal to the normal value of the membership.
The second major issue is how to handle additional donations that would normally result in a membership when a membership is already currently active. This issue raises the question of whether you extend the membership, automatically renew the membership for the next renewal period, or take no action at all until they donate after the membership currently active lapses. These are all decisions your organization would have to make, and each has its own set of drawbacks and frustrations.
While it is possible to record complimentary memberships resulting from donations made by contacts, it is recommended to keep Donation and Membership as distinct processes. This is to both prevent the double entry of recording both donations and complimentary membership for the same transaction and to reduce the operational confusion of handling multiple donations by contacts that would result in memberships.