Management & Assistant Program for Nonprofits
2005 President’s Conference Series
Dec. 1st, 2005
Creating Efficiencies In Moving
Funds from Donors to Your
Organization
Presented by:
Cheryl Ahrenstorff -Vice President, Treasury Management
Lynn Slavik-Vice President, Merchant & Credit Card Sales Manager
Ron Zweber- Sr. Vice President & Manager, Nonprofit Banking
Overview
This session provides an overview on
the multiple ways funds can move from
donors to your organization. We will
explore each of the major areas of
payment options and provide examples
of when each option is best employed.
Checks
Definition: A draft signed by the
maker and payable to a person or
organization named upon presentation
to the bank upon which it is drawn.
Costs
There are generally costs per deposit
and per each check deposited. These
fees can sometimes be offset by
compensating balances in a deposit
account.
Benefits
Very mature, accepted form of
payment.
Marketplace is familiar with checks as a
payment form.
Generally cost effective.
Good access to donor information on
the face of the item.
Limitations
Fraud is a growing concern with checks.
Checks do not create the repetitive
giving that most organizations desire.
Remote Deposit
Definition: Remote Deposit, also
known as electronic depositing, allows
clients to make their deposits directly
from their place of business via the
Internet.
Mechanics
Your organization receives checks for
payment. You then scan checks which
captures check images and MICR data. You
then transmit images via the Internet to your
financial institution. Checks are then either
recreated as "Image
Replacement Documents" or converted to an
ACH (Automated Clearing House) item.
Costs
Costs vary by financial institution but
usually including a hardware and
software cost, monthly maintenance
fee, and per item fee.
Benefits
Convenience: This deposit method minimizes
trips to your financial institution.
Potential Cost Reduction: This could reduce
employee time, travel expenses and courier
fees.
Access to Archived Images: This provides a
database of deposited checks including donor
information.
Limitations
Depending upon the volume of items to
deposit, the capture process may be
time consuming.
You may have staff or technology
limitations.
If you have coin or currency to deposit,
you will still need to visit your financial
institution.
Lockbox
Definition and Mechanics: Lockbox is a banking
service provided for the collection of an organization’s
receivables or donations, for credit to the
organization's account. The service includes collecting
the mail from the company's post office box; sorting,
totaling, and recording the payments; processing the
items; and making the necessary bank deposit.
Costs
Costs vary by financial institution but
usually including a monthly
maintenance fee, a processing fee, a
fee for check copying, an information
reporting fee, and mail or courier costs.
Benefits
Lockbox could potentially increase your funds
availability and decrease float.
Lockbox could reduce your internal handling
costs for payment processing and deposit
preparation.
Lockbox could strengthen your internal audit
controls.
Your staff is less impacted when large
seasonal solicitations are mailed and
contributions processed.
Limitations
Lockbox processing could be too costly
for your organization.
ACH Processing
Definition: ACH Processing will enable
your organization to electronically collect
donations by transferring funds from
donors’ accounts to your organization’s
account on a predetermined schedule
through the Automated Clearing House
(ACH.)
Mechanics
Using your personal computer and ACH
software available online through your
financial institution, you create an ACH file
with payment information of those donors
who have authorized you to electronically
debit their bank accounts. Direct Debit
transactions can be done to virtually any
financial institution. The bank processes the
transmission and credits your account for the
donor’s contributions on your desired
settlement date.
Costs
Costs vary by financial institution but
usually including a software cost, a file
fee and a per item fee.
Benefits
This is an efficient option for repetitive giving.
This option allows for capital campaign gifts
to be debited over an extended time period.
ACH processing allows you to accelerate
collection of your donations.
You may reduce your internal clerical costs by
eliminating the costly preparation, delivery,
and reconciliation of checks.
You gain cash flow predictability by specifying
the collection date.
Limitations
This is not an efficient payment method
if few transactions are involved.
What is a Merchant Account?
A merchant account provides the ability
for a business to accept a credit card as
a form of payment for goods and
services, including donations to
nonprofit entities.
Why accept cards?
National trends reflect significant card usage
from 20% in 1990 to an estimated 55% in
2010.
Consumer demand
Earn points
Revolve payments
Statistics reflect that greater spending occurs
when card payments are an option.
Why is Card Acceptance Important?
The payments world is changing:
Transactions are shifting from paper to plastic and from physical
to electronic
There is strong growth in the adoption of electronic payment
instruments
Competitors are offering Increased choices of electronic
payment vehicles
Percent of Payments by Instrument
100%
Electronic
80%
Cards
60%
Other paper
40%
Cash
20%
Direct checks
0%
1990 1995 2000 2005e 2010e
(1) Other paper includes money orders, official checks and travelers checks
Source: Nilson Report, April 2002; BCG Global Payments Report; BCG analysis
How does a merchant account work?
Business works with their bank to determine
best processing solution based on volume and
logistics; fees are established
Transaction costs are between 2% and 4%
Application is taken and approval process takes
place with set up in about 10 days
Card payments can be accepted in person,
phone/mail or Web page
Gross proceeds are electronically deposited
within 48 hours
Fees typically collected at month end
Can be set up as “seasonal” merchant to reduce
some fixed monthly costs
What are the options and costs?
Touch Tone Capture
Under $100 for set up fee and card imprinter
Enter transactions via touch tone telephone
Pros:
Ease of use
Minimal start up cost
No special electronic hardware needed
Cons:
Most expensive option due to high fees
No flexibility
Electronic Draft Capture
Under $500 for electronic terminal/printer and set up
Designed for in-person sales where card is present
Can also be used for keyed transactions
Wireless technology is available
Pros:
Ease of use
Moderate start up cost
More efficient that touch tone capture
Can print batch information for hard copy
Cons
Could be cumbersome if fundraising events are held in
various locations (access and additional cost for power
source and phone line, program for outside line)
Not efficient for higher volume, card-not-present
transactions
Software or Internet Gateway
Set up fees ranging from $250 to $450
Some providers will charge additional monthly/annual service fee
Tools Provided to interface with Businesses webpage; handled by
Businesses Web Developers
Best option for card-not-present transactions
Pros:
Very efficient for businesses who conduct mail/phone transactions
User friendly platform
Access to custom reports that can be downloaded to the company’s
accounting system
Provides options for recurring payments
No need to update software if using gateway solution
Cons:
Could be cost prohibitive for business with minimal usage
Questions?