In any business endeavor, an owner may encounter multiple sweaty-palmed experiences. Customers may engage in multi-tiered assaults ranging from vehement criticism of a product or service, censure for (the lack of) customer assistance, objection to time lag for delivering said product or service and the airing of numerous other grievances. Of course, an owner realizes that this comes with the precipitous territory of conducting business. However, it remains a humbling experience when interacting with a vociferous client — an individual who will let everyone know from friends and relatives to, of course, “The Better Business Bureau” about the perceived shortcomings of the business.

Perhaps the most daunting situation affecting an “it’s not all what it’s cracked up to be” business owner is a payment that is late or never arrives. Consider the private school owner who reminds a parent about the monthly fee only to receive this reply: “Just give me a few more days.” Think of a construction company owner who rightfully seeks a periodic payment from the client and is dismissed with “I’ll pay you when I can.” Envision a gym owner who may have to do “back flips” just to collect on that monthly payment.

Whether by choice or even necessity, there seems to exist a bandwagon of customers who may not so easily depart with their money regardless of their responsibility or what is morally right. This lamentable circumstance (i.e., when an owner cannot efficiently collect money that is due) seriously hampers cash flow — a business’ lifeline, crucial to its vitality. When business expenditures outpace revenues (negatively affected by late or non-payments), commercial failure is all but guaranteed.

There exists two primary ways in dealing with an undesirable client whose money remains elusive. Many businesses still embrace the collections process — whether they perform this task in-house or contract with outside agencies. If the business opts to contact the client directly, invoice after invoice may be forwarded which is very labor-intensive and costly. An owner needs to consider the expense of invoices, postage, late notices and collection calls, and the time it takes personnel to fulfill this duty (and the concomitant pay / benefits such personnel are accruing). Outside collection agencies are not necessarily an advantageous alternative. They typically keep at least 25% of an owner’s deserved profit.

The second method of handling the cash flow-challenging customer is predicated on the premise that a business owner must be proactive. He/she needs to realize the benefits of automated payments, and how this process can more readily prevent the “Dear customer, please pay me” letter.

Automated payments are a vehicle where a customer’s account is automatically debited and transferred to an owner’s account on the exact date a payment is due. Upon the decision to purchase a product or utilize a service, a prospective customer signs a simple release form, giving permission to transfer payment on a specific due date. The customer chooses how to pay, most notably with checks or credit cards.

The operative question arises: How are funds transferred from customer to owner? United Bank Card Merchant Account (UBCMA), a growing New Jersey company, offers two outstanding ways. Paper drafts may be issued via appropriate software, and delivered to the owner so he/she can deposit them (as if they were paper checks). UBCMA acquires the banking information from the owner and converts the information to the appropriate bank draft.

An owner may decide to alternatively use electronic technology, simply inputting the customer’s information in an easy-to-use program. (Here, the data entry is performed in-house). Data is automatically converted into the required format, and processed through the ACH (Automatic Clearing House) system. It usually takes two banking days for the transfer to be complete. In the scenario where a check is NSF, UBCMA’s technology has an autocollect feature that will automatically re-submit the check two additional times, if necessary. This feature not only saves an owner time and money, it also precludes the rather embarrassing process of collecting the NSF item.

There are myriad advantages using an automated payment system: It ensures reliable cash flow, cuts down on expenses such as mailing invoices or contracting with collection agencies, settles funds in a timely manner, streamlines the billing process, etc. Andy Grove, President & CEO of Intel Corporation, understands the aforementioned benefits. He said recently, “In the same way that we have seen a massive flow of content to the Internet, we will see a shift to automated payment in the marketplace.” Any savvy business owner should want to be an active participant in this shift.

Benevolence, good will and philanthropy are honorable principles to adhere to and run by, but when bills start amassing, a nonprofit or charitable organization will not be excused from payment despite its inherent noble ideals and objectives. To make certain that all expenses will be paid – to ensure that its programs and services will remain in operation indefinitely – any nonprofit and/or charitable group must raise revenues on a consistent basis. Indeed, fundraising is so important that organizations often contract with professional fundraising firms to best determine how to continuously fill their coffers.

In Post-September 11th America, the task of obtaining financial support has grown increasingly more difficult. As our economy remains in flux – as so many of our citizens continue to experience personal money woes – the act of providing largesse itself becomes jeopardized.

Moreover, with so much of the charity still slated to New York-based, “ground zero” organizations, other nonprofits and charities are affected and receive less support. Resources have never been equitably distributed, and it behooves any agency to set itself apart as perhaps the “most worthy” – at least the charity of choice in a donor’s mind. (It is a sad reality that organziations relying on public donations do compete with one another for scarce resources.)

Consequently, nonprofit and charitable organizations need to be business-savvy to maximize funds. Marketing must be pursued to increase income as prospective donors may learn of the group through a variety of sources: media, telemarketing, special events, and direct mail may be coordinated and utilized to “spread the word.” From these efforts, people pledge and give financial assistance, building a donor base.

However, it is interesting to note that most donors give a one-time payment and that usually represents a lifetime contribution. Some organizations do not even call donors back at a later juncture to ask for more money, eliminating good prospects and additional revenue. Indeed, it is clear that it is imperative for an organization to establish regular dialogue with former donors. However, what is not apparent and regularly practiced is to design a pledge program where individuals may contribute on a consistent basis (e.g., every month).

Regular donations may be received with a preauthorized payment as individuals authorize the organization to deduct money from their bank accounts at certain time intervals. For example, an individual can specify that he/she wants to give $100 every month, to be deducted automatically. The funds will be transferred from the donor’s account to the organization’s account, typically via an electronic fund transfer. In the aforementioned example, the organization will have collected $1,200 at the end of the year.

The monthly pledge program (the time frame can be altered) offers a multitude of advantages. The following gives eight great reasons why a nonprofit and/or charity should implement it as soon as possible:

1. Explosive income potential – Simply ask and you may receive. Donors may very well contribute if a direct request is made. Instead of only receiving a one-time payment, an organization may, for example, receive 12 payments per year. Moreover, donors are likely to give more if their total donation can be subdivided over the course of the year.

2. Convenience – New donors are attracted by the ease of making donations. They do not have to sign and forward a check but just merely provide authorization for automatic deductions.

3. Better rapport – The connection between the organization and donor grows closer over time. Donors feel that they have an even more “personal stake” in the organization’s welfare, and are more apt to volunteer time to participate in special events and other fundraising activities.

4. Increases retention rate – Donors are more likely to stay with the program. Long-term value studies reveal that those on preauthorized payments will be contributing to the organization long-term, many until their death. One person contributing $100/month for twenty years can result in $24,000 for the nonprofit and/or charitable group!

5. Reliable source of revenue – The organization is guaranteed income every month, which can cover a variety of monthly expenses (e.g., electric bills, telephone costs, etc.). The agency can budget its cash flow accordingly.

6. Savings – Administrative costs are dramatically reduced as there is much less paperwork. One person in the agency can easily oversee and manage a recurring payment plan.

7. Claiming Share of Resources – An organization that wishes to stake its claim to limited resources and financial reserves must make certain that individuals join its preauthorized payments plan, rather than one for a competitor. If donors participate in another agency’s recurring payment plan, they may not be willing or able to join your program’s plan.

8. Simplicity – It is very easy to establish a preauthorized plan arrangement. A donor fills out a simple form stipulating that he/she authorizes a transfer of money to an organization on a monthly basis. An electronic fund transfer then takes place with the assistance of a payment processing company.

9. In light of the numerous advantages of a recurring payment plan, the operative question does not center on whether a nonprofit or charity should adopt it, but “Why have they not done so thus far?” Any organization that is in the business of fundraising (which applies to all nonprofit and charitable groups) must avail itself to preauthorized payments and pledge to do so with expedience!

As a nation, we have always derived great benefit from the charitable impulses of philanthropists – individuals who felt a strong sense of obligation to their fellow man, sharing their financial resources in an all-out effort to help others. During times of tragedy, such as the September 11th incident, charitable giving notably increases to help assuage our collective suffering.

However, there are times of ebb and flow when it comes to donations, and, it is during those times when resources are low that organizations’ survival is at stake – jeopardizing their agenda and the beneficial ideals and objectives that have been set.

What do agencies typically do to combat a “financial crunch?” Many double their efforts organizing and running fund-raising drives. Others appeal to the masses for charitable donations via a variety of techniques: mass media exposure, telemarketing, canvassing, person-to-person, and letters of appeal are all used with great frequency to publicize the word that funds are needed. In fact, donors are besieged with pleas for their philanthropy on a daily basis.

As there exists a plethora of organizations that request financial assistance in the midst of dismal economic times – as individuals are facing their own cash flow problems – it behooves each agency to utilize effective means to maximize revenue. Indeed, it is the responsibility of each charity, religious organization or non-profit to separate itself from others. Yes, worthwhile organizations actually “compete” for the almighty dollar. Consequently, each agency must emphasize the importance of its goals and, what is not readily considered, make it as easy as possible and less “self-sacrificing” for a donor to give.

To reflect and determine how to best attract donors and deal with the aforementioned concerns (i.e., ease and degree of sacrifice), an organization must consider the following questions:

Are donors encouraged to give a single, large gift or can they extend their charity over a period of time?

Are donors asked to make out a check, pay postage and mail the donation or is there a quicker, less inconvenient system in place for payment to be received?

Are donors told to pay only with credit cards (as people generally give more with this payment option) or are they encouraged to access their checking account?

Finally, are donors contributing to pay, in part, for the organization’s administration or are they giving charity earmarked for the programs, and not so much for administration?

When these questions are fully examined, the answer becomes clear as to the best mechanism for an organization to use to maximize financial reserves via charity. Pre-authorized Payments (PAP) provides a win-win proposition for both donor and agency. PAP is a system where the donor authorizes payments that can be timed monthly, quarterly, semi-annually or even annually (or any specified length of duration). Each payment is automatically transferred from the donor’s checking account to the organization’s account.

Let’s take a specific example to highlight the benefits of such a process.

Mr. Smith has decided to sign up for PAP and give $25/month (equivalent to $300/year) to his favorite charity as he feels a sense of satisfaction and fulfillment offering this type of assistance. Look at his other points of view:

a) He is spared the financial hardship of giving $300 all at once; he simply spreads payments out over the course of the year;
b) He no longer has to remember to write and mail checks; even if he goes on vacation, the charity still receives his contribution.
c) He is also pleased knowing that no credit card company can take part of his donation with processing fees. (He knows that credit card providers typically take at least 2% of each payment.); and finally
d) He feels reassured that this type of contribution is less costly to administer, and thus, his donation goes primarily to fund his chosen program.

All he has to do is sign authorization to make consistent payments so funds may be transferred automatically to his charity of choice. It is simple to implement, and with payments that are spread out, Mr. Smith is getting the biggest bang for his contribution buck.

How do charities, religious organizations and non-profits view PAP? Convenience, efficiency and cost-effectiveness are the watchwords. Since the funds are automatically deposited into their account, with no delay, cash flow accelerates. In addition, they do not have to solely rely on the labor-intensive and the costly administrative process of securing donors; they already have a steady stream of revenue from the “regulars” who automatically contribute. These reliable and consistent receivables can easily get the organization through the “tough times.”

Furthermore, PAP encourages new donors as they are attracted by the ease of making donations. And these donors generally sign up for an unlimited duration, or, at the very least, for a year. Again, the day-to-day functioning of an agency becomes more likely when they receive consistent largesse for the minimum of a year.

Based on the bevy of advantages derived from PAP, it appears that this should generate great interest, and spearhead any fundraising endeavor. It may be the most efficient way of doing business and maximizing funds for needed and valuable programs. As more and more organizations are hit with a budget crisis, they should avail themselves to easy solutions that work. PAP just may be the savings grace that can ensure an organization’s survival.