Whether you're a new nonprofit organization looking to change the world or a small group trying to raise funds for school band uniforms, accepting and processing cash donations can be tricky. Well-intentioned fund raisers needn't do much to get into serious hot water with the IRS, so use tips in this guide to save time and effort by establishing stringent financial practices. Find out how to process cash donations, open a checking account and use the Internet to handle cash gifts so your group can go about the business of helping others rather than repeatedly explaining how the group's efforts are being underwritten.
Open a bank account in the name of your organization or cause. This typically requires documentation, so bring along your charter, by-laws, articles of incorporation and other types of paperwork that can be used as proof of your organization's mission and principles.
Mandate two signers for all cash transactions with your bank account. This "double-signature required" costs no more to implement but it goes a long way to reassuring donors and members alike that your organization is on the up and up.
Draft a standard "cash donation form" and require each gift giver to fill one out each time a contribution is made. This form should include the name of the donor, address and other contact information, a place for the cash amount, date and it should also spell out any terms under which the donation---all or in part---is allowable as a tax write-off. Add a line for the signature of the person accepting the donation.
Qualify every cash gift to make certain it fits within your organization's mission. Make certain it has no "strings" attached and that there is no conflict of interest or quid pro quo implied within the contribution before your group accepts it.
Agree to a standard method for processing contribution box donations. Use what's called a double-handed counting system requiring at least two members of the group to witness every donation box transaction. Physical control of these boxes must be rigorously monitored. Keep a detailed record of the times, dates and people counting, transferring, depositing or otherwise moving donation box funds.
Set reporting limits for cash donations to create legal checks and balances. Some groups require consensus before a set amount can be accepted (e.g., $1,000) to make certain special interests are monitored on the group's behalf.
Consider using a third party service like Pay Pal to process cash gifts. No website is required (though many clubs find it's easy to link to Pay Pal via a homepage link) and supporters can make secure donations from their banks or credit cards. The paper trail is comprehensive and easy-to-use. Pay Pal can also set up automatic monthly subscriptions for frequent givers.
Set up Excel (or other database software program) spreadsheets to track all cash receipts. Break out cash box donations, checks, credit card transactions, Pay Pal proceeds and auxiliary revenue receipts to keep tabs on where the group's cash is coming from for future marketing efforts.
Work with a banker or accountant if your membership does not include a team member comfortable with finances. Always send a thank you letter to gift givers immediately after their cash donation has been received. This extra touch, when sent in a timely manner, reminds the donor of their contribution, speaks volumes about the group's gratitude and sets the stage for future campaign appeals.
Check with an accounting authority to see if your organization's members should fill out personal disclosure forms to be on the safe side.
- Check with an accounting authority to see if your organization's members should fill out personal disclosure forms to be on the safe side.
Based in Chicago, Gail Cohen has been a professional writer for more than 30 years. She has authored and co-authored 14 books and penned hundreds of articles in consumer and trade publications, including the Illinois-based "Daily Herald" newspaper. Her newest book, "The Christmas Quilt," was published in December 2011.