By default, pledges in Virtuous are not tracked as receivable. This means that pledged amounts are not counted in daily fundraising totals. Instead, pledge payments are "counted" as they are received. This provides a very clear picture of your organization's finances; your system reports will provide a very clear picture of actual cash received. This is ideal for making sure you are staying on budget.
Many nonprofits choose to track pledges as receivable instead. This means that amounts pledged are reported as "raised" at the time when your donor makes their pledge commitment. In this scenario, it is vitally important to ensure that as pledge payments are received, they are matched to the correct pledge right away. Because the pledged amount is recognized as raised immediately, subsequent payments towards a pledge are not included in daily fundraising totals. Any payments that are not matched to an existing pledge could result in double-counting of revenue.
Tracking pledges as receivable is a common practice in the nonprofit industry. This is based on the recommendations put forth by the Financial Accounting Standards Board, or FASB. Specifically, the board drafted statement 116, which you can read in its entirety here, as a guideline for nonprofit financial tracking and reporting. Included in the statement are guidelines regarding gift revenue recognition and valuation of in-kind gifts, among other things. Regarding pledges, the relevant passage from the guidelines is:
"Except as provided in paragraphs 9 and 11, contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received."
Based on this guideline, many organizations will "book" pledges when the pledge commitment is made.
As a practical example of this type of reporting, let's pretend that you have just hosted a successful fundraising event. The event included a silent auction and an active appeal for pledges of support. You may have $15,000 pledged and the silent auction items may have sold for a total of $7,000. On the day following the event, it is highly unlikely that your organization has already collected the payments and entered all of the gifts for the silent auction items and received the total amounts pledged at the event. Maybe you have entered a total of $2,500. However, when you report on the success of your event, to your board and perhaps in donor communication, you wouldn't want to say, "We raised $2,500!" Instead, it's more likely that you will announce that you have successfully raised $22,000.
The key thing to keep in mind with the FASB guidelines is that they are just that. Recommended standards for nonprofits to use so that all nonprofits are, in theory, reporting their financial information using the same playbook. However, reviewing the document itself, there are several areas that are still open to interpretation. The best bet is to communicate clearly with your accounting team and your auditors, if possible, to be clear on the practices and policies governing your organization. Once you have done so, you can determine whether tracking pledges on a cash basis or on a receivable basis is the best option for your team.
Making the Switch
Once you determine that you do want to track pledges as receivable, your Virtuous admin will need to update your Organization Settings. These settings can be accessed by clicking on "Settings" in the Primary Navigation, and then selecting "Organization Settings."
This will bring up the organization settings form. There, you will see two checkboxes labeled "Track Pledges as Receivable" and "Include Pledges in Contact Giving Statistics."
What Does Tracking as Receivable Actually Do?
If you elect to track pledges as receivable, this will affect your organization's dashboard widgets and reports. For example, the Yearly Giving Widget will now include pledged amounts in your fundraising totals. Some reports, like the Gifts by Campaign and Gifts by Project reports, will now include both gifts and pledges received, with a visual indicator to show which is which.
When tracking pledges as receivable, you will also see pledges included in closed Gift Ask actual totals when pledges are linked to asks.
While Campaign, Project, and organizational statistics will change, bear in mind that if you only select "Track Pledges as Receivable," Contact Statistics will not be affected when switching to receivable pledge tracking. This will allow for a clear picture of each donor's actual financial contributions, and ensures consistency when including giving statistics in donor receipts and other communication.
This will also give you the option to include pledges in gift queries. Simply create a gift query, then on the query builder screen, check the "Include Pledges" box.
Keep in mind that your query results could include both pledges and pledge payments, which might double-count revenue. To prevent this, include the following parameter:
This will exclude gifts that are related to pledge payments.
In your query results, pledges will be specified by indicating "Pledge" under Type:
What Does Including Pledges in Contact Giving Statistics Actually Do?
By default, each Contact Giving Statistic (like Life to Date Giving, Year to Date Giving, etc.) is calculated based on gift information only, which means pledge data is not included in these calculations.
If you check "Include Pledges in Contact Giving Statistics" in your organization settings, this will include both gift AND pledge data in contact giving statistic calculations.