It can be so overwhelming to confront the cost of running a nonprofit, we may overlook the possibility of receiving what we need for free. In any community (be it literal or centered around a cause) there is an abundance of assets that can be tapped into if we know how to ask. Appealing to the generosity of others and expressing appreciation for the ways they support the community can go a long way towards securing resources. Many individuals, businesses, and organizations are keen to donate their skill, expertise, time, energy, or goods, because it is a mutually beneficial exchange.

For an individual, contributing to a meaningful cause can provide a sense of connectivity and usefulness–a feeling that they are helping. It can also provide a sense that their skill and knowledge is a benefit to the community, affirming the inherent value of all the time they have spent developing their skills and acquiring their assets. For an organization or business, the ability to provide goods or services can illustrate core values and enhance brand identity. Many businesses know the value of giving back to their clients/customers, and seek to espouse brand integrity by aligning business practices with core values shared by the larger community.

In-kind donations are a natural way for humans to organize themselves around community causes. Harnessing these resources means tapping into the village mindset that has supported the larger human family for generations. It’s also an excellent way to develop social networking and establish relationships, giving a “face” to your nonprofit and the importance of its work.

What is an In-Kind Donation?

An in-kind donation is a non cash donation of goods, services, expertise, or time. This includes tangible goods (such as office furniture, supplies, rent-free use of facilities, technology and equipment, property, items for auction, food, clothes, office furniture, vehicles, etc.) and intangible goods and services (such as accounting, legal consultation, fundraising, IT, advertising, etc.). Tangible goods may be used, new, or loaned. Intangible goods may include things like patents, royalties, and copyrights. In-kind donations can be contributed by individuals, organizations, or companies.

Encouraging In-Kind Donations & Asking for What You Need

A strong word-of-mouth network can be just as effective as an on-point social media campaign. Indeed, both of these methods of asking for what your nonprofit needs can enhance one another; getting the message out there in a way that inspires a call to action will almost certainly translate to making a vision a reality. When action steps are laid out succinctly, donors know exactly where to show up, what to bring, and how they can help.

To encourage an influx of in-kind donations to your organization, focus on messaging that appeals to the direct impact the goods and services will provide. For example, if your organization works to support single mothers and you are asking for donations of children’s clothing and baby supplies, you can lay out exactly how much money per year these donations save families, or express the tremendous relief that having basic household items will provide to people who are juggling overwhelming responsibilities. You can also emphasize gratitude and the impact these donations have on your organization’s well being, e.g. “We would not be able to do what we do if it were not for the staggering generosity and dedicated efforts of our amazing volunteers.”

In any exchange, it is important to make specific requests and uphold healthy boundaries. Sometimes nonprofits encounter the issue of receiving more donations than they can manage, or donations of items and services they cannot use. Be specific in your requests to help reduce the amount of literal or proverbial clutter to contend with. State clearly what sort of donations you accept, and what sort of donations you do not accept, as well as your organization’s most pressing, current needs.

As any astute mother can attest, one should never underestimate the importance of good manners. Simple gestures can go a long way in refining your messaging. There are many ways to ask for in-kind donations, including letters, social media campaigns, advertisements, email announcements, and events. People want to help, they want to be useful, and they want to be generous, because it feels good! Appealing to how good it feels to help will likely be more successful than relaying urgency (which is stressful and can even come across as coercive). Sincerity is easy, and is easy to recognize in others. Almost everyone will respond well to a sincere request, a polite declination, and an authentic ‘thank you.’

Setting Up a System to Receive & Record In-Kind Donations

Anything is possible with proper planning and organization. Setting up a system for receiving and recording in-kind donations will streamline the process, reduce stress, and help establish graceful practices around saying ‘yes’ to what is needed and ‘no’ to what is unneeded. For any kind of business or organization, setting up proper recordkeeping is half the battle.

Nonprofits need to have a Gift Acceptance Policy that indicates what sort of gifts they will accept. This policy clearly articulates the nature of the donations the organization can and cannot receive, as well as educates staff and board about issues that may be triggered by certain gifts. A Gift Acceptance Policy should also include parameters for the circumstances under which a gift will be received, how gifts will be recognized and accounted for, and how major gifts like insurance policies or stocks will be handled.

The simplest way to track non cash gifts and their use is with a donation spreadsheet. If a donor gives you an item and tells you what you can or cannot do with it, then you should record the donor’s intent on a spreadsheet. For example: If an artist gives a nonprofit a $5,000 sculpture for their silent auction and says “You can sell it for $2,500 or above, and if you don’t I want it back,” then you should record that information. Whatever the terms are of the item being given should be tracked.

For bookkeeping purposes, in-kind donations can be recorded in a separate revenue account as ‘Gifts In-Kind/Services,’ and the expense can be categorized as ‘Professional Services.’ There are many spreadsheet templates available online for tracking donations and keeping financial records of in-kind gifts. All of these records can be considered part of the ‘intake process,’ whereas offering tax deductible receipts to donors or returning loaned items in a timely manner are part of the ‘return process.’ Laying out this process from start to finish in a way staff can implement easily will ensure the ease of the exchange, and encourage donors to keep on giving!

Are In-Kind Donations Tax Deductible?

Donors can deduct tangible goods. They have to apply a fair market value to the items, which is how much you can realistically sell the item in the market. Donors cannot deduct time, services, or money for raffle tickets, bingo, or lobbying activities.

If a donor receives something in exchange for their donation like a silent auction item or a “giveaway item” (such as a T-shirt), the nonprofit must give a receipt that states the donor received an item valued at $XXX for their $XXX donation. For example, If you hold a fundraiser giving away a free T-Shirt for a $20 donation, then you must state that in the receipt. If it cost the nonprofit $10 for the T-Shirt then the receipt would say: “Your generous donation of $20 included your receipt of a $10 T-Shirt.” The donor would only be eligible for a $10 tax deduction which is the difference between the donation and the cost of the item received.

In-Kind Donations Cultivate Meaningful Relationships

Taking inventory of free, available, abundant resources is one of the best ways to achieve your nonprofit’s mission. It’s not only practical, it taps into a way of relating that contextualizes your organization in a community of mutual aid. Any successful organizational effort is supported by the generosity of others. In this sort of exchange, giving is just as valuable as receiving. When people give, and their gift is received, their altruism rewards them with a sense of enlivenment. Being able to relax into the pleasurable nature of service to others, and having good faith that you can find what you need, will go a long way towards achieving nonprofit goals.