Are your company’s donated services and tangible product recorded and communicated with your non-profit clients?
After more than a decade of working with non-profits, it always amazed me how difficult it was to get an invoice for donated services and tangible products from for-profit donors. This is such a missed opportunity on the part of for-profit firms. Let’s explore why.
Corporate social responsibility is an important strategy in promoting your brand in today’s business environment. Your customers want to do business with firms that invest in the community.
Gift of Service
Many companies allow employees to donate their professional time to non-profit charities. While the value of this donated time is not a tax write-off for your business, it helps tell the story of how your company is giving back to the community.
Let’s say your organization is a for-profit accounting firm. Each month, your staff donate $2,000 of professional accounting services to a local non-profit. Because no payment is requested by your firm, most for-profits simply do not bill for the service.
Always bill for the fair value of donated services that require specialized skills provided by your staff who have those skills that would have otherwise been purchased. Discount the invoice to account for your donation to the charity. In the example above, the accounting firm would generate an invoice as with any other client, then add a line for Gift of Service Discount of $2,000.
The reason to do this is threefold:
- The charity is able to report the value of this donation on the financials. This is important information for the non-profit board in the event that those donated services are not available in the future. They will know how much they will need to budget to cover these costs in the event your firm can no longer provide this service at a discount.
- Charities generally have tiered donor giving levels. As the value of your company’s donations stack up, you may receive increased recognition by the charity.
- Tracking this information is highly useful to your communications and public relations team. An accurate record of charitable giving and staff volunteerism helps to tell the story of your investment in the local community.
Gifts in Kind
Gifts in kind are generally pieces of tangible property or rights to property, such as discounted use of facilities, free/discounted advertising, donated food, and property such as furniture and supplies. These gifts may help reduce your company’s tax burden.
The IRS requires that the donor provides the fair market value of their gifts in kind to the charity. For gifts with a value of more than $5,000, you must obtain an independent appraisal for tax purposes. Receipts for the items purchased and donated will help provide this documentation too.
If you wish to report the value of gifts in kind on your company’s tax return, make sure to get a charitable receipt from the non-profit confirming they received the donated product.
Lastly, share your company’s charitable activities with our communications team so they can share the news with your customers and other stakeholders.