Adding to multi-year pledges/paying off early

Sara Daly

Hello all!



I have been using RE for almost 8 years now, but this is really the first time I've had to deal with this.  In my current organization, people are frequently solicited to increase their pledges, before they are finished paying them off.  This leads to 2-3 (or more) concurrent multi-year pledges to the same fund for a consitituent.  In my opinion, this starts looking confusing and it leads to us having to customize pledge reminders and other things.  



For example: someone has a $1,000/year 3 year payroll deduction pledge to annual fund.  At the beginning of the second year, they decide that this year, they want to increase their giving this year to $1,300 per year.  The way it is happening now, they would book an additional $300 pledge to be paid weekly alongside the pledge with a $2,000 remaining balance.  



As I see it, the options are to:

- continue doing it this way

- pay everything against the original pledge, and create a new pledge for the difference only when the original has been completed

- ???



This is obviously the most frustrating with payroll, but we run into it with non-payroll situations as well.



I would appreciate any advice/best practices or let me know what your organization does in this situation.



Sara

Ryan Hyde

Okay, so we don't do anything like this, but I like looking into new situations.



So my first question is, when you set up the original pledge did you create a payment schedule? If you did, then I think I know what the solution is.

1. Open the original pledge
2. Increase the pledge amount to whatever it is now
3. Click on the "schedule" button
4. Click on "Reschedule"
5. In the bottom section, Select the appropriate frequency
6. Enter in the appropriate number of installments to complete this pledge according to the frequency and the expected paid-off date
7. In "Starting on" select the date of the next expected pledge payment
8. Finish

So this should keep your old payment history intact, increase the total pledge, and change the payment schedule and/or the amount to be paid for the remainder of the pledge's life. 



If this doesn't meet your needs, explain more and I'll see if I can come up with something else. Or maybe someone else who has more direct experience with this type of giving can chime in.

Sara Daly

Hi Ryan!



Thanks for getting back to me.  It's not the payment schedule that's the problem.  I would definitely reschedule if they agreed to pay against the original pledge.  My manager's thinking is more like - they want to give an extra $300 in addition to what they are already giving, so there should be another pledge.  So doing two pledges concurrently isn't wrong, but it makes things messy.  Paying more on the original pledge isn't wrong, but it will mean the following year there is less to pay.



I doubt there is a perfect solution, but I wanted to see what others might do

Ryan Hyde

That's interesting, to say the least. Is this "additional pledge" being paid off in the same timeframe as the original pledge? Or does the new pledge extend past the completion date of the original pledge? 

JoAnn Strommen

Sara, 

So if paynent schedule isn't the issue (which it shouldn't be as schedule can be adjusted to handle any changes), I'm not sure what the issue is.



Yes, having two pledges works but is messy as you said.  "but it will mean the following year there is less to pay." - I'm not seeing the problem. If the $300 addition is all to be paid in year 2, yes, installment amounts in year 3 would be less than year 2, the same as year 1.   What is the problem with that?  



If I had the situation, I would clarify with donor their intent: increase donation amount by $300 with the $300 to be paid this year or spread over the payments for both this and next year.  I would then do an adjustment to the gift to update installment amounts as needed.  We track these if needed with a gift-subtype of 'increase to pledge/gift amount' (not tied to a GL# - just gift sub-type use for info.)



Added note for Ryan's post - his directions are right on. If the pledge is  posted, however, you can't change gift amount on that tab - need to do an adjustment to make changes to amount / schedule.

Sara Daly

The issue isn't how to do it - I understand the various ways pledges can be adjusted.  I just wanted to see what other people do.  



They don't want the donors to pay less in the 3rd year of the pledge - they want $300 on top of the original pledge.  I just don't like the idea of adding a second concurrant pledge because it's messy.  But paying more to the original pledge leaves less to pay the 3rd year - I suggested the idea of adding a pledge on to the end of the original pledge of course, but the 2nd pledge is "how it's always been done."  



I wanted to see what other people typically do with this situation.



Thanks!

Ryan Hyde

"But paying more to the original pledge leaves less to pay the 3rd year"



I don't understand this part. If you raise the amount of the pledge and adjust the payment schedule, you can make sure that the additional $300 is paid really whenever you want it to be paid.



Let me explain my thinking here and maybe you can tell me where the disconnect I'm having here is. 



Let's say the original pledge is for $3000 to be paid out quarterly over the course 3 years in $250 increments. In the second year, the donor is solicited to increase that pledge by $400. If that $400 is to be paid in the 3rd year only, then adjusting the payment schedule and manually increasing each gift by $100. That way, no less money is being paid in year 2, and year 3 is increased by the $400. 



OR let's say that the original pledge is for $2000 to be paid over TWO years, quarterly, in $250 increments. If the donor is solicited to extend the pledge into a 3rd year (let's say an increase of $500, which would extend the donor by two quarters, for this example), then the original pledge is adjusted and the payment schedule is extended out. When you extend the payment schedule out, you're not changing the $250 quarterly payments for year 2. You're just tacking on two quarters to the payment schedule and assigning those payments a value of $250. So you have now taken a 2 year pledge and made it, in this case, a 2.5 year pledge, being paid $250 quarterly. 



I'm just having trouble seeing how these solutions would result in fewer payments in the 2nd year of a multi-year pledge. I'm sure I'm missing some detail since this isn't something we typically do (at least not in my tenure).

Jen Claudy

I think what Sara is saying is this:  Mr. Smith pledges $3000 to be paid over 3 years in quarterly installments of $250.  In year 2, Mr. Smith is asked to increase his pledge by $400.  Sara's organization/manager doesn't want to adjust the total on the original pledge but instead wants a second pledge to be entered in RE for the additional $400.  Currently, she is having to add the second pledge and enter payments split between the two, so when a payment comes in (in year 2) for $300, $250 goes to the original pledge and $50 to the second pledge.  If I'm correctly understanding this, Sara's problem is that everything is now split, and since this is happening regularly, it gets messy and confusing.  So my thought would be to apply the entire $300 payment to the original pledge.  Once the original pledge is paid in full, then switch to the second pledge.  I would also adjust the payment schedule on the original pledge, and set it up appropriately on the second pledge, especially since one payment will end up on the "seam" and need to be split between the two.  RE will ask you if you want the remainder to be entered as a cash gift when the payment is more than the balance on the pledge, so you will be reminded that this is the payment that has to be split when that time comes.



We don't have this situation, but I can sort of see where we would end up with the same scenario.  I reconcile everything with our Finance Dept so having the two separate pledges would probably help that process significantly, since they would be two separate transactions in the Finance system with two different dates.

Christine Cooke 2

My suggestion is to make an Adjustment to the Original Pledge and on the Adjustment, note that the change is due to increasing their multi-year pledge.  That way, you are still working wtih the same one pledge record for that fund.

Riddle me this?  When or if they happen to have a multi-year pledge, and on the 2nd or 3rd year decide to lower the pledge amount how do you handle that?  Don't you do an adjustment?  or do you write off part of the pledge?

In my 9 years of RE, and multi-year pledges, I also tried the additional pledge for the difference in increase thing and discovered right away that was gonna be ugly, especially if you are an org with lots and lots of pledges to track. I learned that Adjustment were the way to go, just document when and why the total pledge amount is going up or down.

Ryan Hyde

Yeah, I think we have the same understanding Jennifer. I guess for me when I see a manager resisting doing things the right way, I don't let that go. In RE there are typically several right ways to do any given job, and there are several wrong ways. Adding a new pledge sorta seems like the wrong way in this case, and a manager who insists on doing things the wrong way needs to be shown evidence that this is indeed wrong and it shouldn't be done this way.



Also - suggestion. If part of the issue is tracking which gifts have been increased (obviously having two pledges for the same fund in this instance would indicate that it has been increased), you could add an attribute of "pledge - increase" to the pledge, and put the date of the soliciation in the date field. That way you can easily see who has increased and who has not. You could even get fancy and do business rules to give a popup message whenever a gift with that attribute is opened, reminding the solicitor that this person has already increased their pledge. 



Christine - I would probably lean toward writing off a portion of the pledge, and then readjusting the payment schedule if necessary (which it may not be, depending on the circumstances). This seems like the most accurate way to keep track of the donor's history of intention.

JoAnn Strommen

Sara,

As stated I have the same question as Ryan.  Unless you choose not to evenly distribute the increased pledge amount over all the remaining installments, there is no reason that payments for 3rd year would be any less than 2nd year.  Re-scheduleing the pledge will accomplish this.  I suggest going into sample database if possible and testing this so you can see how it would work.  It's really quite easy and very clean.



I would definitely add amount so there's one pledge.  I would not put a second pledge to start after first one.  You'd have to adjust every payment then too to get 24 equal payments.  Not the best or a good option to me when I have dealt with similar situation.



Christine - your riddle - we adjust amount.

Susan Leslie

We have this happen occasionaly as well.  Since it is a change to an existing pledge, and we make sure the pledge document clearly states that, then we adjust the original pledge to the new amount and reschedule the schedule to correctly show what is due each year.  This allows for invoicing to be correct and when the gift is received, it can be applied correctly.  If it happens to be a new pledge for a new campaign then we enter it with its own gift record and treat it seperately.