A Beginner’s Guide to Tracking In-Kind Donations for Nonprofits

While financial contributions are crucial for the success of any nonprofit organization, it’s important not to overlook the value of in-kind donations. These non-monetary contributions can be valuable resources, but managing them is a challenge. However, with the right tools and strategies for tracking in-kind donations for nonprofits, your organization can benefit from them while avoiding potential pitfalls.

What Are In-Kind Donations (and Should You Take Them)? 

Very broadly, in-kind donations are non-monetary contributions to your organization. This can range from donations of food and clothing to event space, legal services, and property and art. Unlike cash, not all in-kind donations are accepted by all nonprofits.

That’s because not all nonprofits have the resources to do so. Consider something like clothing drives, with hundreds of donors bringing in bags of old clothes. That might be fine for a large organization with a staff of thousands to wash, categorize, price, and inventory these items. A smaller nonprofit without these resources would struggle to handle it. In the end, the in-kind donation may cost them more than it’s worth. 

That’s why all nonprofits should have a clear, established policy in place for accepting in-kind donations. It should include donation criteria, restrictions on what you accept, contact parties to handle the donation, and your organization’s policies for valuing the item. You’ll also want to set specific restrictions related to intangible versus tangible in-kind donations. Here are some examples of each type of in-kind donation.

Tangible	Intangible
Tangible in-kind donations are physical goods or products. It’s easier to value these items as they typically have a straightforward fair market value. Examples include: Clothing Food Furniture Vehicles Equipment Medical supplies Personal care items School supplies Toys and games Pet supplies	Intangible in-kind donations are non-physical contributions. They can be harder to value as they include abstract components, like time or expertise.  Examples include: Professional services Marketing Consulting Volunteering Event space Mentorships Patent donations Intellectual property licensing Translation services

Accurate tracking of tangible and intangible in-kind donations for nonprofits is vital because you need to report them in financial disclosures and provide receipts for your constituents. To do that, you need a method of accurately valuing the item you’ve been given.

Methods for Valuing In-Kind Donations 

In-kind donations don’t (usually) come with a monetary value—you have to assess each of your gifts and assign one to them. There are a few different ways that organizations go about handling this, from simple self-reporting to detailed appraisals.

• Self-report: Self-reporting makes sense for a lot of the lower-value in-kind donations you receive. For example, it’s impractical to go through an entire bag of clothes that a donor gave to your organization and price each piece. Instead, the donor may estimate that the value is approximately $50. If it seems like a reasonable evaluation, the nonprofit takes the donor’s word for it. While this is the fastest way to manage in-kind valuations, it’s only appropriate in situations where the value is nominal. 
• Fair market value: The fair market value is the price that an item would get on the open market. This is probably one of the most popular appraisal methods for nonprofits because the internet makes it very easy to look up comparable values of items. This method is most helpful for gifts like vehicles, stocks, furniture, or other significant donations.
• Hourly rate: The hourly rate approach can make it much easier to assess the value of those intangible in-kind donations like professional services or consulting. The nonprofit can use the standard hourly rate for such a professional and then track the time they spend volunteering for the benefit of the organization.
• Intended use: An item that’s intended to be used by the nonprofit will typically have a value that’s higher than an item that’s going to be sold. For example, if a company donates a bunch of laptops, and the organization chooses to use them, they receive continued benefits from those laptops. They’d likely be more valuable than a donation of laptops the organization intends to sell. 
• Appraisal: Donations that are particularly high value or rare should be professionally appraised by an expert in the field. Because they’re expensive, these are usually only used for donations of jewelry, art, real estate, or other major in-kind contributions. Insurance-related appraisals may also be used. 

Valuing your in-kind donations accurately is important because, even though they’re nonmonetary, you still have to provide a receipt for your donors. You’ll also want to be able to track the value of your in-kind donations in your donor database.

Receipting and Tracking In-Kind Donations for Nonprofits 

Receipting and tracking your in-kind donations is not as straightforward as monetary donations for obvious reasons—you have to establish the value yourself. While you can’t control that, there are some things you can. Standardize a receipting process for all in-kind donations so you know exactly what information to collect regardless of what’s being donated.

What to Include on In-Kind Donation Receipts 

A receipt allows you to acknowledge the donation and provide important details your donor needs for their taxes. Here are the essential elements that your receipts should include:

• Donor info: The donation receipt should include the donor’s name and address, as well as their tax identification number if applicable.
• Description of the donation: Your receipt should describe the donated item or service in detail, including the quantity, brand, model number, or other identifying information. It’s helpful to include a brief note on the condition of the item, like identifying whether it’s used or new, to back up its valuation. 
• Date of the donation: Include the date or date range if it is an ongoing in-kind donation. 
• Value: You should include both the value and how you determined that value. If you’re using the fair market value, for example, note that’s what the estimate was based on. This will be helpful if there are questions later.
• Intended use: The receipt should indicate whether the donated item or service is intended for use by the nonprofit or if it will be sold or exchanged.
• Acknowledgment: You’ll want to send a separate thank-you notification, but you can also include an acknowledgment within your receipt. 
• Tax-exempt statement: Your receipt should include a statement that the nonprofit is a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code and suggest the donor consult their tax advisor for information regarding the tax-deductible nature of their contribution.

These elements will provide the information your donor needs to claim tax benefits from donations. It also categorizes the data to track these donations effectively in your nonprofit database. 

Tracking In-Kind Donations in Your Database 

Tracking in-kind donations provides clarity on the resources available your organization. It can also help you build relationships as you use the data you gain to understand your donors. 

If you are using a CRM, this is a relatively easy process. All you need to do is include a field that allows you to track this type of donation in each donors’ profile or record. Then, you can segment out those donor accounts in several different ways to understand the effect of in-kind donations on your organization. 

Donors Who Give In Kind	In-Kind Gifts by Campaign
You should create a segment specifically for the names and contact information of donors who give in-kind donations. This helps you personalize your thank-you messages to them by using the details of their donation in the in-kind donor thank-you letter template.	Tracking the value of in-kind donations by campaign or fundraising initiative allows you to assess those efforts’ effectiveness and identify areas for improvement. Through this, you can also estimate your campaign’s overall ROI by comparing the value of the in-kind campaign to the administrative cost around it.
Overall Value	In-Kind Gift Type (Tangible vs. Intangible)
Tracking the value of your overall in-kind donations tells you how important they are to your organization. While most will receive the majority of their donations in cash, inventory-heavy nonprofits like museums or private libraries may have higher in-kind receipts than anything else.	Tracking and comparing both tangible and intangible donations helps nonprofits understand the type of support they are receiving from donors. It can also help you identify areas where you may need additional resources.

When you segment your donor data on in-kind donations, you can get a true assessment of the value of these contributions. You can also use the details tracked to better manage your resources, provide accurate financial reporting, and build strong relationships with your donors. 

Using Neon CRM to Track In-Kind Donations 

Tracking in-kind donations for nonprofits can be a challenge because they’re so subjective. The best way to tackle this is through standardization. If you put a process in place for the way you value and document tangible and intangible donations, you can use your CRM to handle the rest. This will help you create closer connections with in kind donors while gaining insight into your financial position. 

Neon CRM is an excellent solution for tracking in-kind donations for nonprofits, which includes the ability to create custom fields for tracking specific types. To learn more, request a demo!