According to Wikipedia, total cost of ownership is a financial estimate intended to help buyers determine the direct and indirect costs of buying and supporting a product or system.
When searching for new donor database software for your nonprofit, total cost of ownership is an important consideration. It’s not enough to simply compare vendor pricing proposals side by side. You need to also understand your indirect costs and return on investment. You need to ask probing questions too.
Here are three questions you need to ask your donor database salesperson that will save you hours of wasted time looking at the wrong product.
Question #1: What modules are included in the software?
It’s important that your donor database system is able to grow with you without requiring additional monetary investment for functional modules.
For example, every nonprofit, regardless of your size, can use tools to cultivate donors for major gifts, individuals to volunteer, corporations for sponsorships and foundations for grants. Most vendors charge extra for their cultivation tools. Be sure to ask.
Most nonprofits have one or more fundraising events. Some systems don’t provide their own event management tools which means you have to find another solution to help support your fundraising events. If that’s the case, will these systems talk to each other or is there a lot of physical data entry and manual intervention required by your staff? If a vendor does provide event management, there is often an extra charge for the event planning and/or event registration module and extra fees for auction management.
Ask the vendor to provide you with a list of everything that’s included in the base fees and ask for a list of all optional modules and the cost of each. Then, determine which modules you might need over time and how much you’ll spend to add them. Here are a few to get you started: Event Management, Volunteer tracking, Membership management, Online donation forms, Email integration, Patient Management Module, Human Resources Module, Inventory Tracking.
Question #2: Tell me about how my organization and I will be trained?
Training comes in many shapes and sizes. There are pre-recorded training videos and instructor-led group webinars. There is also personalized training using your data and your donor database that’s been configured to optimize performance for your organization. Personalized training can be customized to meet your staff's specific needs and often includes best practices for fundraising and nonprofit management. If you do many fundraising events, training can focus on event planning, management and registration tools including how to prepare items for an auction and how to set up and manage a quick check out process.
Know specifically what type of training you’re being quoted. Ask about free onboarding training for new staff. If you learn better with live hands on training, inquire about whether onsite training is available and the associated costs.
Question #3 How does credit card processing work with your company?
First, make sure that your vendor has an integrated payment platform – an automated way to accept, authorize and process credit cards both offline and online. If not, you’ll need to use a separate payment processor and then manually enter the information into your donor database. Plus, you won’t be able to automatically charge installments for pledge payments or recurring gifts.
If your vendor does have an integrated payment platform, be mindful of the rates, the players involved, and please read the fine print. The payment industry is very complex with many players. There are credit card companies, banks, credit card processors, Independent Sales Organizations (ISO) selling the services of processors, merchant aggregators, security and compliance monitors, and online gateways (for monitoring transactions and running real time reports). And of course, each one takes a monetary piece of every credit card transaction.
Transparency is lacking in this industry. Many processors and/or ISO’s publish low “teaser” rates such as 1.95% plus $0.30 per transaction. It takes a lot of digging and a large magnifying glass to read the fine print where you’ll see statements like:
“This rate is only for card present transactions. Add another 1% for card not present.” This means that if you don’t physically have the card to swipe through a card reader, then you pay more. Card Not Present transactions account for about 95% of nonprofit transactions – online donations and registrations, auto charges for pledge fulfillment and recurring gifts, and manual credit card entry. The rate now becomes 2.95% plus $0.30 per transaction
“This rate applies only to bank cards and excludes cards attached to loyalty and affinity programs. Add another 1% for point cards.” American Express is not a bank card so add another 2% or more to any American Express transaction. Over 90% of bank cards used by consumers today (like MasterCard and Visa) are tied to affinity or loyalty programs – cash back on transactions, airline miles and points to redeem for merchandise. That now makes the rate 3.95% plus $0.30 for bank cards and 4.95% plus $0.30 for American Express.
“Gateway fees not included. Paper statements are an additional $10 per month.” Most gateways charge $10 to $20 per month and some also charge transaction fees (up to $0.10 per transaction). A gateway is necessary for secure online transactions and for reconciling transactions and running reports. Some gateways also charge additional fees to support recurring donations (could be another $10 per month).
“Taxes, PCI compliance and regulatory compliance fees are extra.” There’s a mandatory $3.90 monthly charge for tax reporting to the IRS. There’s a $99 annual PCI compliance fee. There’s also an additional fee (sometimes as high as $25 per month) for PCI non-compliance (if an audit/scan is not done by a security company to verify PCI compliance). Most payment companies pass all these fees on to you, the merchant.
Key considerations are (1) vendor provides integrated payment platform; (2) you know exactly the one rate you are being charged for each and every transaction regardless of the card type and no matter whether you have the credit card present or the charge is being made online (and this one shouldn’t be higher than 3%); (3) you pay no extra fees and there are no hidden fees; and (4) money is deposited into your bank account same day or at least within 24 hours.
Note that these aren't the ONLY three nonprofit CRM software factors you should be investigating... click below to uncover all the hidden costs of ownership!