The Giving Audit: Is Your Donation An Expense or an Investment?

Imagine you’re sitting down with your year-end financial statements. As you prep your business tax return, you hit the 'charitable' line item and see a list that spans pages. It’s a patchwork of $50 donations, $1,000 sponsorships, and various other gifts spread thin throughout the year. While each gift supported a worthy cause, the 'scattershot' nature of these expenses reveals a common problem: your generosity is active, but it isn't strategic.

Each one of these helped a charity achieve some level of service and help to their community. But did they help your business grow? Did it move an audience to remember your business and brand in a way that brought you new customers?

A giving audit is the tool that finds the nexus between your community impact and your corporate goals. It’s about auditing the past to ensure your future giving makes better sense for your business.

This article will provide practical insights on how to start the process and design your audit.

A giving audit is the necessary blueprint to make future donations that drive business growth

Gathering the Data

Look back at your list of donations and sponsorship expenses. Which ones were cash gifts? Which instances involved providing an in-kind donation of your product or service? What sponsorships did you buy into that were oriented to community causes?

For each one of these, ask the “why?” How did this expense come about and why did you do it on behalf of your business? Try to organize them as follows:

• Was this a personal favor to a friend, acquaintance or customer?

• Was this reactive to a mailer you received?

• Was this a thoughtful business decision that was done purely because it helped your brand?

As you review your list, you may discover some of your instances may be a blend of the above. You may have reacted to the ask of a customer whom you had a good rapport with, but that the decision also made good strategic sense for your business. In instances like that, split the cost between the two. We’ll dive deeper in how to analyze them better in the next step.

The Three Bucket Framework

Organize your audit into three buckets:

• The Heritage Bucket: This category includes business donations driven by personal ties, such as your college, your church, or your spouse’s favorite charity. These gifts may honor your family legacy but rarely align with business growth or brand strategy. By identifying these, you can clearly separate personal sentiment from corporate intent. The goal is to move these  gifts to your personal checkbook, freeing up business resources for strategic investments driven by good business sense.

• Community Tax Bucket: These are reactive responses to the numerous recurring requests from your local community. Requests to sponsor a local Little League team, buy tickets for the community foundation gala, or provide in-kind support to help a school event may be relatively small donations, but the frequency of “asks” may be nearly endless. Acting upon them may generate goodwill but are likely not strategic.

• The Strategic Anchor Bucket: These are gifts that align directly with your industry, your customer base, or employee values. They were done with a thoughtful business impact in mind.

As you go through the giving audit, you may discover that nearly 80% of your business giving falls into the first two buckets. You are not alone; most businesses that go through a giving audit discover the same results. Your goal will be to shift more of your dollars into the third.

Pruning for Growth

Some practical steps to help you direct your giving into the bucket that matters most:

-Finding the Nexus: Identify one to three organizations were larger, more specific gifts of money, product, and time make the best sense for your business to generate a relevant impact.

-Measurement: What specific value are you looking to generate from this giving? Growth in a new market, more growth from an existing client base, etc.? By knowing what goal you hope to achieve will provide you a better guide in giving strategically and how to measure it.

-The Power of “No”: Be comfortable in saying “no” to requests that are not connected to your business success. You are not being unkind; you are being a better steward of business resources that are not unlimited. Feel free to give personally to a cause; you can still make an impact but not rely on business resources to do it.

Turning Your Audit into an Asset

A giving audit will turn an expense listed on your business P&L into an investment made to drive future business growth. At Generosity Nexus, we have the wisdom to help you engage in a giving audit that that can make both your business and personal giving better.

Don’t hesitate to schedule an appointment to learn more about how we can help you.