Non-profit eCommerce & Online Donation Strategy

Four-star charity rating is a designation given to the top 10% of charities by the independent charity evaluator, Charity Navigator. While there are other organizations that evaluate nonprofit organizations, Charity Navigator has one of the larger databases having evaluated nearly 200,000 U.S.-based nonprofits. Historically, Charity Navigator used two rating systems: the Star and the Encompass system. Encompass was different from the Star Rating System because it allowed nonprofits to present a more comprehensive view of their organization beyond their finances. Charity Navigator announced that on November 2, 2022, the Star and Encompass rating systems will be unified, creating a singular rating system.

To qualify for a four-star rating, a charity must have a score of at least 80 out of 100 points on Charity Navigator’s rating system, the Encompass Rating System™.  This system provides a comprehensive analysis of charity performance across four key domains, which Charity Navigator calls “beacons”:

• Impact and results
• Accountability and finance
• Leadership and adaptability
• Culture and community

In our current economic climate, it is more important than ever to attract more donors, increase contributions, and stretch gifts further. Four-star charity rating can aid nonprofit organizations seeking to do this in a number of ways.

According to an article in The Nonprofit Times, it is estimated that charities rated from 3- to the highest 4-star rating can see a 6% rise in contributions, with larger effects seen in smaller charities. In addition to the increase of contributions, the rating system can provide an objective measure of the organization’s performance, as well as give potential donors or grant makers an indication of how the nonprofit is managed and how well it meets the needs of its target population. Additionally, having a four-star rating can help organizations stand out, as donors and grant makers may be more likely to support those with higher ratings. Finally, having a four-star rating can help the organization gain more visibility, as it will be featured on the charity rating websites, allowing it to be seen by more potential donors. 

E-commerce’s role in preparing for four-star charity submissions

Two key aspects of the four-star rating submission include a financial audit and demonstrating accountability and transparency. To evaluate financial health, Charity Navigator looks at factors such as an organization’s total revenue and expenses - its cash reserve and its fundraising efficiency. To evaluate accountability and transparency, Charity Navigator examines an organization’s governance practices, as well as its program and overhead costs. 

With limited time and the need to use funds responsibly, nonprofits are increasingly turning to e-commerce for help in identifying cost savings and simplifying their financial reconciliation process so they can focus on their mission. E-commerce sites can help simplify the audit process by providing a secure and comprehensive view of all financial transactions. This can help reduce the time and effort required to prepare for an audit through:  

• Leveraging e-commerce platforms to maintain detailed and accurate records: Nonprofit organizations can use e-commerce platforms to store, track, and manage all financial transactions. This allows organizations to easily access detailed records of all transactions, which can be used to support financial audits.
• Automating financial processes: E-commerce platforms can automate routine financial processes, such as invoicing, payments, and inventory management. Automating these tasks reduces the risk of errors and ensures that all transactions are recorded accurately. 
• Taking advantage of data analytics tools: E-commerce platforms typically offer tools that allow organizations to analyze their financial data. These tools can help identify any discrepancies that may need to be addressed during an audit. 
• Monitoring financial trends: E-commerce platforms can also provide insights into financial trends, such as changes in spending habits or revenue sources. This information can be used to help prepare for an audit and identify potential areas of improvement.

Using these capabilities can allow nonprofits the ability to spend less time on the process and more time on their mission.

Improving fundraising efficiency through online donations

E-commerce sites and online donation solutions are playing a larger role in the gifting process making it quicker, easier, and more secure for donors. Donors no longer need to mail in a paper check or physically visit a donation site. Instead, they can donate online with just a few clicks, often using their credit cards, debit cards, or PayPal accounts. Plus, E-commerce sites have built-in security measures to ensure that donors’ personal and financial information is kept safe and secure. E-commerce sites also allow donors to track their donations and receive automated receipts for their records. Nonprofits should look at these donation websites as a potential way to reduce their costs and benefit from:

• Increased reach and efficiency
• Records of past donors and ensure consistent communication
• Data and analytics to better understand donor behavior, track performance, and measure KPIs such as donations per donor and cost per donation to assess fundraising performance

Chloe Smallwood, Director of Marketing at Chattanooga Zoo, implemented an online donation solution with the help of Amazon Business, sharing that nonprofits should “Be open to the idea and explore whether Donation Driver can positively impact the work your organization is already doing. In a time where it seems like many organizations are looking to reduce costs, investing in new functionalities may not be a priority though it could help your organization achieve greater efficiencies in the long-run.” 

Ultimately, a four-star rating can help nonprofits to succeed in their mission and increase their impact in the community. While organizations are able to receive four-star charity ratings without these tools, E-commerce sites and online donation solutions will provide nonprofits with benefits that can simplify the process while improving their day-to-day efficiency and identifying opportunities to save.

Read more about how Amazon Business is serving nonprofit organizations.