Can Your Nonprofit Organization Work With a Debt Collection Agency?

Nonprofits and for-profit organizations differ in many ways. Despite these distinctions though, there is at least one thing in common between the two types of companies. This is that they both have to raise money to keep everything functioning. People often believe that selling goods or charging for services can endanger their non-profit status. That is not true. At Southwest Recovery Services in Dallas, TX, our team of experienced debt collection agents understands how important it can be to settle past due balances as quickly as possible.

Some non-profit organizations have courses that charge fees, or membership programs. Others might sell products or services. There are several non-profit organizations that only rely on grants and donations. All of these situations can cause non-profits to make money. Is it possible for a nonprofit to secure the services of a debt collection company? The short answer to the question is, yes. Hiring a debt collection agency is not something that will jeopardize the tax status of a nonprofit organization. However, nonprofits do have certain problems and concerns that will need to be addressed.

Can You Make Collection Attempts on a Donor That Has Not Paid?

There are two types of pledges that people will typically make on a non-profit basis. The most common type of promise is to donate a specified amount of money. Although it can be frustrating to have donors not keep this promise, this type of pledge is not legally binding in most situations. In this case, it is best to ask board members or other supporters who know the potential donors to add a little social pressure. As in almost all cases, attempting to talk about this problem via social media is a terrible idea. This can open you to legal consequences and damage your reputation.

However, if something is given in return for the promise, the donor is legally obliged to uphold their side of the exchange. The concept of “something” can take many forms including a table at a gala, names in a program, naming rights to buildings or other types of goods. If someone accepts something similar but does not pay off their promised pledge amount, you should consult with a debt collection agency. Nonprofits must pay even more attention to their reputation than most for-profit groups. Therefore, it is a good idea to send late payments to the collection agency. As trained negotiators, we can resolve situations faster and easier than your own efforts.

What if Someone is Behind on Membership or Tuition Payments?

First, it is very important for you to fully understand your state’s tax laws in terms of charging fees for classes or services. Some countries require non-profit organizations to offer a variety of free or subsidized services to maintain their exemption status.

 Even though membership and tuition agreements are legally binding, it might be more difficult for your reputation to send someone who doesn’t pay their balance owed to collections. If you offer seasonal membership, supporters may feel that you are mistakenly handling some people for full payment and others not. If you choose to follow up on a student or member, a debt collection agency might be the best choice because we can protect your reputation during the process.

How Can You Deal with a Grantor?

Grants are usually delivered with signed agreements and conditions. These agreements are legally binding contracts and must be examined carefully. It is also important to review your grant agreement and see if there is any specific language regarding nonpayment. With some agreements, you may have to relinquish your rights to pursue collections if you receive the grant. If this is not the case and you have fulfilled the grant requirements and have not yet received the promised funds, you should consult a lawyer or collection agency.

Ask Southwest Recovery Services in Dallas, Texas for Support

If you’re confused about the capabilities and limitations of your organization in terms of debt collection actions, then the first thing you should do is reach out to a professional debt collection company like ours. With years of experience working with clients in multiple states across a variety of industries, we’re always ready to give you the advice and support you need to settle past due balances successfully. Don’t hesitate to contact us right away to learn more.