We are posting a pledge this month that is payable over 5 years. We posted the pledge at full value, let's say $1,000. Accounting needs to discount this pledge to represent the current value of that money over 5 years. Therefore, let's say the current value is $900. At this point, our general ledger in FE will be out of balance with RE (by the discount amount).

Does anyone know how to recond a discount on a pledge without affecting the pledge balance? We need the pledge balance to remain at $1,000 because that is the amount to come in (and the amount in a/r). However, accounting is only recording $900 in revenue, so we would like our reports discounted to match this figure.

Thanks much!

Becky

Hi Becky,

 Discounting of pledges is really an accounting function to accurately capture the current value of future payments, since "money today is always worth more than money tomorrow". However, it is fair to say you have received $1,000 in revenue. My suggestion is to have the accounting folks add an account called "Discount on Pledges". It can sit in the revenue section of the chart of accounts, and in your example the balance would be negative. When the pledge revenue account and the discount account are viewed together it properly shows $900, and the pledge revenue account can be used to reconcile to Raiser's Edge since it will have a balance of $1,000 in your example.

Raiser's Edge intentionally does not handle discounts on pledges as it is an accounting function and technically does not reduce the revenue you can book from a pledge - it offsets revenue to more accurately reflect the value of that pledge from an accounting standpoint.

Thanks,

Jeff Sobers

Jeff,

I completely agree.  We view this function as similar to the expense associated with credit card processing.  It's an accounting function and doesn't reflect the amount paid or promised by the donor on his or her record.  I sometimes have to remind our corporate accountant that RE is not accounting software!

Leslie

Hi Jeff. Thank you for your response. It is helpful to know that RE does not handle discounts on pledges so we can quit trying to find out how to make that happen.

From the accounting standpoint though, the revenue can only be booked at the present value. The receivable is booked at full value and a "discount receivable' account contains the difference between actual donor payment and the present value of that money. That discount will get amortized over the life of the pledge so that it is zero when the receivable becomes zero.

I understand RE is not an accounting software, so it makes sense that this cannot be captured in RE. I appreciate you taking time to explain that.

 Have a great week!

Becky

We are not integrating FE with RE for pledges. We use an excel spreadsheet to track individual pledge amounts, apply a discount factor, then book a JE to a control account (not using detail in FE) for pledges/discount/revenue. Is there an easier way to get FE to calculate the discount without using Excel if we were to bring over the detail?