(Reuters) – For a small business owner, Greg O’Neill takes a big company approach to charitable giving. His gourmet food shops are besieged with appeals from a range of causes, so he requires solicitors to apply through a portal on his company’s website. A staff member culls requests.

“It’s like drinking out of a fire hose,” says O’Neill, co-owner of Pastoral Artisan Cheese, Bread & Wine, whose three Chicago stores are located in upscale neighborhoods. Having a retail food business, he says, “places a bull’s-eye on your head.”

Large and small businesses are inundated with requests for charitable donations. Although giving freebies or cash can shave precious dollars off already razor-thin margins, many companies find the dollars they give get repaid in publicity and customer loyalty. It helps to be strategic in

choosing target organizations and to pay attention to bookkeeping and tax benefits, say small business owners and advisers.

As always, however, “you have to watch your own finances first,” says Ruth Goran, a certified public accountant who works with small companies in the Chicago area.

Corporate giving accounted for 5 percent of the $298.4 billion Americans donated last year, according to Giving USA Foundation, which does an annual report on philanthropy. But with many businesses needing to conserve cash, a selective approach such as O’Neill’s makes sense.

Pastoral, with less than $10 million in annual gross revenue, gave roughly $20,000 in 2011, much of it cash, to a variety of causes, primarily those focused on providing healthy food and maintaining sustainable agriculture.

“Generally we feel we make a bigger difference close to home,” says O’Neill, who directs much of the effort to local charitable groups registered as 501c(3) tax-exempt organizations, which allows him to write off the donations for a tax credit.

He also chooses groups that feature Pastoral’s goods at events, which raises the profile of his business. O’Neill can’t quantify the impact on sales he’s gotten from the efforts but says the goodwill ties directly to his business mission.

A SMART STRATEGY

Small businesses with tax structures that pass through to the owners’ or partners’ personal income tax returns don’t actually take business deductions for their charitable gifts; contributions are tallied on the owners’ own tax returns as itemized deductions. But owners should consider making donations on behalf of their businesses anyway, says Goran.

“It is good business strategy,” she says. Customers often choose to buy from socially oriented companies, and those gifts can boost a firm’s reputation in the community.

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