A nonprofit annual report can be seen as a necessary year-end box to check, but it can actually be a key donor retention and marketing tool. If you’re going to go to the time and trouble to create one, why not make it more of the latter? As a 501(3)(C), you may be required to submit an annual report with the IRS known at the Form 990—most are. But the IRS isn’t the only audience that cares what you did last year.
Your donors, constituents and volunteers are curious too. And your annual report is an important communication tool for both retention and conversion.
So, what exactly is a nonprofit annual report?
Basically, it’s a summary of what’s happened in an organization over the past year. Financials are a part of it, yes, but the best reports go beyond how much money was raised and address things that supporters will really care about, like what their money accomplished, who it helped and what’s next for the organization.
Here are some elements you might want to include in your next annual report, in addition to your financial statement (including revenue and expenses):
- Your organization’s mission statement. This is a good reminder for your constituents as well as a brief summary of who you are and what you do for those who are not yet familiar.
- What you accomplished last year. Did you start any key projects or initiatives? Did you meet any goals or finish an ongoing project? Who did you help and how? This is your place to highlight your successes.
- Gratitude for anyone who’s supported your organization. Include your donors, for sure, but don’t forget volunteers, board members, businesses you partnered with, sponsors—anyone who contributed to your accomplishments throughout the year.
- Personal anecdotes, success stories, profile and testimonials. Be sure to embrace the power of storytelling and feature the people impacted by your organization.
The important thing to remember is that your annual report is more than just numbers. It allows you to show that you’re honest and trustworthy. It gives you a place to be transparent about both the highs and the lows of your year. And it’s an important reminder to your most faithful constituents of why they should continue to support your organization and cause.
Want an example? Check out a digital nonprofit annual report we created for The St. Baldrick’s Foundation.
What is the purpose of a nonprofit annual report?
Before you start planning and writing it, this is an important question to ask. Like I mentioned at the beginning, some orgs simply see an annual report as a year-end must-do. I would argue, however, that it can fit in well with your overall organizational and marketing strategy. Purposes beyond just checking that box include:
- “We want to show our financial information in a way that’s easy to see and understand.” Big tables full of numbers are a big snoozefest for most people, and often hard to understand at a glance. Use infographics, graphs and other visual elements to show how much money you took in, how you spent it and what your current financial situation is.
- “We want our most loyal supporters to buy in to our big-picture plans.” Go ahead and dream—this is the perfect place to inspire your donors to commit for the long haul. Maybe you accomplished something last year that’s just a piece of a larger puzzle. Talk about how it fits into your overall plans and what you see for the future. Once you’ve laid out a vision, talk about next steps: Offer opportunities for people to make a donation, attend an event, volunteer or get involved in some way.
- “We want to celebrate our successes and also highlight our challenges.” It’s important to illustrate how you’ve made an impact for sure. If you helped Susan celebrate five years of sobriety or helped John secure affordable daycare, you should say so. But don’t be afraid to also mention work that you’re not able to do yet, like provide enough tutors or offer enough support groups. Mentioning that you have 75 people on your waiting list illustrates a need.
- “We want our supporters to know how much they mean to us.” This is always a good goal—in fact, you can’t express gratitude and appreciation enough for the people who keep your nonprofit up and running. Be sure to use a part of your annual report to say thank you, thank you and thank you again.
How to write a nonprofit annual report.
Once you’ve defined what purpose(s) you want your annual report to serve, it’s time to strategize and write. There are a variety of ways you can put your report together, but no matter what direction you decide to go, here are six standard principles you’ll want to apply.
1. Tell a story.
You can talk in a general sense about how many people your nonprofit helped last year, and that’s a great thing to include—but it’s also very effective to hone in on an individual and share someone’s personal story. Talk about specific people and share real-life scenarios. A good story paints a picture, and in order to do this effectively, it helps to be specific. Instead of, “We helped this man get on his feet,” try, “We got Jim the clothes he needed for his first job interview, and now he’s gainfully employed.” This will put a face to your nonprofit and humanize the individuals you serve. Donors don’t support organizations; they support the people and things that organizations serve.
2. Create an emotional impact.
Use words that emotionally connect your audience to your mission. Stay away from industry jargon and select language that appeals to people’s hearts and emotions. Did you empower someone? Create a new path? Help someone turn their life around? Or save a life? A good test: When you write the story, does it make you feel emotional? That’s a good indication it will do the same for your audience.
3. Be transparent.
If you’ve had a rough year (and in 2020, who hasn’t?), it can feel really tempting to gloss over the challenges or sugarcoat it—but honesty really is the best policy, especially in your nonprofit annual report. If things didn’t go quite as planned (again, 2020) or you didn’t accomplish something you set out to achieve, but upfront about. Did you make a mistake? Briefly mention that—just follow it up with how you plan to correct it. Donors are more interested in supporting an organization that’s upfront and honest about its challenges than one that tries to hide its shortcomings, but gets found out later. Paint a clear picture of money in, money out. Show how the money was used. Own anything that didn’t quite work. And explain how you’re moving forward.
4. Keep it concise.
It’s a lot of work to read—in fact, thanks for hanging with me this far! You have a whole year to cover in an annual report, so think “succinct” when you’re putting it together. There may be parts where you can paint with broad brush strokes, and other areas where more detail is needed, but overall, aim for clear and concise.
5. Keep it donor-focused.
Yes, your annual report is a place for you to talk about accomplishments and successes throughout the year, but the way that you do that can make all the difference. Look at these two sentences:
“Thanks to your generous support, we were able to provide housing for 25 women and children who needed a safe place to live.”
“Your donations helped provide housing for 25 women and children who needed a safe place to live—without your generous support, they might still be living in an abusive or dangerous situation.”
See how one is more focused on what the organization did and the other is more about what the donor did? A donor-focused approach to your writing makes your supporters feel empowered and necessary to your cause. And supporters who feel needed tend to stick more than those who don’t.
6. Use visuals.
Big blocks of text are overwhelming—please don’t ask people to take on pages and pages of black and white. Instead, break up your data and information with infographics, images of supporters and volunteers and other interesting graphics. Visuals make it so much easier to scan your report and find the numbers, facts and information the reader is most interested in. Plus, it can make everything so much more compelling, especially if you’re able to include engaging pictures of both the people in your organization and those you’ve helped.
How to get started on my annual report.
One thing we don’t want you to do: feel overwhelmed. Nonprofit annual reports can be a beast of a project to tackle. We’d love to support you in any way we can.
Do you want to take this project on yourself, or would it alleviate stress to get some help? At Firespring, we can design, print and mail your organization’s annual report. Want more goodies? Download our 6 Steps to an Engaging Nonprofit Annual Report checklist to get you moving forward.