One of the best strategies for reporting your success to your donors and stakeholders is through an Annual Report. You may or may not currently produce one, but if your non-profit organization is like most of those we serve, you probably ask these questions every year:
· Is an annual report required of our non-profit?
· If not, why should we do one?
· Who is our audience?
· What should be included?
· How long (or brief) should it be?
· Is there one format that is better than others?
· Should it be printed or digitally produced?
· What are the best practices to consider when preparing our annual report?
Do we have to produce an annual report?
Your ministry is not required to produce an annual report, but there are many persuasive reasons to create one. However, all non-profits with 501c3 tax-exempt status must file Form 990 or the Annual Information Return with the IRS. An annual report is an optional informational report that non-profits produce to serve their OWN purposes. Here are some benefits to consider:
Inspire your audience about your mission.
One non-profit executive’s perspective is, “The annual report is a comic book. They look at the pictures and glance at the words.” If you only have a glance, make sure your photos include captions that communicate your impact, your stories are brief but compelling, and your financials are clear and convincing.
Show the results and impact of your organization.
Donors are your target audience. Show the tangible results of your work to prove your return on their investment (ROI). Share the spiritual impact to authenticate your spiritual return on investment (SROI). What were you able to accomplish, with their help, over the past 12 months? Do not be afraid to “toot your horn.” Donors give because they love your organization. They keep giving and give more because their dollars are making a difference. Some organizations have wisely renamed their annual report to “Impact Report.”
Build trust through financial accountability.
Being transparent with how you present your numbers will help build trust. Your audience can review your 990 Report on their own to check your financials. It’s much better to tell them first in your narrative with your charts and stories. There are many ways to share this information. Make it simple and clear. They need to see that you are a good steward of their donations.
Show appreciation for your current donors.
In the past, annual reports would generally show a list of donors over the past 12 months. At least those who have given at significant or notable levels. Of the 15 annual reports on my desk right now, only one of them includes this list. And that one is an insert sheet that can be added or removed based on the audience. That is not to say the other reports fail to show appreciation and give thanks. It is just more general and less specific to individuals. Hopefully, you are engaging with your major donors enough that you need not depend on your annual report to say thanks.
What are some “best practices” for writing an Annual Report?
· Create a plan for your non-profit annual report. Have a strategy. Define your purpose and your audience. Include great photos. Compile financial information and key metrics. Interview key supporters or service recipients for stories. Plan enough time to do it right.
· Focus your annual report on the good your non-profit accomplished. Write from your donors’ perspective. What did their donations and volunteer support accomplish? Put them first. Allow them to “own” the results.
· Use visuals in your annual report to keep readers engaged. Remember the “comic book” analogy? Use more visuals and less words. “Info-graphics” help. Transform complex data into easy-to-understand information.
· Be honest about your non-profit’s progress. You want to show success, but that may not be possible 100% of the time on every project. Feel free to mention some of the challenges faced over the past year; show how you are being proactive in solving problems. Transparency builds trust.
· Inspire supporters to act. Your annual report should include a call to action for your readers. Your report will share success and accomplishments. Some will be asking, “What’s next?” Make sure you include the answer to that question and how they can be a part of it. Volunteerism, corporate matching programs, upcoming fundraising events can be shared.
Should your annual report be a printed hard copy mailed or hand delivered to your stakeholders? Or should it be produced digitally and available for downloading as a PDF via an email or on your website? The answer is, “YES!” A combination of hard copy and digital annual report versions will reach the widest audience.
Here are three great samples: Haiti Teen Challenge, Immanuel Schools, and Lakeland Christian Schools.
Your annual report can be an effective fundraising tool as you inform, explain, narrate, and persuade your ministry partners to increase their impact through your ministry.
About the Author: Kent Vanderwood, Vice 
President – Kent offers clients over 35 years of non-profit experience including teaching, administrative, consulting, and directorships. Through his work as Development Director for The Potter’s House, Gospel Communications International, and Mel Trotter Ministries, Kent brings a wealth of experience in fundraising and development. He currently serves as a board member for the West Michigan chapter of the Association of Fundraising Professionals (AFP). His passion for seeing Christian stewardship principles applied in a systematic way helps the non-profit organization or ministry be successful in fulfilling its mission.
