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The latest tech advice for how to manage your nonprofit organization

5 Tips for Building an Effective Nonprofit Annual Report

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Nonprofit annual reports are not a requirement of the IRS, or any government agency.

However, keeping supporters in the dark about your organization is frowned upon. Donors want to know how far their money is going, and what effect their donation has had.

Not only is your annual report a sign of your transparency and goodwill, but it also gives you the opportunity to talk up your success.

Your report needs to effectively communicate how donations have been used and the impact they’ve had, and also convince donors to continue supporting you. I’ve compiled five tips for building your report for the next fiscal year, resources for implementing those tips, and examples from other annual reports.

Luckily, most of the heavy legwork is already done, as all of the information you will need is stored in your membership management software and fund accounting software.

1. Focus on your mission-related accomplishments

Your annual report is an opportunity to show all of the progress you’ve made as an organization. Think of this as a free opportunity to exercise your bragging rights.

The reason I say “accomplishments” is because your annual report is not a place for describing your activities. That is what update emails and board reports are for. Instead you want to focus on what has been accomplished through those activities that you perform throughout the year.

Questions to answer in this section:

  • What impact have you made on the cause you are fighting for (or against)?
  • How many people have you reached?
  • Did you meet your fundraising goals?
  • Has your work inspired others to join your cause? How?
  • What is your return on investment?

The Arthritis Foundation does this effectively in their report:

Their impact is clearly communicated through the use of infographics, short quotes, and brief explanations.

The more donors hear about your wins, the more likely they are to continue their contributions to your organization. They want to know that their money is going to a good cause and is being used effectively.

2. Cover, but don’t beat the financials to death

There’s nothing I would rather read than page after page of exciting and in-depth financial analysis from some of my favorite nonprofits. Okay, not really.

While I would like to know whether the organizations I donate to are in healthy financial standing, I have very little interest in reading long financial reports.

In-depth financial reports are better saved for board meetings. Instead, you should cover the topic as clearly and as briefly as possible in your nonprofit annual report. This section should consist of a narrative description about the financial health of your organization, including information such as fundraising levels and amounts spent.

Be sure to include pie charts and graphs to make these narratives easier for your donors to grasp. The Boys and Girls Club of Cleveland simplifies their financials down to two simple charts in their report, which communicates their situation without going into excruciating detail:

These charts are easy to understand and take less than twenty seconds to read and understand.

3. Your report needs more visuals

I’ve just touched on the need for visuals while reporting on the financials of your organization, but the truth is, your entire nonprofit annual report needs visuals to break up the text.

This report should convey the excitement you and your colleagues have for what you do. The nonprofits I’ve worked for in the past included pictures of local chapters hosting events and recruiting new members—since the goal of these organizations is to recruit and educate college students about current political issues, each of these images communicated a win for the nonprofit.

These images provide visual context to the text in your report, and bring your successes to life. There are plenty of visual aids to choose from including:

  • Charts, graphs, and infographics
  • Pictures of staff and volunteers on the job
  • Pictures of happy beneficiaries of your work
  • Quotes from supporters or beneficiaries
  • Cartoon depictions of your work

Finally, images help avoid TL;DR (too long; didn’t read) syndrome. Walls of text are intimidating and boring. I’ve composed a short list of free designing tools for graphics on the Capterra event blog—these tools are just as useful for creating visuals for your nonprofit annual reports.

4. Always thank your donors

I can’t emphasize this point enough. Your donors want to be thanked for their help. They want to feel appreciated for their contributions.

One way to recognize your donors is to include a thank-you letter from the executive director, acknowledging the donors for all that they’ve done to make the organization’s mission a success. Girls Who Code used this approach when thanking donors in their own report.

You can also recognize donors by creating a thank-you page that lists major donors starting at a specific donation threshold. This threshold will vary based on the size of your organization and size of donations, since you should try and keep this section to a small number of pages.

The Dallas Children’s Advocacy Center went with this approach in their report and dedicated two pages to donors who gave $5,000 or more to the organization :

However you decide to thank your supporters, make sure your gratitude is made clear to them.

5. Include a call to action

Finally, it’s time to get some sort of net benefit for your organization out of these nonprofit annual reports you send out each year. You’ve laid out all of your progress for the year and how your donors have helped make it happen, but the work isn’t over.

Tell your readers exactly what you need to keep these results coming in for the next year, whether that is more donations, more volunteers, or some other form of support. If your report is digital, include links in the report to donation and volunteer sign-up forms.

As for printed reports, including donation and volunteer forms in the report creates a higher likelihood of continued support. Remember, you only get what you ask for.

More resources for nonprofits

Are there other tips you have for building nonprofit annual reports? Are there any other resources you would recommend to our readers? Leave a comment below!

The Capterra nonprofit technology blog is full of resource lists, tools, and guides to better guide your organization to success. Here are a few other tip lists and guides you should check out:

Looking for Nonprofit software? Check out Capterra's list of the best Nonprofit software solutions.

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About the Author

Nick Morpus

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Nick Morpus is a Content Writer for Capterra, a free resource that matches buyers and sellers of business software. He has a background in politics, economics, and journalism, which he dedicates his off-time to contributing his thoughts to other political sites. In his free-time he enjoys reading, drawing, photography, playing guitar, writing, and cooking.

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