This period of the year is a period of reflection and looking back for many people and especially for nonprofits. Especially for those that run year-end donation campaigns, as looking back can be a powerful part of such campaigns. Sharing past impact can help mobilize your supporters to provide more support to your work. Have you ever considered that your annual report can do that, too? Maybe you think your annual report is just another obligation. I disagree! Here is why you want to create an annual report.
A legal obligation
For many nonprofits the main reason for creating an annual report is a legal obligation to create this. Usually there is a government agency that requires them to submit this before a certain deadline. Or to publish it before a certain date, as is the case in the Netherlands.
This obligation is usually tied to a specific status that the organization has (and aspires to keep).
It is important to be aware of the due dates and requirements that apply and to understand these. So that you can build your report accordingly.
A voluntary quality standard
Your nonprofit can also have an obligation resulting from a voluntary association with a quality standard. For instance, if a nonprofit is able to use a certain quality mark it can help create trust with donors. And the organization managing the quality mark can require the publication of an annual report with certain specific information. (In addition to likely some other requirements).
It is important to be aware of the specific conditions and requirements that apply. Similar as above, it is crucial to make sure you understand what is required (and why) so that you can be sure to comply.
No obligation at all
It is of course also possible that your nonprofit does not need to produce an annual report for any kind of external reason. Maybe the organization is small and does not yet meet the threshold criteria for reporting that apply in your context. Or maybe there is no quality mark your organization can join (yet).
Nevertheless, you might want to create a report.
In fact, I wholeheartedly encourage you to make an annual report, even if there is no external pressure to do so.
A powerful accountability tool…
An annual report is a powerful tool for accountability. In it, you can transparently share what your organization has done the past year. What impact you created. And how the community you serve has benefited from this impact. You can tell stories about how your work changed lives. You can draw the reader into your work and make them feel how important your work is…
And a powerful marketing tool …
If feels what your organization’s work has meant for the community, your report suddenly becomes a powerful marketing tool, too! Because that is a first step in mobilizing your reader to support you in the new year. It creates a powerful vision of what their donation or grant can help achieve. And if that is something dear to their heart, they may become interested in supporting you.
But only IF they also trust you.
They need to feel that you use the resources you mobilized last year well. That you used them effectively and efficiently.
That will give them more confidence that you will use their donation or grant well, too.
Annual financial statement
Therefore, the annual financial statement is an important part of your annual report. It should tell the same stories as the words, quotes and pictures – in numbers. And it should show the same dedication to transparency and effectiveness as your text. And of course, it should corroborate the story you paint about your needs for the next year.
Obviously, your annual financial statement (or annual accounts) needs to meet certain requirements, based on the law or best practice in your context and sector.
But don’t let these technical requirements fool you in thinking that this is a separate report. To be a powerful marketing tool, in addition to the other reasons why you might need it, your report needs a transparent, clear and simple financial statement. Only then can your report create enthusiasm mixed with trust and only then you will have a chance of mobilizing (potential) donors with your report.
My key tips
- Once you have collected the key data for your annual report, decide on the key message you want your report to convey regarding the past year and the coming year.
- Make sure you understand the financial statement, even if you outsource creating it (which is necessary as it is totally something you can create yourself – if you want to).
- Ensure that the story of the numbers, the words and the visuals is consistent.
Want to know more and ask questions?
If you want to discuss this more – jump into the Facebook group and get input from a wide range of peers and from myself!
Here is how you can join my free Facebook group
You can join my free Facebook group how to become a professional and resilient nonprofit with Suzanne Bakker here. This group is a safe space for open exchange and discussion on potentially sensitive topics like boards, nonprofit management, fundraising, etc.