Why your 501c3 needs an annual report
Does the term “annual report” make you cringe? Yawn? Feel overcome by a sense of dread?
You might picture a boring 20-page printout full of charts that just sits on a shelf.
Why would you spend time or money creating some document no one’s going to read?
Or maybe you think it’s a luxury you just can’t afford to focus on right now. You’ll get around to it some day, when you don’t have so much on your plate.
Often, nonprofits that are still small or growing don’t see the value in creating an annual report.
But without one, you’re missing out on a crucial marketing document that helps your organization showcase its expertise and accomplishments, demonstrate respect and transparency toward donors, command more credibility, and fundraise more effectively.
Why is an annual report important for your 501c3?
It acknowledges and shows gratitude for your donors. Donors like to see that their contributions matter and that they’re helping you reach your mission. Your annual report is an opportunity to formally acknowledge and thank them in a public-facing way.
It demonstrates that you’re responsible. It shows that you took the time to step back and reflect on your work and that you prioritize communicating transparently with donors.
It builds your credibility. We tend to view businesses and organizations as more credible, trustworthy, and effective if they can demonstrate results and speak about their work in a clear, compelling way in written materials.
It enhances your fundraising efforts & helps you raise more money. Some funders and grant applications may ask for an annual impact report; even if it’s optional, including it can help you stand out. It can also serve as an introductory document to those who wish to understand your work better. Think of it like a marketing tool that you can continue to use again and again for 12 months (until you write your next one!)
Basically, an annual report helps answer questions like:
What concrete impact is this organization making? What, specifically, has it achieved?
What concrete impact is this organization making? What, specifically, has it achieved?
Does this organization value and respect its donors?
Is this organization responsible and credible?
Who else supports this organization?
What should you include in your annual report?
Determine your angle. Reflect on the past year and decide on a general theme or sentiment that captures your work. What sort of challenges or opportunities did you face? What kinds of things “defined” your year? What new trends did you notice, what changes did you make, or what new priorities or insights did you have? Specifically, what made last year unique? This is the main story arc that can shape the rest of your report and help you determine what specific information to include.
Include a letter from your organization's leadership. Reflect on those themes from above and be sure to acknowledge and thank the people who made a difference last year.
Choose up to three accomplishments from the past year. Did you open a new location, expand a program, enroll more participants? Maybe it was a tough year and you just kept the doors open. That’s still a worthy accomplishment. What happened last year that you’re proud of? Try to limit this to no more than three things.
Show your numbers. How many people did you reach/serve, who were they (you can include general demographics or specific stories if that’s appropriate), what did you help them do, what progress did they make? Individual case studies, client testimonials, and quotes can be powerful here, but if you’re short on time, focus on total numbers.
Show financial transparency. How much money did your organization raise last year and from what sources? How did you spend this money?
Acknowledge donors and partners. Name and thank those that gave (including individuals, foundations, sponsors, and other contributors).
Optional: A brief overview of your programs, mission, and values. This is particularly helpful if you want to use your report as a general marketing document that reaches people who might not be familiar with your work already.
An effective annual report doesn’t need to be long or complicated – in fact, to be truly effective, it shouldn’t be too long or complicated. You want people to actually read it.
A well-written annual report is three things, primarily:
Concise. The length of your report will vary based on factors like your organization’s size, the visuals you wish to include, number and type of donors you have, and what kind of story you want to tell. But a shorter, concise report is better than a long-winded, unfocused report.
Direct. Remember your angle and focus your efforts here. Your report doesn’t need to be exhaustive – it needs to tell a story. Avoid filling your report with information that isn’t essential to your audience (primarily, your donors).
Visually appealing. You don’t need complex graphics or professional videos, but your report should be clean and easy on the eyes. Keep it simple and avoid unnecessary graphics, icons, and other visuals that cause clutter. Use no more than two (maybe three) fonts, and include enough white space on each page.
