Yes! Although nonprofits aren’t legally required to publish annual reports, it is an excellent idea to do so. Because a well-presented annual report can achieve a great deal, you can use it to:
- Demonstrate your accomplishments
- Build relationships
- Appeal to prospective donors
- Give thanks and recognize important people
- Describe your financial picture
- Demonstrate accountability
- Provide financial transparency
- Show the impact on your mission or the community you are serving
- Share your fundraising goals
- Assist you in your marketing campaigns
- Accompany your grant applications, media kits, etc.
- Demonstrate the value of membership and donations
- Show that your organization is legitimate and professional
- Inform people of your nonprofit’s mission, structure, approach, and success
Publishing an annual report is a great opportunity to share a complete picture of your nonprofit. Since there is no magic formula, you can tailor it to your organization. For example, nonprofits with a fundraising focus may emphasize aspects to generate additional donors. On the other hand, membership organizations may target their existing members.
If you have never created an annual report, this series will help guide you so you’ll know where to start. Your annual report can be as simple as you need, so it’s doable for even the tightest budgets or least experienced volunteers.
How To Create An Annual Report
First, establish your objectives so you know where to focus your efforts. What do you seek to accomplish with an annual report? Because every nonprofit will answer a little differently, how you answer will help guide you in determining what information to include. Financial information will be vital, so get your books up to speed with Aplos’ easy-to-use accounting software designed for nonprofits.
Identify Your Target Audience
Along with identifying your key objectives, you’ll also want to identify your target audience since a variety of readers may access your annual report. These audiences may include:
- Donors or members
- Prospective donors or members
- Grant issuers
Most people will be interested in similar information, such as the financial picture, how revenue is used, and your mission and accomplishments. However, identifying your target audience will enable you to present the information in a manner that resonates with that audience.
For example, donors, prospective donors, sponsors, and grant makers will want to see a healthy financial picture. Therefore, they will look for transparent, professional, and easily understandable reporting from your nonprofit. Strong accountability builds trust, which leads to more donations.
Next in this series, we will cover the key information your nonprofit annual report should include. Then we will offer tips on how to present a strong annual report.
This article refers to general annual reports, typically not legally required of nonprofits. This article does not apply to legal reporting requirements, such as annual filings to the IRS via Form 990, annual financial reports to Secretaries of State, or requirements unique to your organization. Consult your attorney or tax professional for additional information.[Ghostwritten] by Dawn Spivey 02/18/2013