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7 Best Practices For Creating Your Nonprofit Annual Report

An annual report is a standard practice and quite often a legal requirement for nonprofit organizations.

But an annual report is so much more than just a financial report. It tells the story of your mission, highlights your achievements, thanks to your donors and builds trust and transparency with your supporters.  It’s a great opportunity to showcase your organization!

Writing an annual report may seem like a daunting task, but it does not have to be. With the right plan in place, it can be an inspiring activity to undertake. Don’t worry about being modest – this is the time to celebrate your successes and promote your organization through all the wonderful things you have achieved in the year.

To help you get started, we’ve broken down the creation of an annual report into some easy to follow steps that will give you a solid plan and enable you to create your best annual report yet. 

1. Create A Plan For Your Nonprofit Annual Report

It sounds incredibly obvious but ‘annual’ means that you need to create this report once a year – so try to plan ahead, especially if you know it needs to be written at the same time every year.

Creating an outline for your report is the first step. Annual reports all shared a common outline, so take a look at similar organizations to see what they include in theirs. Do your research and see what information organizations include.

You should be able to find an annual report on every organization’s website. Here’s one from Charity:water to get you started.

nonprofit-annual-report-example-charitywater

The good thing is that the outline of your annual report should be consistent from year to year. So if you have a good format in place you will be able to reuse it. Once everyone understands what information they need to provide they too can plan to prepare it in advance.

If you rely on other teams or staff members for information about financials, programs or beneficiaries, let them know well in advance what your requirements are, so that you all have enough time to compile that information. It can also help them ensure that they collect information effectively throughout the year so that reporting is easier at the end of the year.

Best practices for your nonprofit annual report:

  • Put together a committee of staff who will be required to provide information for the annual report. Give staff tasks for gathering content so that the responsibility is shared and plan to meet at regular intervals to ensure everyone is on track.
  • Put the annual report on your communications calendar, and treat it as an organization-wide activity.
  • Make a plan to send a copy of your annual report to your donors, especially your mid and high-value donors. This could be combined with end of year receipt and/or sent via email – think of using it as a donor retention activity.
  • Plan to publish your annual report on your website – in fact, this should be a default and you should store every annual report there. This way anyone can access information about your organization whenever they need and it increases your trust and transparency for new and existing donors.

2. Ensure Your Essential Reporting Information Is Included

At the very least, your annual report should include the below essential information:

  • A statement from your CEO and/or chairman of your board
  • Information about your organization including your mission, where you work, your goals and your progress towards achieving your mission
  • Information about how your organization is governed
  • A financial report about your annual income, expenditure and funding sources
  • Information about where your funding was spent, including program information and the outcomes of those programs. 
  • Beneficiary stories, or stories about who/what benefited from your organization’s programs – include lots of images.

During your planning process make sure all of these sections are addressed in your report and people know who is responsible for gathering the corresponding information.

Once you have your information, and your plan, you can decide on things like layout and format, number of pages and design. 

3. Report On Your Finances

Donors want to understand where their money has gone, and what it has helped to achieve. Transparent financial information builds trust and helps prospective donors and partners see that you can manage your funds effectively. 

Neverthirst and World Help both have sections on their website where they report on their annual financial statements. They have included previous financial statements as well as new ones, which helps to build credibility and trust

You should include all of your financials in this report, in particular, a breakdown of how much information was spend on key areas such as programs, administration, and fundraising

Best practices for your nonprofit’s financial annual reporting:

  • Include information about any independent audits that your organization has undergone.
  • Include information that demonstrates the impact fundraising has on your organization. For example, we can justify fundraising expenses by quantifying the return on investment towards programs –  “for every $1 spent in fundraising, we were able to restore sight to 3 people”
  • Use graphs, visuals or infographics to condense and display complicated financial information – your readers might not be able to read and understand tables of numbers
  • State any information regarding how you use your finances, in particular your commitment to transparency and financial responsibility. World Help has done a great job of this on their website.
nonprofit-annual-report-example-financials
Include as much information as you can about your income and your expenditure by program and/or region. The Fred Hollows Foundation summaries this information and provides links to further information if required

4. Make It Personal And Recognize Your Donor’s Contributions In Your Annual Report

An annual report is a time to bond with your donors and to recognize their contributions and achievements. While it is about your organization it is also about them, and how they have helped create change.

Include information about any major donors and corporate partners, as well as take every chance to thank all your staff, volunteers and donors for their contributions – both financial and non-financial. In Amigos International’s annual report, they have dedicated a page to calling out and thanking all of their corporations and foundations, as well as donors who have donated more than $1k. 

Best practices for acknowledging donors in your nonprofit annual report:

  • Include some donor testimonials or stories, and/or a section where you showcase donor engagements
  • Thank and call out the volunteers who contribute to your organization. 
  • Highlight events or peer to peer fundraisers that were ran by donors in the year
  • Call out donors or partners who have been giving for a long time and celebrate their involvement
  • Profile and thank any major funders such as institutions and major donors 
  • Use inclusive language such as “together we,” “you have helped” and “your donations have” instead of just “our organization.” 
nonprofit-annual-report-example-worldhelp
World Help opens their annual report with “You are a rescuer” and the language is immediately all about the donor and their support

5. Show Progress Towards Your Goals and Missions

Your donors want to know that your organization is making a difference so there should be a section of your report that celebrates your wins and your progress towards achieving your goals.

For example, if your goal is to end homelessness, you should demonstrate how your programs and projects have contributed to ending homelessness – in facts and figures.

These should all be centered on the mission of your organization, and your reason for existing. Highlighting your mission, and your progress towards achieving it will help to inspire your donors and reaffirm your commitment to your cause.

Best practices for goal reporting:

  • Put your mission statement front and center on the report
  • Highlight the best wins of the year
  • Highlight completed projects and their outcomes, as well as ongoing projects that will help achieve your goals
  • Talk about any changes to your mission or your projects, if the needs of your organization have changed
  • Use numbers, facts and figures that sum up your achievements and provide evidence about your progress
nonprofit-annual-report-example-GLAAD
GLAAD’s annual report is colourful and engaging, see how they have displayed their highlights throughout the year, in both summaries and further information about specific projects and events
nonprofit-annual-report-example-fred-hallows-foundation
Essential information such as global results, once collected, can be put into an infographic like the above from The Fred Hollows Foundation

6. Demonstrate Impact Through Visuals & Stories  

There is a lot of information to convey, so use visuals such as infographics and pictures, so that your report is more engaging to your readers.

Stories are also a way for your supporters to connect with your beneficiaries, and to understand the real impact of your work on their lives. It’s important to have a mix of facts and figures alongside personal stories so that you are demonstrating both the rational and emotional impacts of your work.

Best practices for incorporating visuals into your nonprofit’s annual report:

  • Use images of your beneficiaries and your programs in action
  • Use quotes and interviews with beneficiaries 
  • Use brand colors and an engaging layout so that there are not too many pages of long text
  • Transform data into infographics, stats or other easy to understand information
  • Use QR codes to link off to a video if you want to take people online
  • Leave any boring, administrative information at the door – think about what will be of most interest to your donor
  • Try not to use too much jargon, such as programs outcomes or acronyms, that your audience might not understand
nonprofit-annual-report-example-girls-who-code
Girls Who Code host their annual report on their website, and have an easy to read visual of how many people they reached, in every state.
nonprofit-annual-report-example-she-jumps
She Jumps summarizes all of the key information including quick wins, outcomes and financials into an easy to read infographic.

7. Inspire Supporters To Take More Action

Finally, your annual report should inspire supporters to continue giving to you, as well as provide them with other opportunities for engagement.

Whilst it’s important to celebrate your wins, you should also talk about the road ahead. Highlight why your cause is still needed, what your plan is for the next 12 months and what problems still need to be addressed. 

Best practices for inspiring your donors to take action with your annual report:

  • Have contact information inside the report where people can reach specific staff members or feel that they have someone they can contact with questions and more information
  • Include information about events, your digital channels, community fundraisers, volunteering, and peer-to-peer fundraising opportunities where your supporters can have more interactions with your organization.
  • You may even host an event to present your annual report, where you invite all of your supporters to present and celebrate your achievements.
  • Talk about your plan for the next 12 months, the problems at hand and why their support is still needed 

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