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Best Practices of a Nonprofit Annual Report

Last updated:  January 21, 2021

iWave Blog   

After a successful year of fundraising, gaining new supporters, and enacting change within your community, it’s time to sit down and present your accomplishments to the public. Your annual report updates your supporters on your mission and growth over the last year, the status of your major projects, any new statistics related to your cause, and more.

This annual report is vital to the health of your nonprofit because it lets current supporters know the impact of their gifts and encourages potential donors to join your cause. A successful report will set you up for success over the next year, so you want to be very thoughtful when creating this document.

Unsure of where to start? iWave is here to help you craft this vital report and use it to your advantage.

What Is the Difference Between an Annual Report and Annual Filings?

Annual filings, also known as an Annual Information Return or Form 990, is an official financial report that nonprofits with 501(c)(3) status are required to file with the Internal Revenue Service (IRS) each year. It is a means of oversight and ensures accountability.

If a nonprofit fails to complete their annual filings, they could be penalized or lose their tax-exempt status. This mandatory form is different from an annual report, which is a voluntary document.

An annual report is a tool that a nonprofit can choose to create to reflect, record, and inform the public each year. Though voluntary, electing to put together an annual report can serve many aims and help your nonprofit follow through with its mission, while garnering more support.

Establish a Plan for Your Annual Report

As with any fundraising undertaking, the first step in drafting an annual report is to craft a firm plan. Bring together different departments in your nonprofit to ensure all the necessary information is being included and that everyone is on the same page.

To start, you’ll need to develop a clear purpose for the annual report, including a solid determination on who your target audience should be. Typically, your audience should be current supporters as well as any prospective donors, sponsors, and foundations.

The main goal of your report is to encourage future support; however, you may also want to establish a few secondary objectives. For example, do you want to attract more local attention or start a new project in the next year? You can get the ball rolling by setting up future objectives in your annual report.

With these goals in mind, some of the other strategies you may want to implement include:

• Delegating responsibilities to the appropriate team members.
• Interviewing supporters for feedback.
• Compiling financial statements and statistics.
• Collecting key data from fundraising campaigns.

Be strategic and selective in which programs and campaigns you’re highlighting to further your nonprofit’s goals. If you’ve been running multiple local campaigns that have been successful for years but want to expand your cross-country ventures, spend more time discussing successful non-local strategies.

Center your accomplishments around three to five core themes and you’ll keep your report and your audience focused on the key objective!

Meet the Requirements

In order to create the most successful annual report possible, try reading the reports of other likeminded organizations as well (if you can access them). In doing so, you can identify valuable common trends across similar nonprofits. While you want to be creative with your report to engage your audience, you also need to include the vital information all nonprofits report on, including:

5. A clear mission statement: Whittle down your key values and main purpose and you’ll have your nonprofit’s mission statement. This is probably something you already have on your website, but maybe it needs a bit of refreshing. Reevaluate your mission before releasing your annual report to ensure everyone is well aware of your current goals.
5. A list of projects: It’s important that your supporters know how you have been enacting change. Make sure to mention any new programs and then update on any existing program changes or major growth. These accomplishments should mainly encompass the past year since this document will be released annually.
5. A financial statement: At the end of the day, donors want to know how their money is being used. Be open and honest about any expenses to establish trust with your audience. It will also show how responsive your team is and how effective you have been with your programs.
5. A log of major contributions: Acknowledge the myriad ways in which success was achieved in this past year. List your biggest supporters and thank them for their contributions. This helps encourage continual support and can even inspire future donors as well. You can also dedicate part of your annual report to pointing out which campaigns or specific donors contributed to each project you choose to highlight from the year.

Your accomplishments are bound to change every year, but your underlying report structure should stay the same. No matter how your nonprofit has evolved over the last 12 months, such changes should stand upon the same firm foundation.

Focus on Donors

Your annual report is the perfect opportunity to provide your valued donors with the recognition they deserve! Doing so also creates more opportunity for prospective donors to connect with your nonprofit, which increases the likelihood of them making a contribution.

Instead of centering your report solely around the organization’s achievements, give your donors an equal share of the praise. Not only should the language of your report address your donors directly, it should also emphasize how your successes were accomplished as a direct result of your supporters.

Record statements from volunteers and donors, display images of your volunteers in action, and present your list of major donors. As you talk about the various projects that donors have supported, you can pepper in some knowledge about all the good they have done. Let your audience know how gifts were received and who specifically made the largest impacts.

To take your focus on donors a few steps further, consider including one or more deep dive interviews with some of your most impactful donors and dedicated volunteers. Though concrete statistics are a vital part of any annual report, they will be much more effective if they are backed up by compelling storytelling from the heart.

By emphasizing how vital your community and supporters are, you’re making your donors feel important—potentially leading to continued or annual support. Even the most altruistic of donors appreciate a bit of recognition from time to time!

Use Visuals to Engage Your Audience

When you hear the word “report,” you may be transported back to your school days. In other words, you’re thinking dry, academic writing and walls of text.

When it comes to your nonprofit’s annual report, however, you’re free to get as creative as you want—in fact, color and creativity is a must. Annual reports typically span 10 pages, and you want to maintain the reader’s attention throughout. Nothing grabs attention or expresses personality like vibrant visuals.

These visuals are useful in the following areas:

• In the middle of large blocks of text: Visuals break up walls of text and draw the eye in, keeping readers in the moment.
• When talking about complex data: Some data can be hard to understand, but when compiled into a graph or infographic, it becomes easier to grasp.
• To convey your cause: Match a volunteer quote to a picture of them volunteering to help put readers in their shoes.

If your report is being presented on the web, you can even experiment with interactive elements such as links and videos, which we will explore in greater depth when we discuss hard and digital copies for your annual report.

You want supporters to have an enjoyable experience and walk away with a stronger understanding of how effective your nonprofit was over the last year. Visuals can help make that happen and tend to leave a more lasting impression.

Be Honest and Transparent

In fundraising, there are little surprises around every corner. No matter how organized and well-planned your team may be, you’re sure to encounter speed bumps along the way. It’s important to understand that this is a normal part of the process and not something that needs to be hidden from your supporters.

If your report isn’t fully honest or omits data simply because it wasn’t as positive as you would like, supporters may grow wary. Instead, briefly mention any missteps you encountered, why you believe they occurred, and how you plan on preventing them from happening again in the future.

This will show donors how adaptable and transparent your organization is, which in turn will likely build more trust and enthusiasm for the work you do throughout the year.

In your report, address changes you’ll be making in the future based on new data, supporter feedback, and the lessons learned from the year’s setbacks or hurdles. By doing so, you demonstrate your organization’s receptiveness and dedication to internal improvement. There’s no need to go too in-depth with this data, but it should still be briefly addressed in your annual report.

Inspire Future Action

After reading your report, you want donors to ask themselves, “what’s next?” Since the end goal of your annual report is to garner continuing support for your cause, make sure you’re guiding readers in the right direction.

Some of the ways you can encourage readers to get involved include:

5. Volunteering
5. Participating in matching gift programs
5. Attending fundraising events
5. Joining online fundraising campaigns
6. Making a planned gift

The more opportunities and events you mention, the more likely you are to have a reader find one that fits their specific interests and level of donation capability. If you create your annual report online, be sure to clearly position the link to your donation page, so readers can easily make a contribution.

Along with this, you’ll want to make it easy and straightforward for readers to connect with your organization across a variety of platforms. This includes incorporating your homepage URL, direct contact information, the physical location of your nonprofit, social media account handles, and links to any other relevant information.

Formatting and Distribution

Once you make it a point to create an annual report each year, you’ll want to dedicate a page on your website to housing all your annual reports and related materials. To save your nonprofit time and money, it’s best to carefully pick and choose who will receive a copy of your annual report and in what format.

Since every donor, volunteer, and prospective donor is different, you’ll want to use a multi-pronged approach in sharing your annual report. Depending on your unique nonprofit’s resources, this will look different and may change to some degree from year to year.

However, it’s still important to maintain a consistent brand to help people feel more connected to your organization and its mission.

Print and Virtual

Be sure to set aside some time and possibly money for your annual report. Having a budget to work with can further help you in tailoring your distribution plan. The two main types of annual report you can create include hard copies and digital copies, each of which have a variety of options within them.

Mixing and matching different formats and distribution methods will help you reach the widest possible audience, while remaining efficient in the process.

Hard Copies

Just as it sounds, hard copies of an annual report consist of physical forms that can be dispersed through the mail, in person, or both. Hard copies of your annual report will cost the most, but there is still a range of affordable prices within this formatting option. A few of the most popular physical forms of an annual report include the following:

• Bound Books: A bound book is perhaps the most formal way to organize your annual report in print. These can range in length from a handful of pages up to around 100. There is no perfect length for a bound book, just enough to cover what you want to include in a captivating way.
• Self-Mailers: A self-mailer is a format that does not require an envelope. It is still longer form, so you can include plenty of information from your full annual report. Since there is no envelope, it may encourage more people to browse through it at home.
• Brochures: Brochures can be much smaller than a book or self-mailer, making them a great way to give people the highlights of your annual report with some added detail. These too can be mailed or set out on a table for people to take in at their leisure.
• Postcards: The most economical print option, postcards may be the best way to reach your remaining lower-level donors with a hard copy of your annual report featuring only the biggest highlights from the year.

Whichever print method you choose to take, if you do, be sure to tailor each one to match and optimize the physical space it provides.

For example, while incorporating visual aids in any format of your annual report will enhance engagement and readability, it may be best to fill a postcard with statistics and visuals, so you can make the most of its limited real estate.

Additionally, you don’t have to provide every recipient of your printed annual report with the same format. In fact, doing just the opposite will help you maximize your resources. One way to save on printing costs is by reserving bound book copies of your annual report for your major donors, grant givers, and loyal supporters.

Digital Copies

Your annual report home page is an ideal spot to house and link all your online resources, which again can be multi-faceted and work in conjunction with any print materials you elect to make. A few formats you can use to develop digital copies of your annual report include:

• PDFs: One way to think about PDF is like the digital version of a bound book. These can be as long or short as you’d like or require them to be and should also include plenty of visuals throughout. It’s easy to incorporate things like videos and links, too, so readers can continue learning more about your nonprofit in different ways.
• Videos: Show-and-tell remains one of the most effective types of communication and connection and videos are just that! Videos can include people speaking directly to the camera, a voice over, visuals, writing, and much more. If you decide to make a video, take care to consider things like lighting, perspective, sound quality, and the script.
• Other Interactive Media: The sky is the limit when it comes to building a creative, engaging annual report. On your annual report homepage, you might consider setting up slides that visitors on your site can browse through. Furthermore, you may want to use interactive visuals that allow readers to explore the parts of your annual report that interest them most in greater depth.

Choosing to make a digital copy or copies of your annual report will most likely save you money. They are easily accessible and reach the eyes and ears of a wide audience very quickly. Having a digital copy of your annual report online also enables people to find it and read at a future date.

When it comes down to it, you know your organization and its donors best. Lean on this knowledge when deciding how to publish and who to distribute your annual report to each year. The more eyes on it, the better!

Wealth Screenings and Annual Reports: How Are They Linked?

You may be wondering how iWave and our next-generation platform can help with crafting your annual report. If a major donor has made an appearance on a likeminded organization’s annual reports, you might consider it a key philanthropic indicator. You can then reach out to these potential donors with your detailed report in hand.

Check out our Wealth Screening Guide

Using high-quality donor datasets from related organizations can help guide you along a more efficient and fruitful fundraising path both now and moving forward.

At iWave, we specialize in finding these Hidden Gems, so you can focus your time and energy on building connections with prospective donors and engaging current donors. Each of our clients is also given personalized onboarding and unlimited support to ensure they can take full advantage of our nonprofit fundraising intelligence and make the most of every ask.

Contact us today for a free demo or fundraising assessment to find out more of the ways we can get your annual report in the right hands!