How to Create an Effective Annual Report for the Not for Profit Sector

Nonprofit financial reports can increase fund-raising efforts.

Unlike public, for-profit companies, nonprofit companies are not required to publish an annual report, however, it is fast becoming a trend of nonprofits to publish one just as well. The annual report is meant to be a full disclosure financial document that provides current and future stakeholders with information about company operations. The goal of the annual report for nonprofits is to provide information about organizational operations to potential donors and foundations.

Instructions

1. Create a sources and uses statement. This shows people what you spent cash on in the current year. For instance, if you received a $1,000 donation from a donor, and used it to purchase inventory, the source of funds is $1,000 and the use of funds is inventory. It is not necessary to list who the funds came from.

2. Write a summary of the sources and uses statement. If sources minus uses is negative, explain why and vice versa. Discuss how the funds received helped the organization to achieve its goals and what percentage of the funds are being spent on organizational objectives. You may also want to include a listing of management salaries here.

3. Provide a brief overview of the goals and objectives of the organization. Explain how you plan to achieve those goals and how much funding you need in the coming year to achieve those goals. Unlike the annual report for a for-profit organization, which is as much a legal document as it is a financial one, the annual report for a nonprofit is meant to inform current donors and win over additional donors.

4. Use graphs and bar charts to help explain your performance. Visuals help to drive your points home and add a degree of professionalism to your organization.

5. Decide on a format. While publishing your annual report on full-color, high-gloss paper may send the wrong message to potential donors, a cheaply printed annual report isn't attractive. Find a happy medium.

References

• Fundraising123: Top Five Questions about Nonprofit Annual Reports