10 best practices for annual reports

annual report work samplesIt’s that time of the year again! Not to look forward and to plan, but to look back and report–with an eye to the future. The beginning of a new year also marks the end of a year. For many social profits, the end of the calendar year is also the end of their financial year.

Yes! It’s time to start thinking about your annual report–one of your organization’s most important communications pieces. Unfortunately, it’s one that your key audiences are likely to find lacking.

A 2008 study by the Muttart Foundation called Talking About Charities found that nearly 100 percent of Canadians surveyed believe that it is important for charities to provide information about what they do. However, Canadians gave charities a failing grade on reporting.

  • 1/3 of Canadians said they were not sure where the money they donate to charities is really going
  • Only 1/2  of Canadians think charities do an excellent or good job in providing information about the programs and services they deliver.
  • Only 3/10 say charities do an excellent or good job in providing information on how they use donations.
  • 1/2 of respondents in the report said they wanted more information about the work charities do, “even though it may require more money to be spent on communications.”

10 Best practices for annual reports

The Queen’s Centre of Governance and the Chartered Accountants of Ontario sponsor awards for the best annual reports. What follows are their recommendations for the 10 best practices in creating your annual report found in a longer document. Their best practices are in bold below.

As a communications professional, my perspective is different than that of accountants and governance experts–especially accountants! I value their recommendations but I have included my comments from a communications perspective after each of their best practices.

1. Include a strong introduction, with a table of contents, to significantly help orient the reader to the activities of the organization. An executive summary is a “must have.”

I agree that there needs to be some strong introduction or overview of the organization. I think of annual reports as a great marketing tool and you should make sure that people unfamiliar with your organization can quickly and easily get an idea about your organization and what it does.

Personally, I wouldn’t recommend a table of contents. While it can be helpful, the report it likely too long if it is a must. I think it should be a fairly easy read that encourages skimming and scanning. For the same reasons, I don’t think an executive summary is a “must have.” I’d generally recommend that the message from the board chair and/or CEO play that role and be placed somewhere near the start.

2. State clearly the organization’s mission and relate the activities back to the mission throughout the report.

Absolutely! A definite must.

3. Give a clear statement of performance objectives and targets and describe how they link to the mission.

From my perspective, an annual report can not be all things to all people. You also can’t include all the content possible. You need to make choices.

I  believe that the best reports have a theme that helps to give it a focus. When with the YMCAs of Cambridge & Kitchener-Waterloo, I also had a four year plan for annual reports. One year focused on mission, vision, values and the next three years focused on how the Y built strong kids, then how it built strong families and finally how it built strong communities. This type of plan helps to ensure that the full spectrum of what the organization does is covered.

Organizational tools such as performance objectives can definitely help give your report substance. The trick is to make sure they are presented in a way that is easily understood and digestible. But any measurements that demonstrate the impact of programs are great to include. At the Y, we worked in our outcomes measurement work as appropriate and available.

4. Disclose your organization’s risks, issues and challenges in the context of the mission.

I’m assuming that they are not looking for this to be a stand alone section. I’d never recommend that approach.

But I see the best annual reports as looking forward more than they look back even though they may use the last year as the context for doing so. Taking this approach means that you can work risks, issues and challenges into the messages and stories shared.

5. Tell the reader how your organization governs itself and how that governance structure reflects the mission of the organization.

Again rather than its own section, I’d be more subtle about how to include this information. I’d also keep it to a minimum with the option of including greater detail on your website. Having a list of your board members with their titles/employers or areas of expertise for instance can help to show how they contribute as individuals and a group to your organization’s mission.

6. Have management discuss the financial information in light of the organization’s mission, vision and values; link that discussion to present operations, risks and future plans; all should be written in a concise “discussion and analysis” section of the report.

I find this recommendation interesting. I don’t believe that I’ve ever seen it. The norm is just to present the numbers or to make them easier for lay folk to digest by making them graphs. If there is any text, it’s more often written by accountants for accountants.

I like this idea but it really needs to be in your audience’s language. I’d include it with the financials you are sharing and suggest keeping it as concise as possible.

7. Post the annual report and the audited financial statements (if not included in the annual report) on your website in an easy to find area.

I recommend posting your audited financial statements as a stand alone piece–probably as a PDF. The complete annual report should definitely be online and easy to find. My post on making the most of your annual report has some relevant tips.

8. Decide on your primary audience and write the annual report for them using plain language appropriate to that audience.

I’ve made references to this tip earlier but it bears repeating. A key consideration, especially for an annual report functioning as a marketing or fundraising tool, is that your primary audience isn’t familiar with how your organization works and the insider lingo that is used. Keep that in mind, if you offer “swimming lessons” call them “swimming lessons” and not “aquatic programs” for example.

9. Balance carefully the “too much information” approach versus “lack of content” approach to arrive at a happy medium in the annual report. Ensure that one person edits the report so that it is internally consistent both with regards to content and to writing style.

This recommendation hits on one of the trickiest and most important aspects of an annual report and the reason for my earlier comments about focus. Lack of content can also be an issue. You need to give enough meat that there is substance to your annual report but at the same time not try to say it all. Longer, specialty pieces, or your website can give a more complete picture. You’re just trying to give enough substance so people are better informed. They can be directed to where they can learn more.

A single editor is a great idea! Even better, I’d suggest having the report written by a single person (except maybe any pieces that are coming directly from the mouth of a specific person).

10. Avoid committee reports in favour of one broadbased board report that tells the organization’s story in a compelling and integrative manner. The committee reports can be posted to the website if they are considered important disclosures.

An annual report based upon a committee format is really old school. It might be ok if your target audience is internal people and primarily those that go to your annual meeting. But I see annual reports as being more of a marketing document that can showcase your organization and its work to potential board members, community partners, funders, donors, staff, etc. I also strongly believe that it should have a long shelf life so that it can be useful and interesting to someone picking it up when issued or 11 months later when it’s about to be replaced.

The website option mentioned could also be used to help an organization used to including committee reports transition from that approach.

Read my look at the 2012 top 10 tips for social profit sector annual reports.

My approach to annual reports

As you can tell, my approach as a communicator is different than the folks from Queens and CA Ontario. I too have learned some things that I can incorporate into future reports I work on. I’ll also continue to follow the recommendations based upon my feedback from a communications perspective.

It’s important to remember though that every report exists within a different context. I lead the decision-making and writing for the United Way of Cambridge and North Dumfries for its 2011 Community Report. It was the first time they had created one for use beyond the annual meeting and with more of a marketing emphasis. We all found the result to be a very good step in the desired direction.

Another way to explain my approach is to share one of my reports from the YMCA. You can find the 2008 report here.

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