One our All-Access Pass holders, Lane Phalen, a board member and PR committee chair for a local humane society called TAILS, recently submitted this question about what you say in an annual report when you are running a deficit:
“TAILS was founded ten years ago and we haven’t done an annual report at all yet. Because we were in the red last year, I had a huge argument with other board members when I said I wanted to do an annual report. They said to do an annual report now would make us look like a sinking ship and people wouldn’t donate. I felt by letting people know that we needed money, it would raise contributions. We have had incredible accomplishments during the past ten years, which is what I wanted to highlight. Can I do an annual report without putting finances in it or down-play them? ”
Here’s what I told Lane:
You have to be honest, but just because you are in the red doesn’t mean you are a sinking ship. There are PLENTY of ways to put a positive spin on it and highlight all of your good work to motivate more donations. It’s all about the attitude in your messaging. Explain why you were in the red (helped more animals than you really could afford to given that donations are down because of the recession, but need is up for the same reasons — or whatever the case may be). Then explain what you are doing to rectify the situation (What changes in decisionmaking have you made? What concrete plans have you made to raise more money or reduce costs?). If you remain upbeat and focused on the results of the organization, and deal honestly with any problems, including red ink, your supporters will respect that and understand.
In my opinion, you are much more likely to be viewed as a sinking ship if you DON’T communicate with your supporters about your work. Hmmm . . . what are those people hiding?
Writing an annual report for the first time? Check out our How to Write a Nonprofit Annual Report on-demand course. It includes our e-book and workbook that will help you write a full-length report, as well as a recording of the one-hour webinar where I explain how to create a great annual report in just four pages. Get the details.
