In the Red Last FY? What to Put in Your Annual Report
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?
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I completely agree that you need to be open and honest with your supporters about all aspects of your organization–even the fact that you’re running a deficit (particularly if, as you suggest, you explain why).
What struck me about Lane’s question, though, was that–if I understood correctly–her organization had never produced an annual report before this year. So, I’m guessing the desire to produce an annual report stems from what appears to be a 10-year anniversary, and it sounds as if her organization is looking for a way to mark and celebrate that.
The trouble comes in, though, with the fact that annual reports include financial information–and I agree that financials that show a deficit might undercut a celebratory message.
Ultimately it comes down to figuring out what you’re trying to achieve through your communications and THEN figuring out the right vehicle for it. If TAILs wants to celebrate their 10-year anniversary, they should–and should determine what’s the best event / brochure / letter, etc. to do that (but don’t call it an annual report if it doesn’t include financials). If TAILS *also* wants to establish a transparent relationship with their donors around their financial status, then they should figure out the best vehicle for that (a separate report, a cover letter to the anniversary piece, a quarterly “financial bulletin,” etc.).
Thanks so much for sharing this. Sometimes our intstinct is to hide the bad news, but let’s face it, a savvy donor can easily find the information themselves. We are facing this very issue right now, and I think there are some positive aspects (% of donation that goes to services, new leadership, etc.) that we can play up. A mixed donor update is better than no donor update.