Is Poor Impact Reporting Preventing Your Charity from Securing Funds? 

Unlike a trustee’s annual report (TAR) or a Statement of Recommended Practice (SORP) report, charities aren’t mandated to produce impact reports. However, recent research from the Institute of Chartered Accountants of Scotland (ICAS) breaks down why impact reports are essential communication channels between charities and funders. 

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What are the fundamentals of impact reporting? 

Typically created in donor management systems, impact reporting should show how a charity has used a fund, from the value of that fund to the reach of the fund within the community. These reports help to build donor trust and charitable relationships, while showing a charity’s commitment to transparency. 

According to ICAS, impact reporting is “the long-term difference charitable activities have on the people and causes they seek to help.” [1] 

To fully understand what types of information an impact report must contain, here’s a quick breakdown of the different funding types: 

1. Grants and trusts: Funds awarded by trusts, foundations, or lottery bodies. Often highly sought-after grants that cover general costs, rent, and salaries. 
2. Public fundraising and donations: Direct donations from the public, managed through digital platforms such as JustGiving, Crowdfunder, or via debit payments. This also includes well-known initiatives, like Gift Aid, or legacy donations left in wills. 
3. Earned income and trading: Typically earned through a charity’s trading arm to sell goods or services, with the profits gifted to the charity. Examples of this include community cafes, training programs, or renting out buildings. 
4. Corporate partnerships: Commercial businesses often donate a percentage of their earnings to charities, or sponsor specific events to engage with the local community. 
5. Social investment: Instead of direct donations, this involves a company providing a repayable loan to help a charity scale, buy property, or develop a new trading arm, for example. 

The majority of charities will operate with a mix of all these funding streams, which is why impact reporting can be so complex for many not-for-profit finance teams.  

Why can different opinions affect the data in an impact report? 

Unlike corporate companies, stakeholders who gather qualitative impact-related information aren’t usually involved in the operational running of the charity. Instead, these stakeholders may be front-line, engaging with those directly affected by the charity’s activities. 

As a result, this creates disparity between the way that frontline and finance staff collect and present data, making it difficult to demonstrate true value and community change. Without clear guidelines around what constitutes impact, finance teams may struggle to clearly define how each fund, department, and initiative has affected the community. 

This extends into the wider sector too, depending on the resources available to each charity. According to ICAS, this presents some problems when cross-examining the impact of the whole sector. “Some charities are able to measure impact based on outcomes, while others may recognise impact on the basis of relieving immediate needs only.” Despite the different measurement styles, those who engaged in impact reporting clearly described it as a journey where they were able to develop their impact measurements over time. [1] 

Practical steps to improving your impact report 

To help your charity improve its impact reporting, try to include both qualitative and quantitative data that showcases impact. As a starting point, here are four simple ways you can begin measuring impact before year-end reporting arrives. [2] 

1. Gather service-user testimonials

Successful impact reports often contain first-person testimonials from those directly affected by the charity’s activities. This is a form of qualitative data that can appear as a narrative element in a call-out box to support numerical data.  

2. Create case studies or anecdotes

Like testimonials, case studies or anecdotes support quantitative data. These are longer narratives that include several testimonials and capture the challenges a service user faced before engaging with the charity and their progress after engagement. 

3. Collect survey results

Surveys are one of the most efficient ways a charity can collect quantifiable data to sit in their impact report. These surveys can be sent directly to respondents, ensuring good governance, or to those in charge of the service users’ care, like mentors or support workers. 

4. Calculate ESG data consistently

Environmental, social, and governance (ESG) is integral to good impact reports and can be mapped directly from financial data. This quantifiable data allows charities to evaluate their impact on the environment and carbon emissions, social responsibilities, and ethical conduct. 

Impact reporting focuses on storytelling 

When prepping your data for impact reporting, keep in mind that this report is all about storytelling. Building a narrative that showcases how your charity has positively and directly impacted the community is the most compelling way to secure future funds from foundations, the general public, or even corporate sponsors.  

Focus on readability, with eye-catching numerical statistics that are supported by first-person narratives. Reach out to your peers if you’re unsure how to begin, as they may have some advice to share with you from lessons learned. 

Book your free demo today to learn how Xledger’s software helps charities create compelling impact reports that incorporate environmental, social, and governance data with narrative storytelling.