Annual reports play a vital role within any company, no matter its size. They're important for summarising your business's key accomplishments and goals, providing an overview of the company’s financial progress over the last year, and outlining future plans.
Annual reports are a significant responsibility of the finance or accounting teams within a business, and they form one of the most important documents for management and other key stakeholders. In this guide, you’ll not only learn what an annual report is, but you’ll also learn how to write an annual report, what it should contain, and more.
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What is an Annual Report?
An annual report, also known as an annual statement or financial statement, is a detailed document that provides information about the financial wellbeing of a company. Annual reports are used to inform shareholders and potential investors about the financial health of the organisation, and are also used by managers to assess their company's performance.
For current investors, an annual report can help them decide whether they want to continue investing in the business going forward. For business owners, the report provides insight into how well things have gone that year compared with previous years' performances. Therefore, they also provide valuable insight into where improvements might be needed going forward.
Annual reports are different from quarterly earnings statements or other financial reports that companies provide their shareholders with on a regular basis (like month-end reports). Annual reports typically cover more ground than just one quarter's worth of data, and they often include graphics in order to make the information easier for readers to digest.
Who Creates Financial Annual Reports?
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An annual report may be created by either an accounting team within the organisation or outsourced to an auditing firm that specialises in this type of work.
Companies typically have accounting teams that work on their books year-round, so it's likely that this group will also be responsible for creating a company's financial statements, such as balance sheets, income statements, and cash flow statements.
If working with an external auditor to prepare the annual report, then they will create it instead of a company’s internal accounting staff members.
What Should be Included in an Annual Report?
The purpose of an annual report is to provide investors, shareholders, and other stakeholders with an update on how a company has performed during the year. It should also include information about its strategy going forward.
Therefore, an annual report must provide a snapshot of the company’s performance over the past year, including things like its financial statements and consolidated statements. It should also provide an update on the company’s business strategy, as well as discuss any major changes that have occurred within the industry or company itself.
How to Write an Annual Report?
The cover page is the first thing people see when they open an annual report. It's important to include your company name and logo, along with its address and contact information. You should also include the fiscal year of the report for reference.
Like all important documents, an annual report should also include an introduction. This introduction doesn’t have to be long or detailed but should cover information such as a mission statement that outlines what the company does, how it does it, and why it does it.
The first major section of your annual report should be a letter from the CEO to shareholders. This is an opportunity for them to introduce themselves and reflect on the past 12 months, while also explaining what they hope to accomplish over the next year.
The second section should include a brief description of the business and industry and how it has changed over the past year. This is also a good place to discuss any significant changes in business strategy or objectives, as well as provide an update on new products or services you’re offering.
The third section should contain relevant financial statements, including a:
Balance sheet, which lists all assets, liabilities, and shareholder equity at a specific point in time; this is usually at the end of each fiscal year.
Income statement, which shows revenues and expenses, as well as net income (or loss) for the year.
Statement of cash flows, which shows how much cash came into or went out of the business over time. It can help business owners see how much cash they have on hand and whether or not the business is operating profitably.
It's also important that the report summarises how each figure has changed from last year's numbers. Additionally, those creating the report should explain any unusual circumstances that affected the results during this reporting period and discuss future plans for improving performance going forward.
Finally, businesses should also include information about their leadership team within their annual report. This is a good opportunity to introduce the readers to the heads of each department and what they do.
Once you familiarise yourself with how to write an annual report, the process becomes much easier over time.
How Can ExpenseIn Help with Your Annual Reporting?
ExpenseIn is a cloud-based expense management software that keeps all of your company’s expense information in a single, secure, and easily accessible location. This information is vital to a company’s annual reporting – particularly for the income statement and statement of cash flows – so having it on-hand when needed is recommended.
ExpenseIn also has a real-time reporting feature, which offers up-to-date information regarding a company’s expenditure. This means that any decision made will be based on current data and trends, which is invaluable when writing an annual report
