A Guide for Writing Annual Reports

The following tutorial is a merger of the tutorials written by teams 44 and 48.

If you plan to own or work for a successful company, learning about what goes into the making of an annual report could be a beneficial thing to learn. An annual report is a report a company puts together at the end of the year documenting their finances, accomplishments, fundraising, customer profiles and photos. These reports are sent to the companies donors and or shareholders so that they may be informed about what their money is contributing to. Annual reports may also be seen by future shareholders and donors so it is important for companies to put thought into them and highlight their successes in order to attract new investors. The following tutorial will explain key ways to craft a successful annual report.

What is an annual report?

It’s been a long year and there may be a lot of explaining that needs to be done. Maybe the shoe is on the other foot and everyone is due for a large pat on the back. Regardless of where the performance of a company may sit on the scale, if it’s a publicly owned, then the Securities and Exchange Commission (SEC) requires that company to produce an annual report. An annual report is a publication by public corporations, provided to their shareholders (often as a “Letter to Shareholders”), that details physical and fiscal operations for the entire year. Organized into detailed sections, annual reports are accentuated with charts and graphs in support of KPIs (Key Performance Indicators) which detail company standings versus the budgeted action plan for the year.

The skeleton of an annual report

At the most basic level, an annual report is an explanation for the yearly profit and loss for a company. Depending on the areas of operation for a company, and KPIs, annual reports can contain sections such as:

The business statement of the company
Utilization rates (in marketing)
Examination of OEEs (in manufacturing)
Cycle times of workflow and invoicing (in accounting)
Project management and overhead
Market standing and volatility
Sales forecasts
Action plans for shorted metrics
Accomplishments
Market value and company stock prices

Metrics are measured versus the yearly action plan and presented through charts and graphs detailing current company standings as well as explanations for where those standings are at in relation to the measurable. If a company is doing well in a category, it can explain the things that led it to excel in that area or, conversely, why it fell short along with planned action items to get the metric on the right path.

Who reads these things anyway?

Current and prospective investors, employees, creditors, analysts, and any other interested party will analyze a company using its annual report. (Kenton, 2019) So, basically anyone that has or wants to have anything to do with said business will be looking at the currently available annual report. Maybe they are looking for potential profits or high market performance, maybe they are looking at ethical practices and environmental sustainability of the company, either way, a companies’ annual report is posted publicly in the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) database as 10-k forms.

Ooooh, shiny!

Annual reports often include many visual metrics for KPIs. These can be in the form of bar charts and graphs, pie charts, line graphs, photos, and other media. A Gantt chart can be an effective way to show progress on long-term deliverables. Charts on safety metrics such as OSHA recordables can detail a company’s support of safety in the workplace.

Where is this bus headed?

Annual reports often reference a longer-term examination of the industry, usually detailing three to five years of planning and execution toward a single large goal. Goals can be quite varied depending on the supporting measurable. Measurables such as hitting milestones on profits, garnering a certain percentage of market share, or sustainability and eco-friendliness initiatives, detail progress toward long term goals usually supported by action and ideas statements that explain to the reader how those goals will be met within the timeline.

Four quarters

Annual reports, in addition to meeting SEC filing requirements, are the best way to get a snapshot of how a company is performing in their field. If you are investing money or looking for gainful employment and career path you should examine any prospective companies’ latest annual reports, doing so should give you a good indication of expectations for that company and help in your decisions concerning that company in your future endeavors.

Focus On Accomplishments:

Donors expect the business to raise money, but fundraising should not be celebrated on the same level as the mission-related results. They would rather know what the company did with the money than how that money was raised. It is best to put the fundraising activities in the financial section of the report rather than front and center. Donors want to know what your accomplishments are, but more exclusively want to focus on the “whys” rather than “hows”. The important questions to be answered include: “What were the results?”, “Why did the company spend the time and money the way it did ?”, “What difference will it make?”, and items of that nature. Different achievements should be noted as well, not just financial achievements. These include: research advances, market share gains, honors awarded to the company and employees, etc. This section should also include elements such as sales increases and new machinery that increases productivity and profitability. The main reason to include a focus on accomplishments is to show the shareholders and stakeholders that they made good investments and to make them feel as though they are contributing to the success of the company or organization. Some companies have requirements for their annual reports that include things like the highlights of programs they have, awards the company has won, records broke such as sales or shrink and remodels. Documenting the companies accomplishments and achievements in the fiscal year are vital. Many entities look through annual reports to make investment decisions, form opinions, and can make or break a company. Aside from documenting the sales and accounting portions of a companies records, the achievements are the basis of a company. Focusing on the big accomplishments as well as smaller victories can be included in the report and are encouraged.

Include Personal Profiles:

Within an annual report, including a section with personal profiles will help bring your company’s accomplishments to life. This tactic is used for a few
reasons. As we know, annual reports are made to broadcast and document a company’s accomplishments during the past work year. This being said, a
company’s donors and shareholders read these annual reports to see if their contributions are being put to good use and are justifiable. Not only is this section
used for current contributors, but in essence, they also help secure future donors and shareholders as well. Now that you understand how crucial this section is within an annual report, it’s time to learn how to execute this tactic. To start off, General summaries of your work will only put your contributors to sleep, the goal is to play with your contributor’s emotions. Contributors love real stories about real people, its human nature, even the most fact-driven donors and shareholders respond well to a combination of facts and stories. This can only be
accomplished if the two forms of communication reinforce each other. First, start off by explaining what you have accomplished overall. Second, follow the
accomplishments with an individual personal profile to humanize your work. This can be simply done by including data that tells a heartfelt story. For example, identify how your work helped a particular individual or how it made a positive difference backed by data. The data should justify the point you’re are making with the story, combining quantitative and qualitative storytelling is very powerful.

Explain Finances:

One component that goes into an annual business report is explaining the finances. The business wants to explain their finances in a way so the public can easily understand them. Much of the public and people who contribute to the business will not know how to read a typical financial report. To help them better understand, the report should include a paragraph that explains the table in easy language. Another way to help donors better understand the finances has put them into an infographic that is easier to understand and comprehend. This makes the business simplify their finance numbers. An infographic will grab the reader’s attention and will be easier to read. When the numbers are just simply typed out into text, most readers will skim over the numbers and not understand them. Within the report, using the infographic and simplified paragraphs, the business wants to explain what numbers they are including. Also, they want to address where the money is coming from while also explaining what the money is being spent on. The report in the finances section can also include any fundraising strategies the business used to raise money. The people associated with the company and the public also would like to be informed if there were any cost saving strategies implied throughout the year. Any relating information that may seem important to any donor of the company should be included. The finances are an important part of the company and potentially if people invest in the business or not. Explaining finances in an annual report is an important aspect.

Conclusion:

In conclusion, annual reports are much more important than one may have thought before reading this tutorial. This tutorial covered three main topics to highlight when building an annual report:
focus on accomplishments, include personal profiles and, explain finances. These topics are very important to discuss so investors feel confident that their money is being put to good use and is making a difference