Annual Finance Reports

Annual finance reports analyze a company's performance over the preceding year and discuss its plans for the upcoming year. These reports are produced most often by publicly held companies for their stockholders and by non-profit organizations for their donors.

Target Audience

An annual finance report should be written for a specific audience. The slick, marketing-oriented report sent to stockholders will be quite different from a report written for internal use. The numbers will be the same but the narrative portions of the report can emphasize important aspects of the company. Common audiences include:

• Stockholders and potential investors are the most common audience. They want to know how the company will benefit their investment portfolios. Medium and large businesses often spend a great deal of money producing slick and informative publications to bolster investor confidence.
• Employees are interested in their employer's financial stability. The report can educate them on the big picture, telling them about products and services the company offers that they may not have known about. It can also be an important tool for raising employee morale by emphasizing that their innovation and teamwork keeps the company financially sound.
• Customers are interested in stable companies that will provide products and services for years to come, but they may have less interest in the actual numbers than any other target audience. They are more concerned how the company's services are going to change or improve. Customers are more focused on a company's core values than in the past, and this can be an opportunity to emphasize a company's positive image.
• Suppliers have their own businesses to run and want to see you are going to be a reliable customer into the future. By discussing your company's commitment to quality, this sends a subtle message to suppliers that you expect the same from them. It also shows that you value your contribution to your company's success.
• The general public will always be important to your organization, even if they do not do business with you. They want to see your company has a positive effect on the community both economically and in other ways such as charitable contributions and environmental sensitivity.
• The US Securities and Exchange Commission may be your most important audience. They require publicly traded companies to file Form 10-K every year, which is a more detailed annual finance report than is typical for your other audiences.

Components Of Annual Finance Reports

The contents of finance report may vary, depending on the company and the target audience, but there are sections that are commonly featured.

• Company Description outlines the industry or industries the business is involved in.
• Letter from the President may go by other names such as Letter to Shareholders. It discusses the company's past performance and future outlook. This is more conversational and upbeat than the MD&A below.
• Financial Statements detail several aspects of a company's finances including historical performance over the last several years and current financial position.
• Management's Discussion and Analysis (MD&A) provides more detail to the financial statements. This section is much dryer and more detailed than the president's letter.
• Audit Report confirms the information in the financial statements section complies with generally accepted accounting principles.
• Company's Managers lists members of management along with brief biographies highlighting their business experience.
• Investor Information provides details such as current share price and the date of the next annual meeting.

Annual finance reports are more than just collections of dry data of interest only to accountants. Use them to their full potential as marketing and educational tools to give your company the most benefit.

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