Last updated:
June 3, 2024 11:00 AM
min read

What's an Annual Report and How to Write It

Guide to Annual Reports: Definition and Writing Tips

What's an Annual Report and How to Write It

After the end of the financial year, the next important step is preparing the annual report. What's an annual report? This is information about the company's past, present, and future.

In this article

An annual report summarizes the company's activities for the previous year and provides information about a company's financial condition, achievements, strategic goals, and plans for the future. Its data tells whether a company has been successful and what its problems are, and it is a source of information for stakeholders such as shareholders, customers, and partners.

The right approach to writing your annual report is of utmost importance. Nothing builds trust with stakeholders more than accuracy and clarity in the presentation of information. Before deciding on investment or cooperation, investors and potential partners want to receive information that will show an objective assessment of the condition of your company. 

Depending on the type of company, an annual report is filed with the Securities and Exchange Commission (SEC) or created for such owners and users as clients, external auditors, tax authorities and banks. The first category includes public companies, investment funds and other legal entities whose activities are regulated by federal agencies. The second is small business companies and non-profit organizations.

01 | What Types Of Information Are Included In An Annual Report?

The company must collect data from different areas of activity for the past year for the annual report. Let’s consider what types of information are included in an annual report.

  • Financial information about the company's income, expenses, profits, losses, assets, and liabilities from financial statements such as balance sheets, income statements, cash flow statements, and tax liability information.
  • Operational information about the company’s current activities -  production processes, deliveries, procurement, customer service, and personnel management. 
  • Information about the company's aims, the plans, the future projects, and the partnerships. 
  • Information on external and internal risks and potential of the company.
  • List of users such as shareholders, customers, partners, suppliers, and public authorities.
  • The trends and analytics of the industry, the market, consumer demand, and other factors are also important. 

All data are collected from various sources, including company internal accounting and reporting systems, external databases, reports of analytical agencies, and other sources of information.

02 | What is Included in a Company's Annual Report?

The structure and format of the report play an important role in how clearly and correctly the report will be understood. What are the components of an annual report?

This is the first section of the report, which includes a brief description of the company, its activities, and its purpose. It also includes an overview of the company's achievements and obstacles during the reporting period and a letter from the company’s chairman, primary owner, or CEO. This section also gives management a chance to thank shareholders and other people for their help and trust.

Business Overview

This section provides detailed information about the key aspects of the company's activities for the reporting period. It includes a description of the products, services, markets in which the company operates, and its main competitive advantages.

The financial analysis

This section analyzes the company's financial results for the reporting period. It contains the balance sheet, income statement, cash flow statement, and other financial indicators.

The strategic goals and plans for the future

This section discusses the company's strategic goals for the future and plans to achieve them. 

The final section of the report summarizes and generalizes the important points discussed in the report. The conclusion may also contain recommendations and forecasts for the future.

03 | Tips for writing a good annual Report

Annual reports come as documents either in print or electronic form. There are certain standards for reporting provided by law or recommendations from professional associations. These rules say which fonts, sizes, and styles to use for text and how to use pictures, graphs, and tables to make information clear. 

  • When choosing the language and style to write your annual report, it is important to consider the target audience. Here are some tips that you can follow to make the text of your annual report clear and attractive:
  • Determine who your audience is. Understanding her needs and expectations will help you choose the appropriate language and style. For a professional audience, it is better to use technical language and a formal style; for the general public, it is better to use simpler and more accessible language.
  • Express yourself clearly and concisely, avoiding complex terms and unnecessary details so readers can easily understand your message.
  • Choose a tone that matches the nature of your company and the report's goals. For example, you can use a formal tone for serious topics or a more informal tone for discussing accomplishments and plans.
  • Use clear and specific terms, avoiding slang and abstract concepts, to avoid misunderstandings. The text must be accessible to readers.
  • Visual design plays an important role in the report. Clear headings, punctuation, separators, and graphics are necessary. This makes the text more readable and attractive.
  • Including examples, illustrations, and graphs can help illustrate your information and make the text more attractive and understandable to readers.

By using these tips, you can make your annual report more appealing and understandable to your audience, increasing the effectiveness of your communications and the report's impact.

Report editing steps include the following: 

  • The text of the report is checked for grammatical errors, spelling errors, and punctuation errors.
  • Editors review the style and language of the text, making sure it is appropriate for the target audience and the tone is appropriate for the report.
  • It is important to check the logical sequence and coherence of ideas in the report so that it is easy for the audience to read and understand.
  • Check that all information in the report is accurate, reliable, and supported by sources.
  • Once editing is completed, the report is signed by competent persons such as the chairman of the board or managing director.

After the report is finished, it is shared with interested parties like shareholders, investors, customers, and others. This may include publishing the report on the company website, emailing it, or printing and distributing it in hard copy.

04 | Conclusion

The annual report shows how the company is doing and what plans it has for the future. This helps to understand the company's activities and goals. Following the guidelines outlined in this article will help organizations create annual reports that inform and inspire confidence, leading to long-term success.


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