(March 2006) posted on Thu Mar 16, 2006
Reviewing the past year in-depth is an exercise in company ownership and management.
By Marty McGhie
Let's get into the nuts and
bolts of what your annual
report might look like. To
make it simple, you can segment
your annual report
into the following five general sections:
- Letter to shareholders: gives the president, CEO, or chairman
of the board an opportunity to write a formal statement
about the company's performance this past year. In this case,
you may be writing the letter to yourself as the "shareholder,"
but that doesn't matter; write the letter as if you are reporting to
a group of shareholders or investors. Be honest in your written
assessment of both the negative and the positive experiences.
Share the vision of your overall corporate plans and how you'll
improve on your weaknesses and perpetuate your strengths.
- Financial summary: provides a narrative of the financial
results of the business. Discuss specifics about your revenues
and expenses. Write about areas where the company succeeded
in gaining revenues or cutting expenses. Identify the
strengths and weaknesses in your financial picture. Is your
short-term debt too high? What is your debt-to-equity ratio, and
has it improved or worsened during the year? Did you have any
extraordinary gains or losses? How much interest did you pay?
What did the cash-flow picture look like? Identify goals for the
upcoming year for your profitability ratios. Answering questions
like these will provide you with a great perspective on the past
year, as well as some vision of where to go for the next year.
- Analysis of company operations: where you provide details
of your company's operational aspects and the past year's
operational results. Again, include the good and the bad, your
strengths and weaknesses. Present information about your
plant"?is it an advantage or disadvantage to your current business?
Discuss your equipment"?did you add new equipment,
or retire any old equipment? You might choose to include specifics
on what new equipment you're planning to purchase.
This also can be an appropriate place to write about your
marketing plan from last year: Was it a success, or did you ,in
fact, struggle on the marketing side of your business? What new
markets were you able to penetrate? Did you pick up market
share in certain areas of your product line, or lose market share
in another? Introduce your marketing goals for the coming year.
Discuss key vendor relationships, banking relationships, and
any other pertinent items.
- Financial statements: the heart of the report"?after all, an
annual report without financial statements wouldn't really be
too useful. You can elect to provide detailed financials or offer
more consolidated data, depending on how much information
you wish to provide the readers. When compiling your financial
statements, stick as close to generally accepted accounting
principles (GAAP) as possible, providing more credibility to your
financial statements. You can get creative in other sections of
your annual report, but this section should be presented in a
very professional manner.
- Miscellaneous information: the last part of your annual
report, an optional section where you can write about anything
else you want to present. For instance, you can discuss your
business plan for the past year and how you performed, and
you can share your business plan for the upcoming year. You
might choose to include photos and a brief description of some
of the major projects you completed in the past 12 months.
A better perspective
Remember, this is your annual report, so write about what you
want. Be creative, and don't hesitate to make your report interesting.
Get copies of other annual reports from some large publicly
traded companies and use some of their ideas. Also remember
to be honest in your review. As you reflect on the past year
and write about both the good and the bad, you will find yourself
with a much better perspective on how to improve your business
for this year.
Marty McGhie (firstname.lastname@example.org) is VP finance/
operations of Ferrari Color, a digital-imaging center with
Salt Lake City, San Francisco, and Sacramento locations.