Every year, public corporations are required to produce an annual report for their shareholders. The main purpose of this report is to update your shareholders on both the operations and the finances of your business in the past year. There’s a lot of information to be conveyed in your annual report, more details of which can be found in quite a few of our blogs, including 4 Tips for Producing an Annual Report.
But aside from shareholders, who will actually be reading your annual report, and how will it influence their decision-making? In today’s blog, we’ll be highlighting the primary stakeholders that will be using your annual report.
Which stakeholders use annual reports?
Annual reports tend to be publicly available documents. That means that just about anyone could be viewing your annual reports – but who will actually be using them?
The primary audience for your annual reports will be those who are looking to invest in your company, as well as those who have already invested. They’ll want to gain a greater understanding of your company’s financial position before deciding whether or not to invest.
As well as information regarding the business’s finances, they will also be looking for some kind of road map for the company’s future, including your goals and your objectives.
The people you employ are also likely to consume your annual reports. It will help to give them a clearer understanding of your business’s strategic focus areas.
Your employees may also hold shares in your company, if you offer such incentives. As a result, those employees would be particularly invested in where the company is heading.
Finally, there’s your customers or clients, many of whom will check annual reports to better inform themselves regarding different businesses. Now more than ever, customers are wary of which businesses they build relationships with. They would rather buy from, or work with, companies that offer products or services of a high standard. An annual report can go a long way to convincing customers that your company is the one they should be supporting.
What is included in an annual report?
The exact contents of an annual report can differ, but you’ll find the same set of sections in most. These sections usually consist of the following:
- Introduction, wherein you’ll convey general information about your company
- Financial & operating highlights
- Letter, or address, from your CEO to the company’s shareholders
- Images and graphics that reflect your branding (these would be found throughout the report)
- ESG and corporate governance disclosures
- Financial statements, as well as notes to those financial statements
- Report of the auditor
- Financial summary
What’s most important in an annual report?
While it’s a good idea to include thorough detail in your annual report, it’s worth bearing in mind that not every section we listed will be absolutely vital. The key components of an annual report are the report of the auditor, your financial statements, and the notes to those financial statements. If you have those sections covered, your next priority should be including only the information that will actually serve a purpose to your audience. Otherwise, it’s just padding.
Amidst our range of Corporate Finance Services solutions, we assist businesses with their investor and shareholder communications, including annual reports. To find out more about what we offer, check out our Corporate Reporting Services page.