As a small business owner, you may be wondering if you should publish an annual report for your business like the ones publicly traded corporations are required by the Securities and Exchange Commission to publish.
You've likely seen them before: elegantly designed annual reports produced by major public corporations that contain financial information and interesting stories about people and events pertinent to the corporations and their industries.
Annual reports are not, however, beneficial only to large, publicly traded corporations. Armed with an understanding of what an annual report can accomplish, small businesses stand to gain similar benefits by publishing annual reports of their own.
The purpose of annual reports
While publicly traded corporations are required by the Securities and Exchange Commission to publish an annual report, small businesses also may benefit from the practice of publishing an annual report. In addition to regulatory compliance, other reasons for publishing such a report include:
- Overview of recent financial performance. An annual report provides readers with a look at your business's financial performance in the past year.
- Marketing and promotional use. A small business annual report can double as a marketing and promotional vehicle for your business, effectively reaching prospective customers as well as potential investors and creditors.
- Management strategy and goal setting. The business annual report lets owners and management take a step back and see the past year in a big picture perspective. This can provide invaluable information to assist in evaluating current strategies and formulating future goals.
- Building trust. Whether it's prospective customers, suppliers, or employees—or potential creditors, or investors—a professionally designed annual report containing relevant and quality content has the ability to build the trust necessary to attract potential stakeholders to your business.
What to include in an annual report
So you've decided you're going to take your small business to the next level and put together an annual report. Should the annual report you publish contain the same type of information presented in the annual reports of much larger companies? And what are some common components of annual reports?
Because the small business annual report is looking to gain the same benefits from publishing an annual report that publicly traded corporations do, one strategy for putting together a compelling annual report for your business is to examine the annual reports published by larger corporations.
While there are certain components that are common to most annual reports, such as the presence of key financial statements, other components will vary from report to report. Here are some ideas to get you started:
- Financial statements. In order to provide annual report readers with key information about a business's financial performance in the past year, annual reports include basic financial statements, such as a balance sheet, an income statement, and a cash flow statement. These financial reports help to give readers the data necessary to gauge the financial health and performance of your business. This is particularly important if your business is looking to obtain credit or attract investors.
- Recent business accomplishments. Annuals reports often highlight recent goals and milestones achieved by your business. Whether it's reaching a distribution goal or attaining a marketing target, providing this kind of information in your annual report makes your business more appealing to current and potential stakeholders alike.
- Features about your people. The annual report is also a good place to shine a spotlight on the people working within your business. Stories about awards won by employees—and even positive human interest stories about key personnel—can help to enhance the overall picture of your business that an annual report provides to its readers.
Creating an annual report also will provide a useful record of the growth and development of your small business over time. In addition to raising your company's overall professionalism, an annual report can provide valuable insights not only to you but also to all of your business's constituents: customers, investors, and employees alike.
Whether your small business is producing an annual report for state compliance (where required) or you're considering a more comprehensive form of annual reporting, involve appropriate financial and marketing professionals early in the process. You also can hire an online service provider to assist with creating compliance-related documents, to give you greater peace of mind.