How to Write Annual Finance Reports

Allison Martin

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How to Write Annual Finance Reports

By Allison MartinMaster of Accountancy

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 non-profit organizations for their donors. However, select small businesses also use these reports to gauge their company's progress.

Printable Annual Finance Report Template

To begin preparing your annual financial report, you can use this comprehensive template as a guide. This document provides step-by-step guidance on how to complete each section of the report.

To retrieve a PDF version of the printable, click on the image. If you have trouble downloading the printable, refer to this document for assistance.

Annual finance report template for a small business

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Step 1. Company Description and Overview

In addition to providing a brief synopsis of your company and its respective industry, you should also discuss major events that occurred in the past year, along with notable achievements, such as milestones met by specific employees, management, or the company as a whole.

Sample Text

Stellar Lawns, LLC is a residential and commercial lawn care solutions company headquartered in Miami, FL. We are a key player in the lawn care industry, and we are committed to exceeding the needs of our customers through the provision of lawn care services that are a step above the rest.

In the past year, we have expanded operations to serve five additional states, including Georgia, Alabama, Texas, South Carolina, and North Carolina, making Stellar Lawns, LLC a key player in the Southeast region of the US.

As a result of the recent expansion, the company also doubled net profits for Q4. The expansion also prompted the addition of a new team member, Dylan Williams, who will be serving alongside our Chief Executive Officer as the Director of Sales.

Step 2. Letter from the CEO

This letter should be written by the CEO or owner of the business in a professional but personable tone.

Start by expressing your gratitude to patrons of your business along with employees for all they do to sustain the company.
Address your vision for your organization and how you plan to make it come to pass.
If your business recently went through or is in the midst of a rough patch, discuss your plans to implement initiatives that will turn things around. Doing so will help restore confidence in your brand from both customers and employees.

Sample Text

Dear Valued Customer/Investor,

I would personally like to thank you for your continued support of Stellar Lawns, LLC. Without your support, our success as an entity wouldn't be possible.

I'd also like to express my gratitude to all our employees who work so tirelessly to ensure the needs of our valuable customers are met.

In Q1 of last year, we expanded operations into five new states, and our company has soared to new heights since that point. As we continue to expand, we plan to implement several initiatives in an effort to improve our operations and ultimately become the preferred lawn care provider in the Southeast region.

Enhance customer relations to further improve the interactions between call center staff and customers
Introduce our lawn care products to several key markets throughout the Southeast US
Implement more green products to do our part in preserving the environment
Launch a rewards program to thank our loyal customers

We value your business and look forward to serving you for many years to come. As always, thanks for trusting us to handle all your lawn care needs.

Best,

John W. Smith, CEO
Stellar Lawns, LLC

Step 3. Financial Reports

According to the U.S. Small Business Administration, tracking your company's financial data is, "essential when seeking funding from lenders or investors to take your business to the next level." Doing so also helps you price your products and services, determine margins and cash flow, and facilitate the filing of taxes, the article adds.

Your annual report should include:

Balance sheet
Income statement
Cash flow statement

Balance Sheet

There are three parts to a balance sheet: assets, liabilities, and owner's equity. The sum of assets and liabilities should be equal to owner's equity in order for the balance sheet to work.

Assets can be classified as current, which can be converted to cash within a one-year span, or fixed. These typically include:

Cash (short-term)
Accounts receivable (short-term)
Inventory (short-term)
Buildings (fixed)
Land (fixed)
Equipment and machinery (fixed)

Similar to assets, liabilities are also categorized as short-term or long-term. Examples of liabilities include:

Accounts payable (short-term)
Taxes payable (short-term)
Loans payable (long-term)
Notes payable (long-term)

Owner's equity is comprised of invested capital and retained earnings.

Income Statement

Also known as the Profit-Loss Statement, your income statement reveals your net profit for the year. To determine your company's net profit, you will use the following formula:

Gross Profit or Total Sales

-Cost of Goods Sold (i.e. inventory, materials, supplies, taxes)

-Total Operating Expenses (items, such as utilities, taxes, and fees)

=Net Profit Before Taxes

-Income Taxes

=Net Operating Income

+Retained Earnings (beginning of year)

=Retained Earnings (end of year)

Cash Flow Statement

The cash flow statement indicates how much cash is flowing in and out of the business. To determine your ending cash balance, use the following formula:

Beginning Cash Balance

+Cash Inflows (items, such as cash sales and payments on accounts receivable)

-Cash Outflows (items, such as purchases, salaries, and advertising expenses)

=Ending Cash Balance

4. Company's Managers

This section is fairly straightforward, as all you'll be doing is listing the names of key officers and their respective titles. If any key positions or individuals were added or eliminated from the management hierarchy, you will also want to disclose this information.

5. Footnotes

Be sure to include footnotes in your annual finance report to clarify components of the financial reports that may need explanation.

Sample Text

Note 1: Stellar Lawns, LLC is a lawn care provider for both residential and commercial properties in the Southeast region of the United States.

Note 2: Stellar Lawns, LLC is a cash-basis company and follows the calendar year for financial reporting purposes.

Note 3: Current assets and liabilities are those that will be collected or satisfied in one year or less.

Note 3: Assets are depreciated on a straight-line basis using the estimated useful life, which ranges from 10 to 30 years.

Note 4: Accounts payable include amounts due to independent contractors for their services.

Note 5: Income taxes are calculated using the current applicable rates.

Finance Reports for Publicly Traded Companies

If your company is a publicly traded entity, you must follow the format found in the Securities and Exchange Commission's Financial Reporting Manual. Otherwise, you will not be in compliance with federal guidelines.

A Final Thought

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 so your company can derive the greatest benefit.

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