What do you think of when you hear about an annual report?
If you’re like most people, you think of thick, boring document produced by big business each year, sent out to shareholders who never read them. And there is a certain amount of truth to that, too.
If you’re new to business, you may suddenly wonder about annual reports – and if there are any rules meaning you have to produce one, too.
The good news for SMBs is that annual reports are not mandatory for every business. However, once you register as a company you may have to produce annual financial reports (which is usually presented as an annual report).
You may also need to produce some sort of annual report if it is stated in your constitution, deed, financial agreement or other controlling document.
Generally speaking, the rules apply to the financial information you must include; the remaining information is an account of the business for the prior 12 months and is often determined by the company itself or the associated industry standards.
So if you don’t have to prepare an annual report, can you?
Yes, any business can prepare an annual report – and add whatever you like to it if you are doing it voluntarily!
A good annual report is a mix of general information, financial information and marketing. It is used by people to decide if they want to invest with the business - whether that means a direct investment as a shareholder or as a client – or even be associated with the business (such as an employee adviser or supplier).
Having an annual report certainly adds an air of professionalism and credibility to any business, and you can limit the financial information if you wanted.
On the other hand, it can be time-consuming and expensive to produce an annual report so it’s not something to be taken lightly.
For a business that doesn’t have to produce an annual report, do you think there is much value in doing so? Would you consider creating one for your business?