Producing timely financial reports is an important practice for any corporate entity. But punctuality alone isn’t enough. Business organizations also need to produce complete and accurate financial reports to keep their business running.
Therefore, it becomes difficult for these corporate entities to maintain accuracy and punctuality at times. It is understandable that leaders from these corporate houses remain busy and have to look after a lot more things. Thus, here are a few financial report tips for corporate entities to prepare financial reports.
Financial Report Tips for Corporate Entities
Follow these financial report tips to prepare financial reports for corporate entities accurately.
Plan in Advance
The first financial report tip is that you need to plan in advance. Creating a financial report is time taking and requires an organized system. In addition, the organized system is required for tracking data, business achievements, media clippings and photographs.
On the one hand, you can create the report in the house; on the other hand, you can also hire a design firm to prepare the report more professionally.
Set up Your Accounting System Correctly
Many times corporate entities do not set up their accounting system correctly. As a result, they do not understand that this is integral to maximizing the organization’s value and generating useful data whenever needed. An essential tip to avoid this is to help a reputable firm set the correct accounting system up. This will ensure your organization runs smoothly.
Use Modern Tools and Software
Do not stick to the traditional reporting method through countless spreadsheets; instead, opt for modern software and tools. There are various tools available on the internet which you can use to generate results in no time based on your needs.
Monitor your Cash Flow, Profit and Loss, and Balance Sheets
It is impossible for you to track every financial aspect of your business every month or a quarter of a year. So instead of that, focus on three primary statements: your profit and loss, balance sheets, and cash flow. Tracking these three alone will give you clear views of your financial status annual sales expenses. Along with it, you can also track how your business has affected your liquid assets.
Present the Key Message
Both your investors and employees want to know about what you accomplished in a year. Prepare a proper message which you want to let them know. A financial report is the best place to highlight your organization’s achievements. Try to let people know why you took certain decisions and what the final result of it was. If you can connect your goals and accomplishments, businesses can put their faith in you. This will create a connection for future business ventures.
Finalize the Structure of Content
While writing a financial report, you might be confused about what to put and leave out. Therefore an important financial report tip is that you map out what you will include and what you will not.
Besides including the basics of a financial report like introduction, financial statements, chairman’s letter, remember to include a storyline that will give an overview of the report. It should be a narrative thread. Do not put unnecessary information.
While writing the report, remember to use clear words and be unambiguous and precise. Be professional and unbiased while preparing the report. Also, remember to be honest in your report. Do not exaggerate your achievements and hide your failures. Let your employees and business partners know your failures and successes.
Use Attractive Design
A well written financial report is used as a marketing tool by businesses. Thus, an essential financial report tip would be to present your report so that readers can scan through the document and fetch the information they need. Here are a few tips on making it attractive:
- Include Infographics, photographs and other visual elements to make them appealing
- Use subheadings and headings whenever necessary
- Write short, crisp and straightforward paragraphs
- Highlight keywords, phrases or quotes to make it eye-catching
- Use a complementary and bold colour scheme and layout techniques that are in sync with your brand
Seek Help Online
If you cannot manage to prepare a financial report alone, you can seek help from online finance service providers. They will prepare a professional and attractive report which will surely gain the attention of your stakeholders, employees and investors.
Why is an Annual Financial Report Important?
Besides knowing financial report tips, it is necessary that you understand why creating one is important. Both public and private companies use financial reports to give information to their employees, investors, customers and the media. Here are a few reasons why it is important
- It creates the opportunity for companies to highlight their key accomplishments over goals, objectives and expectations from the coming year.
- Helpful for managers as a decision-making tool.
- Provides information on the company’s financial status and position
- It lets you introduce yourself as the key member of the business to the general public and investors.
- Creates an opportunity for the employees and investors to know about your company’s growth strategy for the upcoming year.
What are the Key Parts of a Financial Report?
Along with financial report tips and the importance of financial reports, you need to know what to include in it. The basic things you need to have in an annual report are the chairman’s letter, business profile, financial statements, management discussions and analysis.
You must begin the annual report with a letter from the chairman, the CEO or the primary owner to the shareholders. It should provide an overview of the achievements and failures of your company in the past year. Write about your company’s initiatives and a summary of the financial decisions. The key elements of this section include the challenges faced by the company, successes and growth of the company.
This section will mainly include the mission and vision of your company, details of directors, investor profiles, registered corporate office, products and services offered by your company. It will also include a primary source of revenue of your business, risk factors of your corporate entity and competitor websites or profiles.
This section is important for your company’s current and future investors, employees, shareholders and other business stakeholders. It helps them determine the company’s overall performance of the past year, whether it will pay off its debt, and its growth opportunities. The statements included here are:
- Balance sheet
- Cash flow statement
- Statement to shareholders
- Income statement
These are the statements that will show how much your profit or loss your company has incurred. It also provides information on the annual expenses and earnings. Besides these financial statements, information about the market price of shares of the company and the company’s dividends has to be provided.
Other than these basic details, your financial report must include:
- Stories, photographs and Infographics
- Auditors’ comments on the financial status of the company
- Discussions about forecasted income and expenses
Management Discussion and Analysis
This section will include your company’s performance for the past three years. It discusses the profit margins, income and sales.
If your business has launched a new product or service or there has been a drastic shift in sales and marketing efforts, you must include them in this section. The other things you need to discuss in this section are business acquisitions and new hires or any additional information that would be helpful for stakeholders.
Drawbacks in a Financial Report
Although financial report tips are generally helpful for an organization to prepare its financial report, the report might also have drawbacks. These are mentioned below.
- Since they are open to human interpretation, intentional manipulation is done to disguise a company’s financial performance in many cases. Make sure you only provide original data in your report.
- Another drawback is that you can only write this report on your company’s financial issues. You cannot include how your company works with the local community or employees.
- A reader will get wrong information if they read only one financial report of one time period. To understand a company’s growth for several years, readers need to read each year’s financial report.
- The financial reports do not have any predictive value. Since it is based on a specific time period, the statements do not provide any information on its future performance. For example, your organization might have excellent performance in one month, but it has no sales the next month.
Conclusion Follow these financial report tips to prepare your corporate entities’ financial report. Make sure you include all the basic points required in your financial report. Plan ahead of time on what you will include and what you will not.