Transparency and management: the importance of the annual report in SMEs
The annual report of accounts of a Spanish SME (Small and Medium Enterprise) is an essential document that compiles and explains in detail the economic and financial situation of the company throughout a fiscal year. This document is mandatory under Spanish legislation and provides a clear and transparent view of the company’s activities and results. In addition, it serves as a communication tool with partners, investors, financial institutions and other interested parties.
The annual report of an SME’s accounts is made up of several key sections that cover different aspects of the company. It begins with a general introduction and a letter from the company’s president or CEO. This section provides an overview of the company’s performance during the year, the most important achievements, the challenges faced and a future perspective. It’s a way to set the tone for the memory and provide context about the company’s performance.
The Corporate Information section provides basic information about the company, including its history and evolution, a brief description of the company’s mission, vision and values, as well as the organizational structure and main activities and products. The mission, vision and values describe the company’s raison d’être, its aspirations and the principles that guide its operations. The organizational structure includes a description of the organization chart of the company and the main managers. In addition, information is provided on the company’s main activities, products and services.
Corporate governance is a crucial aspect for transparency and trust in the company. This section details the composition of the company’s management body, normally composed of the board of directors or the sole director, depending on the structure of the SME. It also describes the corporate governance policies and practices adopted to ensure efficient and responsible management.
Management Report
The management report is an essential part of the annual report and provides a detailed view of the company’s operational and financial performance. It includes an analysis of the general economic environment and its impact on the company, as well as a summary of operational activities, including production, sales and marketing. A detailed analysis of financial results is also presented, with an emphasis on revenues, expenses, benefits and other relevant financial indicators. In addition, the main risks and opportunities that may affect the company in the future are identified.
Financial Statements
Financial statements are the core of the annual report and provide a quantitative view of the company’s financial performance. They include the balance sheet, which presents the company’s assets, liabilities and net worth as of a given date, usually at the end of the fiscal year. The profit and loss account shows the company’s income, expenses, and net income during the fiscal year. The statement of changes in net worth shows the changes in the company’s net worth throughout the year, including increases and decreases in capital, distribution of profits, and others. The cash flow statement details the cash flows generated and used in operating, investing and financing activities.
The explanatory notes accompany the financial statements and provide additional, disaggregated information that helps to better understand the figures presented. They include a description of the accounting policies adopted by the company and any significant changes to them. Additional information is also provided on balance sheet items, revenues and expenses, as well as details on important transactions, such as acquisitions, asset sales, and related party transactions.
The annual report must include the external audit report, which ensures the veracity and accuracy of the financial statements. This report is issued by external auditors and certifies that the financial statements present a faithful picture of the company’s assets, financial situation and results.
Information on Staff
Human capital is a fundamental asset for any company. This section provides information on the structure and composition of the staff, including the number of employees, their distribution by department, gender and seniority. The company’s human resources policies are also described, covering aspects such as hiring, training, professional development and employee well-being. In addition, staff satisfaction and retention indicators are presented.
Future Perspectives
Finally, the annual report includes a section dedicated to the company’s future prospects. The company’s strategic objectives for the next financial year and the strategies to achieve them are described here. Financial forecasts are presented for the coming year, including revenues, profits and other key indicators. Expansion plans, new investments and product launches are also reported.
