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How Startups Can Derive Real Financial Planning Insights from Annual Reports

Nobody looks forward to slogging through a huge collection of reports at the end of the fiscal year, especially if your startup hasn’t exactly been achieving hockey stick business growth.

How Startups Can Derive Real Financial Planning Insights from Annual Reports

However, diligently looking over your reports is an excellent way to gain some insights into where your company is headed. That’s why startups with sufficient investment capital often name a CFO even before they add other members to their staff.

If you’re an entrepreneur, then chances are that you already understand how important it is to keep a close eye on your finances.

What you might not realize, however, is the constant need to provide better reports in order to ensure that your chief financial officer has all of the information they need to work with, to derive real insights about the future.

Better reporting processes are a big part of that goal. While it isn’t necessarily enjoyable to read over material that points out problems in your operation, improved reporting procedures can reduce the risk that any of these problems blossoms into something major.

By providing clear, accurate, and concise reports from the get-go, your CFO will be empowered to fight these problems and come up with equally clear solutions.

The real question that remains, however, is how to do this. Take, for example, a medium-sized startup company that consistently sets prices too high.

This firm might end up with lower than expected cash flow levels, which would have been avoidable had the firm simply complied with the most basic annual 10-K filing rules.

Deciding What Information to Include in Your Reports

Any annual report is only going to be as good as the processes that compile it. Hard numbers are always going to be the most important aspect of a report, so entrepreneurs need to make sure that the initial numbers they’re feeding into the system are accurate.

Check all of your inputs and ensure that the numbers make sense going into whatever system you’re using to generate reports. Systemic problems, like those resulting from faulty or dated reporting software, need to be corrected at this point as well.

Every company is going to be a little different with what should be included in their reports, but in general, the essential components of a 10-K filing should at least include:

  • Item 1 – Business Description
  • Item 2 – Potential Risk Factors
  • Item 3 – Any Legal Proceedings
  • Item 6 – Selected Financial Data
  • Item 7 – Management Discussion
  • Additional Analysis of the Current Situation

Pay special attention to any lines regarding an evaluation of solvency, especially if you’ve contracted with a professional financial advisor to handle any reporting requirements you’ve run into. This part of the report will give you the bottom line on whether or not your company is actually staying above water.

That being said, you’ll also want to keep in mind that no matter what, your firm is still made up of people, so adding anecdotes from the movers and shakers in your startup is a great way to provide additional material for your CFO and other financial specialists to draw insights from.

Since you’re probably bringing along your annual reports each time you meet a potential new client or investor, this along with the business description and risk factor areas should prove to be of special interest. A few other improvements can make this aspect all the more impressive.

Improving Your Reporting Workflows

In general, only companies that have multiple shareholders issue formal detailed annual reports as required by federal regulators. These are designed to help shareholders learn more about the financial status of the companies they put their money in.

It also gives managers an opportunity to please their case and comment on how their businesses operated over the previous year.

Rules put forth by the SEC require pretty much every company and registered mutual fund to submit a report electronically. They also have to post a variety of proxy materials on their own sites.

Getting these details out of the way helps to ensure that you’ll have plenty of time to use the reports sitting on your desktop to make those vaunted decisions that you’ll be empowered to make as a result of these reports.

Getting bogged down in manual data entry can put a real damper on the workflow, as it can compromise data accuracy and can keep your team so busy copy-pasting that no one is available to spend any time actually learning from the trends that the data reveals.

This is where automated imports and cleaning of connected data can make a big difference.

There are often significant benefits to be derived by preparing these reports, mind you, even if you aren’t legally obligated to do so.

Assuming that your startup is large enough to have any financial officers, it’s large enough to have at least some kind of internal report. This will enable your team to draw real insights from it.

Making Data-Driven Decisions Based on Your Reports

Take a look at the debt to equity line when you’re trying to figure out whether to start spending money on your business venture. While it’s possible to start a business with as little as $10,000, you might find that you need seed capital later.

Examining the overall cost of any additional expenditures will give you the foresight to decide whether or not you actually want to go through with them.

Some people have suggested that luck is what makes or breaks a business, and while this might be true there’s something to be said for proper planning. Examine all of your sales figures and see if you can’t identify any patterns.

While you might want to consider investing in visualization software that will allow you to instantly spot trends, you probably don’t even need this to get started.

Depending on your specific situation, you might need a solution that can help you separate all the noise from otherwise worthwhile information. If that’s the case, then consider your options very carefully, because while information overload is a real problem, so is visibility.

Sit down with your CFO and other members of your financial team if at all possible. Go over the issues and discuss whether or not certain figures are relevant to your current business goals.

While you might find that not all of them are, chances are equally good that you might identify a few indicators you never thought of before.

Communication between everyone involved is paramount in making sure that you get the most out of this experience.

Solid financial planning techniques have long insisted that people examine the annual documentation for each security that they’re invested in, so there’s no reason you can’t simply apply this logic to your own company.

Perform a simple visual sales analysis by looking over all the times that users buy and sell your goods. It shouldn’t be too hard to see whether or not there’s a clearly identifiable pattern.

Improving Your Reporting Processes

While this might seem like a daunting task at the moment, you only need a few simple things to get started. Transfer your reporting workflows to a single platform. \

By using a centralized source for information, the process of drawing up new reports won’t require any sort of search effort. Provide a single source of truth that everyone can fall back on.

The more that your business depends on some sort of legacy spreadsheet, the higher the risk that errors can creep into the equation.

Self-service options can help to empower your coworkers, and it can certainly reduce the workload for you and everyone in the financial department because you won’t have to track down everyone to make a statement or get a comment.


Best of all, it can help to dramatically increase feelings of cooperation among everyone in your organization. Keeping all of this information in a single repository will also help to settle disputes since everyone will know to take a look at your reporting system if anything seems awry.

You always want to start with a clear goal whenever you make any changes to your business, and revamping your reporting processes is no different. Take some time to get everyone on the same page.

Talk with your CFO and anyone else in the financial department. For that matter, you might want to take this opportunity to bring people from all walks of life in your startup together and give them a chance to communicate any concerns they have about the direction your business is moving in.

As time goes on, you might find that you really do have better reports and a stronger business because of it.


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