What is an Annual Report?

what is an annual report

What is an Annual Report?

An annual report is an in-depth, comprehensive overview of a business’s achievements and key metrics from the preceding year.

It’s meant to provide shareholders, investors, donors, and various other interested parties with a rundown of a company’s overall performance, financial status, and strategic direction.

For public companies, basic annual financial reports are required by law. But most companies also produce a more user-friendly annual report for their employees, customers, and investors.

These reports don’t look like boring financial statements--they’re stylized, flashy, and heavily branded.

Take a look at this snippet of Shopify’s infographic annual report from 2016, for example. It feels more like branded marketing collateral than a traditional report. It’s so much more than a collection of financial statements.

what is an annual report

When creating this type of infographic annual report, there’s a lot of consider: what to include in the report, how best to visualize the financials, how to lay out the text, which colors to use, which fonts to use, and so on.

That’s why I’ve put together this extensive guide on everything you need to know to create an attractive, effective annual report.

I’ll start by reviewing the essential components of an annual report before moving on to the design best practices you’ll need to create an impactful report.

What should an annual report contain?

I’m going to skip over the components of the official annual reports required by the U.S. government. I'll leave that to the CFOs and lawyers.

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Instead, let’s focus on the components of an infographic-style annual report that you might want to use for marketing purposes.

Most consumer-facing annual reports comprise a few core sections, including:

  • A cover page
  • A table of contents
  • A company vision statement
  • Financial highlights
  • Strategy
  • Performance and outlook

As seen in the annual report example below, each section typically contains a mixture of text and data, visualized with simple charts and graphics.

what is an annual report

 

Recently, however, smaller companies have started branching out with the content of their annual reports.

They’ve started using their reports to give customers an insider’s look at all of the yearly goings-on of their businesses. Milestones, notable achievements...everything they are proud of and want to show off.

Take a look, for example, at MailChimp’s 2016 annual report. They’ve put a fun spin on the traditional report, including everything from number of pounds of coffee brewed in the office to number of customers surveyed.

what is an annual report

Whether you stick with the traditional format or take a more playful approach, it’s a good idea to start with a ready-made annual report template. This template’s grid-based layout makes it easy to customize for any type of content:  

what is an annual report

 

Best practices for annual report design

One of the biggest challenges of designing annual reports is to find the right balance between style and functionality.

The function of the annual report is to communicate key metrics, financial numbers and activities to its stakeholders. The style of the report should not detract from that function.

Use the following design best practices to ensure the style of the report supports clear communication, and doesn’t take away from the content of the report.

1. Create a high-impact annual report cover page with large images

The cover of your annual report should grab, and hold, the attention of your readers. This can be hard to achieve without the help of a professional designer.

The workaround?

Use large, high quality images as the focal point of your cover page for a bold, eye-catching effect.

In this annual report example, bright blocks of color are combined with a full-page image to create a simple, yet striking design.

what is an annual report

 

Cover images should not be used purely for decoration. They should tell your customers, stakeholders, and employees something about the culture or values of your organization.

Use cover photos to set the tone for the report and to convey the company spirit that you’d like to project to your readers.

Does your company focus on positive customer experiences?

On company culture?

On high quality, professional products?

Take a look at how each of the companies below uses cover images to project their own, unique narrative focus. Nestle is focused on customer experiences, GE is focused on their employees, and Thermo Fischer Scientific is all about the product:

what is an annual report

Source high quality images for a professional touch.

Using low quality or pixelated images can make the report look amateur and reflect poorly on your company or organization.

If you’re going to go with a full-page cover image, it’s worth investing in a professional photographer to take photos of real employees or customers, like L’Oreal has done for their annual report:

what is an annual report

Otherwise, try to source high-resolution images from respected sites like Unsplash or Pixabay.

2. Choose the right charts for your annual report metrics

Annual reports are all about the numbers, meaning that a key ingredient of creating an effective annual report is choosing the right chart for each metric.

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There are a few types metrics found in most annual reports, including:

  • Financial highlights (revenue, earnings per share, growth, profit margin)
  • Month by month financial trends
  • Sales breakdown by market and by product
  • Year over year financial performance

The type of data you are visualizing should determine what type of chart you use. Let’s review the best visualization types for each type of metric.

Use “big number” charts to summarize financial highlights.

The financial highlights section of an annual report should summarize the most important facts and figures of the year simply and concisely.

The easiest way to show this assortment of different metrics in a small space is to simply write out those numbers in big, bold text. We call this type of visualization a “big number” chart.

In a big number chart, the size of each number should vary based on its importance, as shown in Concho Resources’ 2017 annual report:

what is an annual report

As you can see in the example below, big number charts communicate key metrics quickly, clearly, and with impact.

what is an annual report

 

Use line charts to display monthly trends.

Line charts are the standard display for tracking changes over time, which is essential in an annual report. Investors and shareholders will want to see month by month trends for all sorts of financial metrics, including sales, profits, margins, and share earnings.

 

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Line charts are perfect for comparing and contrasting sales trends across competitors, as seen in this annual report example:

what is an annual report

 

As seen in Adidas’ 2016 annual report, line charts are particularly useful for tracking the growth of share prices over time (compared to market indices):  what is an annual report

Use stacked bar or donut charts to show market composition.

Another core component of the finances section of an annual report is market segmentation, which shows the breakdown of annual sales into different categories.

You might break down your sales by geographic region, by product category, by customer profile...whatever helps your business identify opportunities for growth and improvement.

Traditionally, sales breakdowns are visualized with pie or donut charts, a standard method for showing part-to-whole relationships.

what is an annual report

Source

Pie charts, while intuitive to read, are notoriously poor data visualization tools. Most people struggle to distinguish between the size of similar pie segments at a glance.

A better choice would be a stacked bar chart, seen in the market segmentation report below.

what is an annual report

 

Use grouped bar charts to compare year-over-year financial performance.

Year over year financial performance is of interest to many potential readers.

Investors, employees, and customers will all want to see how an organization’s current performance compares to that of previous years. It’s arguably the most important metric to be included in an annual report.

The most efficient method for visualizing year-over-year performance is with grouped bar charts, like these ones in GE’s 2017 annual report. The side-by-side bars emphasize the changes from one year to the next.

what is an annual report

As seen above, it’s a good idea to use a highlight color to draw extra attention to the year of interest (2017, in this case).

3. Use bold color accents to highlight key facts, quotes, and figures

Color should never be used simply for decoration in an annual report.

Although aesthetics should be a consideration, color should primarily be used to enhance communication--to clarify the information on the page.

As I just mentioned for the bar charts above, color can be used to highlight key information. It can be used to draw the reader’s attention to particularly important facts, figures, or data points in information-dense displays of text and data.

Check out how the yellow color is used to create visual contrast in this annual report example:

what is an annual report

 

The contrast between the green background and the yellow highlight color draws attention to the most valuable bits of information: the data! The contrast creates points of visual focus, helping us make sense of the information on the page.

When creating your annual report, try to pick one highlight color and apply it to every key data point that you want your readers to pay attention to. The brighter, the better!

To learn more about using contrasting color schemes, check out this guide on how to use colors in infographics.

4. Create a clear type hierarchy to make your annual report skimmable

Annual reports are typically quite information-heavy, with a great deal of technical information on each page.

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To prevent your readers from getting lost (or worse: bored), it’s important to create a clear hierarchy of information on each page. This hierarchy will help your reader navigate through the report, allowing them to easily skim through to the most pertinent information.

You can create hierarchy by altering the size, weight, and placement of various elements. Headings should be larger than subheadings, key figures should be bolder than general body text, chart captions should be small and light, etc.

what is an annual report

Check out how text hierarchy enhances the readability of the corporate performance annual report below. The titles and key numbers are styled in bold, black, large text, making them stand out from the rest of the page, while less pertinent text, like labels and captions, are smaller and more subtle:

what is an annual report

 

When creating this visual hierarchy, it’s important to be mindful of the principles of typography. You don’t want the typography to distract from the content of the annual report.

Here are a few principles to keep in mind:

  • Use a maximum of three different fonts to ensure the text is interesting but not chaotic.
  • Use a stylized font for the header text and a minimal font for the body text.
  • Use different font weights and styles to create contrast and draw the eye.

Want to learn more about typography for annual reports and infographics? Check out this guide on how to choose fonts.

5. Create your annual report on a grid for a balanced page layout

I strongly suggest using a grid to format your annual report design.

Building off of an underlying grid framework will ensure consistency from page to page, while allowing you to experiment with different compositions (to keep your report interesting).

what is an annual report

Using a grid can also help you create negative space, which is critical to great design. It gives the viewer time to process what they are seeing before moving on to the next section. Negative space is the core design component of most crisp, modern designs, like the one below:

what is an annual report

 

6. Focus on what’s important with a condensed one-pager annual report

Short, one page annual reports (also known as one-pagers) are gaining popularity as an alternative to extensive multi-page annual reports. These reports cover only the most important metrics, making it possible to grasp an organization’s performance at a glance.

One of the keys to a successful one page annual report is a simple color scheme. Pair neutral greys with a single bright highlight color for a sleek, cohesive look.

what is an annual report

 

Conclusion

I hope this guide has answered the question, “what is an annual report”. To wrap up, here are all of the design best practices you should keep in mind when creating your next annual report.

  • Create a high-impact annual report cover page with large images
  • Choose the right charts for your annual report metrics
  • Use bold color accents to highlight key facts, quotes, and figures
  • Create a clear type hierarchy to make your annual report skimmable
  • Create your annual report on a grid for a balanced page layout
  • Focus on what’s important with a condensed one-pager annual report

Still not quite sure how to write an annual report? Get started with an annual report template, like this one:

what is an annual report

 

More report design guides:

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