How to Prepare Annual Financial Report for Associations: A Guide

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How to Prepare Annual Financial Report for Associations: A Guide

Content Writer, Glue Up
10 minutes read
December 12, 2023

The annual financial report serves as the comprehensive yearly overview of the association or business, detailing its journey from the beginning to the end of the year, month by month. It plays a crucial role in assessing the company's performance over the past financial year.

Organizations heavily depend on this report and carefully craft it to gain insights into their financial standing. To navigate the complexities of preparing an annual financial report, this blog provides an elaborative guide.

Probe in to learn how to effectively compile and present this critical document for a thorough understanding of your company's financial performance.

Key Takeaways

  • The annual financial statement provides stakeholders with a comprehensive overview, enabling them to assess the company's performance over the past year.
  • A well-prepared annual financial report delivers ample data, facilitating effective budget planning, assessing risks, evaluating profitability, and projecting future returns.
  • To prepare an annual financial report, it is essential to compile all necessary financial statements, including income statements, balance sheets, cash flow statements, and relevant receipts.
  • Publicizing the financial report creates transparency among stakeholders, as this report reveals financial performance, accomplishments, and future plans. It also encourages investors.

What Is an Annual Report?

An annual report thoroughly overviews the association's or business's yearly performance. This report is segmented into month-by-month and week-by-week progress.

It outlines the budget allocation, expenses incurred, profits, losses, and associated ratios, incorporating charts and graphs highlighting peak performance months.

Also, the report indicates sales fluctuations, client retention percentages, and revenue generation, summarizing the company's journey from the year's inception to its conclusion.

By scrutinizing this report, you can effectively assess the performance of the overall business. Furthermore, the annual report aids in forecasting the organization's standing compared to competitors, providing valuable insights for strategic planning and future decision-making.

What Is the Purpose of Financial Reporting?

Annual report

The primary objective of financial reporting is to deliver business insights. However, these reports go beyond just insights, providing a wealth of detailed information that covers various critical aspects, as follows:

Communicate Essential Data

Financial insights are important in fostering communication with stakeholders, including investors, executives, and other key parties. This information is essential for:

  • Effective budget planning
  • Assessing risks
  • Profitability
  • Future returns

According to the EY Global Financial Accounting Advisory Services (FAAS) corporate reporting survey, 72% of respondents stated that finance teams are increasingly expected to measure and communicate how the company creates long-term value for investors and other stakeholders. This underscores the importance of annual reports in delivering the essential data to stakeholders for evaluating a company's long-term value creation.

For instance, if the median gross profit for a B2B business is $76k per month and your financial insights reveal that your business has consistently exceeded this benchmark, it becomes a compelling point to showcase to your investors.

Outperforming industry standards can serve as a powerful incentive to seek additional funding, emphasizing the business's robust performance and potential for further growth. Moreover, publicly disclosing this document enhances transparency, instilling confidence and trust among investors and other stakeholders in your business.

Monitors Income and Expenses

Financial reporting plays a vital role in the systematic monitoring of spending areas, judicious budget allocation, precise profit calculation, and accurate identification of losses.

It serves as an essential tool in pinpointing extra expenses that may need to be trimmed, facilitating efficient debt management, and providing a comprehensive overview of assets. Additionally, financial reporting aids in evaluating the debt-to-asset ratio, offering insights into the financial health and stability of the business.

Importantly, this process allows for proactive calculations, enabling businesses to stay ahead of their competition by anticipating challenges and strategically positioning themselves in the market.

Supports Financial Analysis and Decision-Making

The performance analysis within an annual financial report is instrumental in enhancing decision-making for the business. According to the EY survey, 79% of finance leaders state that they currently have the necessary data volumes to provide stakeholders with the insights they seek into company culture. This report, therefore, aids investors in making informed decisions.

By leveraging diverse data points within the report, you can effectively track

  • Real-time performance metrics
  • Identify key spending areas
  • Spot opportunities or areas of interest

This capability is invaluable for making accurate forecasts.

The detailed financial analysis not only enables businesses to stay ahead of the curve but also empowers them to discern current trends and identify potential revenue-generating aspects.


Another reason financial reporting is mandatory is to ensure compliance with legal bodies and government agencies. These entities establish specific criteria and templates that dictate how financial activities must be disclosed.

It allows them to track your financial activities throughout the year with the help of this annual financial report. Adhering to these guidelines is imperative, given the set deadlines for submission.

In the United States, compliance is monitored by the Generally Accepted Accounting Principles (GAAP), while international associations follow the International Financial Reporting Standards (IFRS), reinforcing the necessity to maintain accurate books and prepare reports within the given time frame.

This adherence is particularly crucial for legal businesses to uphold regulatory requirements.

Simplify Your Taxes

Taxes can be a hectic task for businesses, regardless of their size. An accurate annual financial report significantly aids in calculating tax returns; otherwise, the complexity of tax returns can be overwhelming.

Creating a well-detailed financial report is instrumental in simplifying the tax filing process, making it more manageable. This approach not only streamlines the filing of tax returns but also facilitates the Internal Revenue Service (IRS) in accurately assessing taxes.

By adhering to this practice, businesses can establish a positive reputation and avoid potential penalties associated with untimely tax filings, emphasizing the importance of timely and accurate tax reporting.

How to Prepare Your Association's Annual Financial Report: A Step-by-Step Guide

The annual financial report plays a significant role in assessing the company's performance and is a legal requirement. Even a seemingly simple report can become complex to prepare. Therefore, we are providing you with a step-by-step guide on how to prepare this crucial document.

Step 1: Gather and Review Financial Data

The first and foremost step in preparing a detailed financial report is to collect and organize all financial data for the reporting period, including

  • Income statements
  • Balance sheets
  • Cash flow statements
  • Relevant Receipts

Subsequently, it is crucial to ensure the accuracy and completeness of the financial data through a comprehensive review of these statements.

financial data

Finally, a thorough examination of the financial data is essential to identify any evident trends, patterns, or areas of concern that may necessitate further insightful analysis or explanation.

Step 2: Develop a Membership Forecast

The second step involves developing a membership forecast. To accomplish this, you need to create a detailed spreadsheet where you insert your membership records spanning the year, carefully tracking performance.

Membership Forecast

This spreadsheet should include different sections, such as members retained, new members acquired, and estimates for membership in the upcoming year. Additionally, incorporate a dedicated section detailing how much revenue was generated from members throughout the year.

Further enhance the analysis by breaking down revenue according to different membership plans, providing insights into the average spending of each member. This strategic approach ensures a subtle understanding of both membership dynamics and financial contributions, contributing to well-informed and precise membership projections.

Step 3: Create a Budget for Expenses

The third step is paramount as it involves decoding the expenses. It is imperative to review historical expense data methodically to identify areas where costs can be controlled or reduced.

budget expense report

This process is instrumental in developing a detailed expense budget for each department or program. The budget should consist of all the details, including the sources of funding, major spending areas, and priorities for each department or program.

Factors such as projected membership, operational needs, and strategic initiatives should be carefully considered during budgeting.

This strategic approach thoroughly examines expenses, facilitating informed decision-making and efficient cost management across various aspects of the organization.

Step 4: Prepare Financial Statements

The fourth step is to generate the income statement, balance sheet, cash flow statement, and statement of changes in equity for the reporting period. It is crucial to ensure that these financial statements are carefully prepared in accordance with Generally Accepted Accounting Principles (GAAP) or other applicable accounting frameworks.

financial statement
This detailed preparation not only ensures accuracy and compliance but also promotes transparency for investors, partners, and the public.

By providing a clear and precise snapshot of the organization's financial performance and position, these statements contribute to building trust and understanding among stakeholders. According to the "Enhancing Investors Trust Report 2022," 80% of retail investors aged 25–34 expressed trust in the completeness and accuracy of the information, highlighting financial statements' significant role in delivering confidence and informed decision-making.

Step 5: Analyze and Interpret Financial Performance

In the subsequent step, calculate key financial metrics, including but not limited to revenue per member, expense per member, reserves-to-expenses ratio, and debt-to-equity ratio. This involves precisely examining the organization's financial landscape to derive meaningful insights.

financial performance analysis

Compare these financial metrics to internal historical trends and industry benchmarks, enabling a comprehensive analysis of strengths, weaknesses, and areas for improvement. This strategic assessment provides valuable insights that guide decision-making and enhance the organization's overall financial health.

Step 6: Write the Management Discussion and Analysis (MD&A)

In the sixth step, furnish a narrative overview of the association's financial performance, stressing key trends, significant changes, and factors influencing the results.

This narrative should explore the association's strategic direction, address risks and uncertainties, and outline the future outlook. Providing a comprehensive report ensures a contextual understanding of the financial performance, offering stakeholders a fine-tuned perspective on the association's past, present, and future financial landscape.

Step 7: Prepare the Letter to Members

The seventh step involves preparing personalized letters addressed directly to members. These letters briefly summarize the association's financial performance, accomplishments, and future plans.

Take the opportunity to convey the association's overarching mission, values, and unwavering commitment to its members. The letters deliver a sense of connection and transparency by directly addressing members, ensuring members are well-informed about the association's financial standing and strategic vision.

Step 8: Assemble the Annual Report

Following that, your next task is to create a cover page that prominently features the association's name, logo, and reporting period. Integrate a user-friendly table of contents to facilitate easy navigation throughout the report.

Ensure the inclusion of essential sections such as the letter to members, Management's Discussion and Analysis (MD&A), financial statements, and any other pertinent information. Design the report with a clear and consistent layout, leveraging visuals and graphics strategically to enhance readability.

This diligent approach ensures a professional and organized presentation and contributes to a more engaging and informative annual financial report.

Step 9: Review and Audit the Annual Report

The second last step involves conducting a demanding annual report review, examining it for accuracy, completeness, and compliance with applicable regulations. To ensure additional scrutiny, engage external auditors to review the financial statements independently and provide an audit opinion if required by association bylaws or regulations.

This dual review process not only validates the integrity of the financial information but also reinforces transparency and adherence to regulatory standards, instilling confidence among stakeholders in the reliability of the annual report.

Step 10: Distribute the Annual Report

The final step in the process is to distribute the annual report to members, potential members, stakeholders, and other interested parties.

This distribution ensures that relevant individuals and entities have access to the comprehensive information encapsulated in the annual report, fostering transparency and keeping all concerned parties well-informed about the association's financial performance and strategic outlook.

This step is critical for maintaining open communication, building trust, and promoting a shared understanding of the association's achievements and future plans.

This blog is designed to guide you through the process of preparing an annual financial statement. We acknowledge that this process may not be as straightforward as it sounds, but there are helpful tools, such as Glue Up, available to streamline the entire process.

Glue Up is an all-in-one engagement management platform designed to automate various financial processes and boost revenue growth. With Glue Up, you can efficiently manage invoices, issue receipts, and accept multiple payments in various currencies, including credit cards, debit cards, and other online payment methods. 

Leverage the capabilities of Glue Up to enhance your financial reports. For more information, book a demo to explore how Glue Up can help you ace your financial processes.

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