This report will give a greater understanding of the information needs of a business. I will be looking at the: Material Flow and Information Flow. For this, I will be using Bathtoys Ltd, to give an example of what information is required for the annual report.
Overview of Communication in Business
A business has to have a defined flow of information, either internal or external to the business. In addition, the business needs to be co-ordinated, so that the right people get the correct information and at the right time for the profitability of the company. The information within the company needs to be collected to show the shareholders and Companies House (the government) what the company has been up to over the year since the last annual report.
What information needs to be Stored
For the annual report you need to collect information over the year, and summaries the information for the report. This report will inform the shareholders and the government were the managing director has guided the company over the past year. It will show were the management has spent money, and were money has come in to the company. This is the type of data the company needs to collect, were it comes from and the reason it is collected:
- The finance department needs information on what money is in the bank now – this information comes from the bank, it will indicate the viability of the company.
- The finance department also needs to know what the financial situation was the same time last year – this information comes from the annual report made the previous year, it will show if the company made more profit over this year. This indicating the strength of the company.
- The sales department collects information on the money coming in from sales of the plastic ducks – this information is taken from the sale of the ducks, which has been stored on computer over the past year. This method enables sales and finance to have free access to the same information. You use this information to create a chart (profit and loss), which shows the strength of the company.
- The purchase department collects information on the total cost of purchases of supplies and equipment over the year – this is summarised from the weekly/monthly orders. Used in the profit and loss chart.
- The finance department collects information of the amount of wages, rent, electricity, and tax the company has paid over the year – this is taken from the amount the bank has released to pay these payment requests. Used in the profit and loss chart.
- The net profit will indicate what the company has made over the past twelve months, this is summarised from the above.
This information will show the profitability and viability of the company. And if the money that the shareholders invested in the company – by buying the shares the company placed on the market – are still worth what they paid.
This information is collected together for the use of the shareholders; they can see if the company is being run to a satisfactory level and take action if it is not. One of the actions they can chose if the company is not heading the way they would like is to demand changes in the management of the company i.e. fire the managing director.
The annual report can indicate to the management if what they said they were going to accomplish in the last annual report is what actually happened, and if not it should indicate what went wrong.
Why use a manual system to construct the reports?
Firstly it is to ensure that there are no mistakes with any part of the annual report. There is no sensitive information that anyone can use for the benefit of other companies, shareholders do not own shares in one company and could decide to give the information to your competitors.
There are multiple reports, one for the shareholders, another for Companies House and the management of the company (to show were they can improve the day to day running of the company) all using the same information, but edited to give only the information they require. Another advantage is you can personalise the reports, making them more interesting to the person reading the report. By butting logos and using the readers name.
The information within a company needs to be collected for the annual report, but it must be organised and you can not just give every bit of information to everyone. If you do not have a set operational structure for the collection of the information you my lose information. And this could lead to some embarrassing questions from the shareholders and Companies House. This information must be used to the advantage of the company, building on what you learnt from last year’s report.