16.9. Lend a Hand in Preparing Your Financial Reports

Many business managers look at preparing the annual financial report of the business like they look at its annual income tax return — it's a task best left to the accountant. This is a mistake. You should take an active part in preparing the annual financial report. (I discuss getting the financial report ready for release in Chapter 12.) You should carefully think of what to say in the letter to stockholders that accompanies the financial statements. You should help craft the footnotes to the financial statements. The annual report is a good opportunity to tell a compelling story about the business.

The president or chief executive of the business has the ultimate responsibility for the financial report. Of course your financial report should not be fraudulent and deliberately misleading; if it is you can, and probably will, be sued. But beyond that, lenders and investors appreciate a frank and honest discussion of how the business did, including its problems as well as its successes.

In my view, the gold standard for financial reports is set by Warren Buffett, the CEO of Berkshire Hathaway. He lays it on the line; if he has a bad year, he makes no excuses. Buffett is appropriately modest if he has a good year. Every annual report of Berkshire Hathaway summarizes the nature of the business and how it makes profit. If you knew ...

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