Finance teams must prepare for a year of financial reporting challenges. This checklist can help organizations stay on track.
Here’s a worthy goal for finance teams in 2021: Get in shape to meet the upcoming challenges of financial reporting.
No one wants to repeat the unpredictable and exhausting response required by the events of 2020, with organizations scrambling to address one crisis after another. Those challenges – and the new ones arising – continue to affect reporting, which is why teams must emphasize preparedness, planning, and greater attention to detail in 2021.
As reporting season gets underway, finance teams can follow this practical checklist to streamline their efforts in the coming months.
Planning and scheduling
- Create a schedule of key financial reporting due dates
Plan early and plan often, beginning with awareness of key reporting dates on the calendar, such as when various forms and statements are due.
- Develop a work plan and timeline of steps to complete reporting tasks
Work backward from the key reporting dates to establish a work plan with detailed steps and reasonable due dates for each task.
Documentation and data collection
- Collect more thorough documentation to support reporting
Expect closer scrutiny from auditors about the business impacts of COVID-19, which will in turn require more detailed and rigorous documentation. Organizations also should prepare to comply with any new documentation retention and reporting requirements for government assistance programs.
- Ensure data availability
Evaluate data requirements well in advance of reporting due dates. Identify sources for all required information and determine if current systems and reports provide granular enough data for detailed reporting.
Accounting guidance
- Review all necessary accounting guidance
Establish an understanding of all relevant accounting models and any FASB guidance for contract modifications, asset impairment, going concern, government assistance, and other key issues. View this quick-reference guide to get started.
- Stay abreast of government assistance programs
Develop a process to keep up with the evolving terms and conditions for programs such as the Paycheck Protection Program (PPP), and determine how any changes will affect reporting for government assistance.
Reporting consistency
- Check for consistency across estimations and assumptions
Maintain consistent assumptions across the organization. Problems result when teams use one set of cash flow assumptions for goodwill impairment testing and another for fair value estimates.
- Prepare to explain any differences in assumptions used
If different assumptions (such as cash flow estimates) are being used across the organization, be prepared to explain why, with responses grounded in accounting model differences or estimation requirements.
Communication
- Establish clear lines of internal communication between teams
Without clear communication across the organization, finance teams run the risk of being left in the dark, for example, on key terms of contract modifications or performance expectations. Make financial reporting a collaborative, companywide effort.
- Connect regularly with auditors and external stakeholders
Schedule conversations with auditors, regulators, and other external stakeholders sooner rather than later. Get clarity on questions and issues that could cause delays down the line. Keep stakeholders regularly updated on progress and developments and address early on any issues they raise.
Process improvement
- Review and tighten processes and internal controls
Look for any control deficiencies that might have surfaced in 2020 when teams were scrambling to pull together precise forecasting and reporting during periods of economic uncertainty. In addition, where changes were made to business processes, ensure internal control over financial reporting has been adequately considered.
- Incorporate pandemic- and 2020-related lessons learned into processes
Identify areas to strengthen and strive to maintain completeness, clarity, and control in financial reporting.
Perhaps the biggest lesson learned from 2020 is that nothing is certain. More than ever, finance leaders need a solid game plan and high-quality financial reporting to navigate disruptions.
