Expectations around the annual financial report have drastically changed over the last 10 years. Reporting requirements have intensified, technology has shifted, and the average expected report length has significantly increased—rendering many annual financial reports dense, ineffective, and often unavailable until months after the close of the fiscal year.

Your company’s information is more valuable when it’s timely. An effective annual financial report provides financial statement users with an up-to-date, accurate overview of a utility’s financial position. However, by the time many annual financial reports reach the public, the provided information no longer represents a utility’s situation. 

Here are five steps your utility can take to plan, prepare for, and produce a clear, efficient, and effective annual financial report shortly after fiscal year-end.

Key Steps

1.    Set a Goal and Communicate

Many companies make the mistake of completing an annual financial report the same way each year—following the same steps and timeline and often leading to repeated problems, delays, and pitfalls. For example, many utilities repeatedly wait between 60 and 90 days to close the books or hold open accounts payable. This can have considerable impacts on the overall financial reporting process.

To avoid past patterns, your finance department can identify a new series of project goals, determine a target completion date, and develop a timeline the project management team can refer to while creating the report. Developing a plan and using well-determined estimates can allow a utility to close their books more quickly, provide more accurate data, and shorten the issuance of the annual financial report.

Before beginning the annual financial report or developing a project management team, the finance department should assess the utility’s needs and resources. It can then identify project goals by completing the following steps:  

• Identify key stakeholders in the process
• Determine and document the project’s goal with stakeholders
• Communicate the goal with team members across multiple departments
• Determine costs and benefits
• Focus on costs and benefits moving forward

2.    Plan and Prepare

Two key components go into your annual financial report’s planning stage: determining a timeline and developing a project management team.

Develop a Timeline

There are many steps that go into collecting and finalizing each part of the annual financial report, including completing each of the following:

• The letter of transmittal, if applicable
• Management’s discussion and analysis
• Financial statements and supplementary information

Finishing these steps often takes much longer than a company expects, but developing a project timeline can help. To get started, management can assess project needs by asking a few key questions:

• What must we include in the annual financial report?
• Could potential changes in regulations or requirements affect the timeline?
• How much time will each step take to complete correctly?
• Can we complete any steps or parts of the report before year-end?
• Are any steps or processes duplicated? Can they be eliminated?
• Do we have the right resources to complete the project on time, or do we need to outsource?

After answering each question, the project management team can create a timeline that includes milestones and completion checkpoints. During this process, it’s important to consider steps that can or should be completed prior to year-end. For example, if a new accounting standard is implemented that requires additional disclosures, these disclosures can be considered and drafted. It’s important to include all departments necessary for accumulating key information when assessing these milestones.

Determine a Project Management Team

Many companies mistakenly assume that completing a successful annual financial report is the accounting department’s responsibly. While accounting should be a central part of your project management team, the team should also include people from each department who can hold authority over the area and report on beneficial or potentially risky team decisions. 

While team structures vary depending on a company’s specific situation, it’s important that the project management team includes departments beyond finance and accounting, such as:

• The management division
• IT department
• Legal representative or other risk authority
• Public relations authority

This project management structure will allow for timely input from many parts of the company, helping the team analyze actions and identify and eliminate inefficient processes across departments.  

3.    Apply New Technology

Accuracy and timeliness determine your annual financial report’s relevance. When reading a financial statement, an external stakeholder should be able to quickly determine the following points:

• Operational consistencies
• Major planned projects
• Inconsistencies or potential problems
• The presence of significant risks

However, many of the most difficult, time-consuming portions of the financial statement don’t fall under the above categories—but they’re still required. Upgrading your company’s system, or using its existing system more efficiently, can help the team compile and analyze time-consuming information more efficiently and produce a timely annual financial report with more-precise data.

An effective technology platform can help your company efficiently locate, organize, and summarize required data that could otherwise take a large team many hours to compile and finalize. Examples of effective platforms include:

• An accounting enterprise resource planning (ERP) system
• Annual financial report preparation software
• Automated spreadsheet work papers and audit schedules

4.    Implement the Plan

After project management has created a plan and adopted effective technology, the team can begin the project according to the timeline.

One key element of implementation is approach. Along with technical components, such as strategy and timing, the project management team should regard the annual financial report in the same way it would any other substantial annual project. Planning, monitoring, readjusting, and continually receiving weigh-in from each portion of the team will lead to a smoother project with better results.

Here are a few tasks the project management team should perform regularly throughout preparation:

• Communicate with the accounting team and key stakeholders. Regular communication helps the project meet the expectations of all key stakeholders.
• Regularly monitor the project status. Monitoring helps the project meet its expected timeline and the project team identify any roadblocks that need to be resolved.
• Redeploy resources. Changing team members and assignments helps the utility meet overall goals. This is a vital part of the process.

5.    Debrief with the Project Team and Stakeholders

Reviewing results and making changes to meet new requirements, regulations, and market demands is a key principle of success.

After completing the annual financial report, the project management team should debrief with stakeholders. The team can then document which parts of the approach worked well and which parts should be changed in the coming project year, allowing them to improve future project-planning processes.

We’re Here to Help

For more information on how to prepare, plan, and complete a successful annual financial report, contact your Moss Adams professional.