As companies grow, groups of individuals naturally form into divisions, departments and even regional locations. As this business structure forms, financial reporting must also become more segmented in order to determine if and how each line of business or department is contributing to the overall financial success of the company. The challenge with this is that the individuals in charge of these segments are rarely financial experts or accountants (nor are they expected to be) and trying to communicate financial goals and results to these key leaders can be like trying to communicate in a different language.

Ensuring each business unit is aware of its contributions to company success as well as any key financial trends or objectives is more complicated than simply exporting and presenting a report from the company’s ERP and expecting that the information be understood. Financial managers have to educate and share the numbers in an appropriate and effective way to ensure maximum impact.

So how do financial leaders communicate to these middle-managers without causing them to either fall asleep, become even more confused, or worse – be so intimidate by all the numbers that they nod their heads in false understanding? We invite finance managers everywhere to take a page from the book of their marketing counterparts and get to know their audience. Tailoring the message and the way it is delivered can increase comprehension exponentially.

How to Communicate Financial Information to Non-Financial Stakeholders

Here are 5 guidelines that will help even the most technical of finance gurus to effectively communicate key financial information to non-financial stakeholders:

  1. Understand what your audience can control. Overall, managers only need to know what they can control. For example, if their administration costs are too high resulting in a bottom-line loss, provide them with those numbers because they have control over that spend. Middle managers likely don’t have any control over the cost of rent for an office building, so you wouldn’t show them details about their occupancy costs. However, they can control their marketing budget, so communicate the details surrounding that. By showing them where their money is being spent and where they can effect change if necessary, you will be as relevant as possible. Half the battle as a finance manager trying to communicate to stakeholders is understanding what they REALLY need to know. What key financial results related to their profit center should be presented in order for them to effectively understand whether what they are doing is working, or if there are opportunities for improvement?
  2. Eliminate accounting jargon and acronyms. Like any other profession or specialization, finance managers learn many different acronyms and use jargon that helps to keep communication amongst finance peers and associations quick and concise. However, the bulk of this language is likely not known to others outside of your accounting and finance team. By using acronyms you will lose your audience, because they will spend more time trying to figure out what the acronym stands for than actually retaining any of the information you are providing. Always spell it out for them and use layman’s terms! Do you have an example here of an acronym – stories are always good!
  3. Minimize the noise. Financial statements and reports can be intimidating for those who don’t have the training or experience to read and interpret them. Try massaging the reports before they reach your audience. Scale the information down to the base facts and necessities that are relevant to them. Reduce the amount of noise by eliminating formal statements, vague report column names or legends that contain company labels or jargon. Pull only the information that is relevant to them – less is definitely more in this case.
  4. Use text and images instead of numbers to show trends and summarize data. Nobody outside of finance wants to sit down and review a presentation full of Excel tables and numbers that they don’t truly understand. Make the information more legible by showing specific trends using graphs or charts. Rather than just throwing out a bunch of numbers, provide a summary or overview of the information in writing. This is where the use of dashboards can prove very helpful.
  5. Be consistent. Make an effort to present the information to people the same way for each reporting period. While the content and message may change, the delivery and metrics shouldn’t. Using the same measures and explanations gives each manager the opportunity to understand basic concepts and know what to expect in each meeting. Once they have this understanding, they will begin to ask more in-depth questions and gain a better concept of what they are accountable for from a financial perspective. Dashboards will provide a tool for them to interact and engage with on demand, helping to further increase their interest in the company’s overall financial position and tie those into to their everyday activities and decisions.

Communicating key financial information to non-financial stakeholders is vital for ensuring understanding and action from each department or division. By taking a little extra time to consider the audience, finance managers can help anyone in the organization understand the language of numbers.

Please contact us with any questions. We are here to help!

This Tip was written by:

Lonnie Dowdell, CGA

Lonnie completed her CGA in 2011, while working as the assistant controller of a private consulting company in the Ottawa area.  In 2012, the company went public through means of a reverse-takeover and she was promoted to Controller, responsible for all financial reporting, the management of a 6 person accounting team, and all ERP system development and integration projects.  Having been a Microsoft Dynamics GP end user for 6 years, she recently transitioned into a consulting role at CRGroup working with Dynamics GP clients and prospects.