Communicating Financial Information

Tasks, tools and elements of communication

project/programme purposes are both judged and kept alive by their financial performances. That is why the effective communication of the proper financial information is one of the most important and challenging tasks facing any organization, as well as any of the subsidiaries, branches, departments, or teams within the organizational structure. Before it can be communicated, however, it must be understood. The ability to effectively communicate that information to others—and to do so in a way that will help them properly interpret it—can be just as important as understanding it.
This course will look at the many various ways financial information is presented, both internally and externally, such as annual reports, stockholder information, budgets, bids, press releases, and so on. It will also look at various ways to structure and present the information so it can be more easily understood and used as an effective communication tool both internally and externally. This course will also show how the audience the information is destined for shapes the way the information is structured and presented. 
 

Overview  As we all know, different numbers mean different things to different people.
project/programme purposes are judged and kept alive by their financial performance. The numbers that describe that performance are what we use to keep score of how well, or how poorly, our own organization is doing. When numbers are made public, everyone gets to see how well we are doing, just as we get to see how everyone else is doing.

Annual Reports and other Financial Documents

What Do the Numbers Really Mean? Numbers form a language of their own. In fact, they form numerous languages and dialects. As with spoken languages, just because you are fluent in one does not make you fluent in others. At times, you will need an interpreter. It is also possible to numb someone with numbers. When the vast majority of people have to spend too much time trying to deal with or understand numbers, the numbers become confusing and meaningless. Numbers can also be quite frustrating, and many people don’t trust them—sometimes with good reason.

What Are the Management Objectives Involved? Financial information is often seen as a sort of “report card,” a way of grading the organization, its executives, and the jobs they are doing. With this in mind, management must know what the numbers mean, and just why they are releasing them. In the same way that every speech, news release, statement, brochure, or publication has to have a purpose, so does every number.

Different Types of Financial Information There are many different types of financial information. These include those that are obviously financial: stock prices, quarterly or annual reports, and profit and loss statements, amongst others. All organizational information, however, can have a price tag attached to it, an impact on profitability, and thereby be considered financial information.

What Do the Numbers Mean to Various Audiences? Financial information provides a specific type of message. Like all messages, it can have different meanings for different people. Again like all messages, it can be tailored to a specific audience. You have to know what the numbers mean—or could be interpreted to mean—to each segment of your audience before you release them.

Deciding What Specific Information to Release Financial information is usually the most important and sensitive information a organization ever releases about itself. That is why it must be extremely careful about what it sends out and analyze the impact the information could have. Not only do you have to decide what information is worth, you also have to develop ways to protect it.

Deciding when to Release Specific Information If you talk to comedians, they will tell you that the secret of comedy is timing—having just the right number of beats between the set-up and the punch line. It is the same with financial information. Getting the timing right requires you to understand what else is happening in your organization, your field, the stock market, the government, the news, and the economy in general, and how your release and other events could react together.

Targeting Information for Internal Audiences Internal audiences often find different, more in-depth, incisive, and personal interpretations of financial information than external audiences do. As a result, releasing this information in-house can require as extensive levels of planning as go into releasing it externally. This is especially true if the numbers reveal bad news. Employees may begin to question their own job security and start to lose faith in their management. Morale can begin to suffer and employees can start job hunting.

Targeting Information for External Audiences To the outside world, you quite often “are” your financial report. You need to have some control over what that report and the other financial information you release says about you. When you release information you have to know both to whom you are speaking and that many people are seeing that information. Another important factor is how information will be used and interpreted. That is why you need an established information flow process.

What Does Each External Audience Need to Know? Different external audiences quite often concentrate on different aspects of a financial report. Even those that claim to look at the entire report still pick and choose which “numbers” to give the most weight or credence to. You must know what each outside audience is looking for and how they will most likely interpret it.

What Does Each External Audience Already Know? No annual report, quarterly earning statement, or other piece of financial information exists in a vacuum. The outside world already has a great deal of information about you and how you operate, as well as your past financial reports. They probably know much, much more than you think. You have to take all of this into consideration when you decide what to tell them “next.”

How Do You Help Them Interpret Information? You are the most logical and qualified source of information about your organization and about what the numbers and any other financial information you release really means. But if you do not help the outside world interpret the information, other people, including your competitors, will. Making sure that the numbers are interpreted properly is as important as the numbers themselves. At times, it is even more important. Let us look at how they can be interpreted, and at what people are looking for when they read them

Preparing Information There is more than accuracy involved in preparing financial information for release. In many cased the entire “package” is as important as the numbers it contains. In school, many of us lost points in math class because we didn’t “show our work”—show how we had reached our final answer. When it comes to financial statements, you will have to walk a fine line. You will have to show some “work,” but it can be damaging to show too much.

How Do Your Numbers Stack Up to the Competition’s? Regardless how you would like your information treated, people will automatically compare it to your competitors, to others in your field or sector of the economy, and to the economy as a whole. The people doing the comparing do not need your management’s approval, or even your help, to do it. They will very likely, however, need your help to do it right.

Making You and Your Numbers “Media Friendly If everyone in the news media were an accountant, you would not need to explain and interpret your financial statement. They aren’t accountants, but they have to explain those numbers to people who know even less about financial statements than they do. The key point to remember about the news media is that you do need one another. You have to get your message out to the various publics you want to communicate with. They need the stories you provide.