Communicating Financial Information to a Non-Financial Audience

1
Communicating Financial Information to a
Non-Financial Audience

• IABC International Conference
•  
•  
• June 27, 2005
• Washington, D.C.
• James D. Cole, CPA
• Email questions to jdcole2001_at_aol.com
• Disclaimer This presentation is made in support
  of the educational efforts of the participants
  and should not be deemed to represent
  professional advice of a legal, accounting or
  investment nature. The application of these
  concepts as presented is necessarily dependent on
  the circumstances of each situation and would
  therefore require appropriate consultation with
  professional service providers before
  implementation.

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Communicating Financial Information to a
Non-Financial Audience

• GOAL
•   
• Learn what does and does not need to be said
  and how to walk through critical information
  with non-financial audiences. Also learn how to
  obtain better information from accountants and
  financial experts to improve YOUR communication
  efforts.

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Objectives and Highlights

1. Sifting the chaff-- what does and does not need
   to be communicated
2. Lighting the pathrelating to your audience
3. Pointing out the potholesemphasize the critical
   data
4. Walking togetherestablishing ongoing
   communication helpful to all

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Who Cares?

• Poor financial communication examples
• Enron ( i.e.Where did Arthur Anderson go?)
• Worldcom (see above)
• Internet stock bubble
• NBA (National Benevolent Association)The
  organization operates more than 90 nursing homes,
  senior facilities and childrens homes
  nationwide. 369M in assets, 293M of
  liabilities, now in Chapter 11

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Who Cares?

• Integral role in financial communication
• Both internal and external communications
• Departmental budgets
• Investor/constituent relations

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Background of communication

• Internet definitions of communication
• The activity of communicating the activity of
  conveying information they could not act
  without official communication from Moscow
• www.cogsci.princeton.edu/cgi-bin/webwn

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Background of communication

• A connection allowing access between persons or
  places a secret passageway provided
  communication between the two rooms
• www.cogsci.princeton.edu/cgi-bin/webwn

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Background of Communication

• The act of transmitting verbal and non-verbal
  information and understanding between seller and
  buyer.
• www.ncn-ltd.co.uk/sellingtaster/misc/glossary.htm

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Instructor Definition of Communication

• the transfer of an idea, concept, data or other
  information from one person to another

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Instructor Definition of NOISE

• Unwanted sound, or the FAILURE to successfully
  transfer an idea, concept, data or other
  information from one person to another

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Communication and Noise Common Attributes

• Both can result in action
• Decision to proceed with true information
• Decision to proceed with inaccurate information
• Decision to NOT listen

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Intent of Financial Communication

• Report card of activity and status
• Provide credibility
• Stimulate thought or action

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Problems from the Beginning

• Poor preparation by communicator
• What is SPECIFIC intent?
• Varies from type of data (i.e. audit versus
  budget)
• Communicator lacks information
• Background of data
• Goal of audience

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What About the Experts?

• Role of CPA
• Per Virginia Society of CPAs website, One
  advantage of working with CPAs is that they speak
  your language .. they are adept at untangling
  financial as well as non-financial puzzles and
  illustrating the total picture with clarity and
  objectivity .

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Communicating with the Experts

• Ask questions your audience will likely ask of
  you
• Define terms in common language
• Determine your communication goals

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Poor Preparation by Recipient (audience)

• Homework
• Data supplied by communicator
• Knowledge base
• Lack of training/experience

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Environment for Delivery not Conducive

• Time and place for every communication
• Distractions (i.e. audit report at end of long
  agenda)

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Communication Planning

• Thorough knowledge of raw information
• Understand audience
• Agree on motive, approaches
• Provide material ahead of presentations

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Biggest Issue in Communicating

• Every audience starts at one place
• WHY should I listen?
• Does it affect me?
• Does it affect someone I know?

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CRITICAL CONCEPT

• RELATE to the audience
• Sales people want SALES data
• Cash managers want cash, not accruals
• Stockholders want EPS, etc.
• ExecutivesBIGGER picture and bottom line
• The public WHY do I need to know?

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Pitfalls

• Acronyms FASB, GASB, RevProc, etc.
• Technical complexities
• Skipping footnotes or appendices
• Small font
• Endless lists of data
• Pennies in reports

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MORE Pitfalls

• Using accounting to explain accounting
• Failing to explain relevance
• Overuse or improper use of technical terms

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Better mousetraps

• Charts, graphs
• Overviews, even for audited reports
• Plain language
• Use examples audience can relate to
• Refer to products (sales of cars, etc.)
• Use the terminology of your audience

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Explain Some Terms

• Depreciation
• Deferred Taxes
• Deferred Revenue
• Budget Variance
• Extraordinary items

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Audience Examples

• Biggest complaint from audience
• Worst experience from audience
• Best tip from audience

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Objectives and Highlights-AGAIN

• Sifting the chaff-- what does and does not need
  to be communicated
• Lighting the pathrelating to your audience
• Pointing out the potholesemphasize the critical
  data
• Walking togetherestablishing ongoing
  communication helpful to all

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• Websites for reference
• http//www72.homepage.villanova.edu/susan.stiner/c
  gu/2003Files/comm03.htm
• http//www.wolfkeens.com/BIGPICTURE/pages/wp10.htm
  l
• http//www.ibm.com/investor/financialguide/
• http//www.onlinewbc.gov/docs/finance/fs_intro.htm
  l
• http//www.kodak.com/US/en/corp/annualReport03/ind
  ex.shtml