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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@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 path—relating to your audience

3. Pointing out the potholes—emphasize the critical data

4. Walking together—establishing ongoing communication helpful to all

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Who Cares?Poor financial communication examples

a) Enron ( i.e.—Where did Arthur Anderson go?)b) Worldcom (see above)c) Internet stock “bubble”d) NBA (National Benevolent Association)

The organization operates more than 90 nursing homes, senior facilities and children’s 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 CPA’s 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. Executives—BIGGER 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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A B C , I n cM o n t h l y I n c o m e S u m m a r y

J a n u a r y 2 0 0 4

R e v e n u e s

I n c o m e f r o m P r o g r a m A 2 0 2 , 6 1 8 . 0 2

I n c o m e f r o m P r o g r a m B 1 1 , 3 2 4 . 6 5

I n c o m e f r o m P r o g r a m C 3 , 2 3 5 . 2 2

I n c o m e f r o m P r o g r a m D 2 , 2 3 5 . 1 0

I n c o m e f r o m P r o g r a m E 1 1 , 2 4 4 . 5 0

I n c o m e f r o m P r o g r a m F 1 2 , 4 5 6 . 5 7

I n c o m e f r o m P r o g r a m G 4 , 5 4 5 . 2 2

I n c o m e f r o m P r o g r a m H 2 2 4 . 1 6

I n c o m e f r o m P r o g r a m I 3 8 , 1 1 1 . 0 0

I n c o m e f r o m P r o g r a m J 6 9 2 . 7 8

O t h e r I n c o m e 3 4 2 . 0 0

T o t a l R e v e n u e s 2 8 7 , 0 2 9 . 2 2

E x p e n s e s

A d m i n i s t r a t i o n

W a g e s 8 0 , 2 6 4 . 5 9

P a y r o l l T a x e s 8 , 0 1 5 . 4 6

E m p l o y e e I n s u r a n c e s 3 , 2 9 1 . 1 4

P e n s i o n 2 , 1 7 4 . 5 2

R e c r u i t i n g 8 4 0 . 0 0

P r e - e m p l o y m e n t S c r e e n i n g s 3 2 5 . 2 0

E m p l o y e e S c r e e n i n g s 2 2 3 . 0 0

E m p l o y e e D e v e l o p m e n t 2 1 . 0 0

P a y r o l l S u p p l i e s & S u p p o r t 7 1 5 . 6 5

E A P / W e l l n e s s P r o g r a m 7 8 4 . 3 9

A s s o c i a t i o n D u e s & L i c e n s e s 5 9 1 . 6 6

E m p l o y e e M i l e a g e 3 , 5 2 5 . 3 4

L o d g i n g 1 , 8 5 6 . 5 4

E m p l o y e e M e a l s 7 8 5 . 6 9

C o n f e r e n c e / M e e t i n g R e g i s t r a t i o n 3 3 2 . 2 0

O f f i c e S u p p l i e s 5 1 5 . 4 4

C o m p u t e r S u p p l i e s / R e p a i r s 5 6 . 4 5

P r i n t i n g / C o p y i n g 6 , 5 4 4 . 2 0

P o s t a g e / C o u r i e r 6 5 9 . 5 4

A d v e r t i s i n g / P u b l i c R e l a t i o n s 5 6 5 . 8 9

G e n e r a l I n s u r a n c e 1 , 5 4 8 . 0 0

S u b s c r i p t i o n s 3 3 2 . 4 5

M i n o r E q u i p m e n t / F u r n i s h i n g s 2 3 . 2 3

E q u i p m e n t L e a s e 9 6 4 . 3 6

E q u i p m e n t M a i n t e n a n c e 6 6 . 3 0

P u r c h a s e d M a i n t e n a n c e 9 2 2 . 5 6

G r o u n d & B u i l d i n g S u p p l i e s 3 3 4 . 8 0

G r o u n d s M a i n t e n a n c e & S u p p l i e s 3 5 5 . 8 0

V e h i c l e F u e l 1 2 4 . 4 5

T e l e p h o n e / P a g e r s 1 , 8 1 7 . 3 5

W a s t e R e m o v a l 3 5 . 0 0

F o o d 3 6 0 . 0 0

O t h e r S u p p l i e s 1 , 2 2 4 . 5 8

L e g a l 9 9 4 . 4 0

A c c o u n t i n g F e e s 2 , 4 4 4 . 1 7

C o n s u l t i n g 2 3 4 . 6 5

F i n a n c i a l I n s t i t u t i o n F e e s 3 3 8 . 4 6

G i f t s 6 5 . 2 0

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Expenses 1

2

3

4

5

6

7

8

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Expenses

Personnel 96,655

Travel 6,500

Publications 7,204

Other 13,975

Total Expenses 124,334

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Expenses

1

2

3

4

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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

1. Sifting the chaff-- what does and does not need to be communicated

2. Lighting the path—relating to your audience

3. Pointing out the potholes—emphasize the critical data

4. Walking together—establishing ongoing communication helpful to all

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7) Websites for reference

http://www72.homepage.villanova.edu/susan.stiner/cgu/2003Files/comm03.htm

http://www.wolfkeens.com/BIGPICTURE/pages/wp10.html

http://www.ibm.com/investor/financialguide/

http://www.onlinewbc.gov/docs/finance/fs_intro.html

http://www.kodak.com/US/en/corp/annualReport03/index.shtml