How Do You Communicate Complex Financial Data to Non-Financial Stakeholders?
CFO Drive
How Do You Communicate Complex Financial Data to Non-Financial Stakeholders?
Communicating complex financial data to those not steeped in finance is a critical skill, so we turned to top financial executives for their strategies. From implementing a risk-scoring hierarchy to narrating the financial story for clarity, here are six methods shared by CFOs and Presidents on effectively engaging non-financial stakeholders.
- Implement a Risk Scoring Hierarchy
- Translate Data with Visual Aids
- Distill Reports into Visual Summaries
- Relate Financials to Stakeholder Interests
- Explain the 'Why' Behind the Data
- Narrate the Financial Story for Clarity
Implement a Risk Scoring Hierarchy
Communicating complex financial data to non-financial stakeholders can be a significant challenge, especially when conveying the nuances of financial risk. Often, financial struggles are obscured or downplayed to avoid disruption, making it difficult for organizations to grasp the full scope of the risk.
At Interos, we recognize that clarity and precision are essential in these situations. We advocate for a hierarchy for scoring and monitoring risk. By categorizing risks into levels of severity, companies can filter through vast amounts of data to identify the most pressing threats, enabling stakeholders to focus on what truly matters first.
Our approach is further strengthened when companies define the criteria and thresholds that are most critical to their financial stability. With these parameters in place, organizations can establish a 'Watchtower'—a real-time monitoring system that keeps a constant watch on those critical indicators. This proactive system empowers financial leaders to not only communicate the existence of risks but also their potential impact and the necessary actions to mitigate them, making it easier for non-financial stakeholders to understand and engage with the information.
In essence, by filtering the noise and focusing on what truly impacts financial stability, you can ensure that complex data becomes actionable intelligence. This, in turn, leads to better decision-making across the board, highlighting the crucial role that non-financial stakeholders play in the process.
Translate Data with Visual Aids
In my current and prior roles, I often need to translate complex financial data into actionable insights for non-financial stakeholders, such as board members or potential investors who might not have a deep financial background.
One notable example was during a quarterly board meeting where we needed to present performance and investment strategy. The financial data included detailed performance metrics, valuation reports, and projections that could be overwhelming to those not intimately familiar with financial jargon.
To address this, I took a multi-step approach:
Simplify the Narrative: I started by framing the presentation with a clear, high-level overview of the key messages we wanted to convey. This included our overall performance relative to benchmarks, major achievements, and strategic goals.
Use Visual Aids: I incorporated charts, graphs, and infographics to illustrate key points. For instance, I used a series of easy-to-read bar and line graphs to show performance trends over time. Visuals helped translate numbers into a story that was easier to follow.
Highlight Key Metrics: I focused on a few critical metrics that aligned with our stakeholders’ interests. For example, I emphasized return on investment (ROI), internal rate of return (IRR), and net asset value (NAV), providing simple explanations and context for why these metrics were important.
Encourage Interaction: I built in time for questions and discussions throughout the presentation. This allowed stakeholders to clarify any uncertainties and ensured that they were following along with the data.
Summarize and Next Steps: At the end of the presentation, I provided a concise summary of the key takeaways and outlined the next steps, including any strategic decisions or actions required from the board.
By using these techniques, I was able to effectively communicate the complex financial data in a way that was accessible and actionable for our non-financial stakeholders, ensuring they had a clear understanding of our fund's performance and strategic direction.
Distill Reports into Visual Summaries
Effectively communicating complex financial data to non-financial stakeholders requires translating technical jargon into clear, relatable terms. One successful approach I used was distilling financial reports into visual summaries, such as charts and graphs, highlighting key trends and impacts.
In a recent presentation, I used a dashboard that visualized revenue growth and cost savings instead of diving into detailed spreadsheets, explaining how these figures directly influenced the company’s strategic goals. I also connected the financial metrics to tangible business outcomes, like increased market share or improved customer satisfaction, which helped non-financial stakeholders grasp the relevance of the data to their roles and the company's success.
Relate Financials to Stakeholder Interests
Helping non-financial stakeholders understand financial statements is a large part of the CFO's job. The key is explaining statements and metrics in clear terms that they can relate to. Part of the process includes building a relationship with them and developing consistent messaging. I use the example that the P&L is about momentum, and the balance sheet is about strength. Once you get past the P&L and balance sheet, the rest of the reporting relates to these reports. If you lead them through the process, they become more comfortable, and often their questions provide more clarity to all involved.
Explain the 'Why' Behind the Data
With any complex financial data, I try to break it down into simple components that can be easily understood and explain what drives the results I am reviewing with the non-financial stakeholders, and also explain why this is important. I have found that explaining the 'why' is almost as important as the data itself in assisting stakeholders in understanding how it impacts them and the company.
For example, if I am explaining a complex budget model to them, I will walk them through the activities that drive an expense or revenue item so they can grasp how that affects that particular line item. When communicating financial results, I will explain the same drivers and how those affected the results, so they can grasp the concepts more easily.
Narrate the Financial Story for Clarity
Ever tried explaining a complex financial report to someone who just wants to know if they can take more money out of their business? It's a challenge to communicate complex financial data to non-financial stakeholders.
As the former Executive Director of Goldman Sachs 10,000 Small Businesses, I've worked with 886 small business owners who collectively generated 15,000 jobs and nearly $1 billion in revenue. One thing I learned? Many entrepreneurs don't 'know their numbers.' They often overlook their financials, missing opportunities to make informed decisions.
This isn't just about numbers on a page. It's about creating a narrative that resonates. When I communicate financial data, I focus on the story behind the figures. I break down complex concepts into relatable terms, showing how financial health impacts their business growth and exit strategy.
Did you know that most small business owners don't focus on the eight key drivers of company value? They often build businesses that rely heavily on one person, one client, or one vendor. This dependency can be detrimental, especially when they want to sell their business.
I use a statistically proven, structured methodology to help business owners create exit plans that can increase their company value by 71%. Yes, you read that right! And it starts with education and accountability.
To help, initially, I offer a free 40-question assessment based on those eight key drivers. This isn't just a checklist; it's the start of a roadmap to transforming their business into a valuable asset.
As an African American female business coach, I'm passionate about empowering entrepreneurs to see their business as an investment, not just a job.
