How Do You Communicate Complex Financial Information to Non-Financial Audiences?

How Do You Communicate Complex Financial Information to Non-Financial Audiences?

Communicating complex financial information to those outside the finance bubble is a crucial skill, so we've gathered insights from top CEOs and CFOs to illuminate the process. From simplifying financial terms for clarity to focusing on relevant financial metrics, explore the six strategies these financial experts use to make intricate financial data accessible to all.

• Simplify Financial Terms for Clarity
• Highlight Key Takeaways in Benefits
• Relate Financials to Familiar Concepts
• Use Visuals for Financial Transparency
• Communicate Budget with Clear Language
• Focus on Relevant Financial Metrics

Simplify Financial Terms for Clarity

Finance professionals often encounter the challenge of communicating intricate financial information to audiences without a financial background. This necessitates simplifying the communication to ensure clarity and understanding.

For instance, at BPlan Experts, when we perform financial projections or valuations, we encounter terms like "cash in hand," "Internal Rate of Return (IRR)," and "Discounted Cash Flows (DCF)." While these concepts are fundamental to those with financial expertise, expecting non-financial clients to grasp them without simplification is unrealistic. Therefore, I have always suggested to my team that they present financial information in an accessible manner, akin to explaining it to a five-year-old.

To illustrate, consider the term "cash in hand." For a startup, having a cash reserve is crucial to weather initial losses until the company reaches operational profitability. When explaining this to a client, we describe "cash in hand" as the total cash available to cover expenses until the business starts making a profit. This simple explanation helps clients understand not only the concept but also its importance.

Moreover, we emphasize why maintaining a cash reserve is essential. By linking the concept to the client's specific context and goals, we ensure they appreciate its significance and make informed decisions. This approach fosters better communication, enhances client relationships, and ultimately contributes to their business success.

Highlight Key Takeaways in Benefits

Our company launched a deferred-compensation unit plan, also known as phantom equity, for our employees. To communicate this benefit, it was important to emphasize the bottom line first—that this was a big win—and then identify a short list of takeaways the employees could remember and re-explain to their partners. I highlighted the takeaways in a one-pager with the what, how, and why and provided a simple example. It was important to minimize jargon and acronyms while allowing the employees to feel valued and informed.

Relate Financials to Familiar Concepts

I once explained our company's EBITDA to our team of mostly engineers during a quarterly presentation. I used the likeness of a complex system they were developing—the earnings were the operational part of the system, the interest and taxes were the unavoidable technical glitches, while depreciation and amortization were the system upgrades we had to account for over time. It not only made the conversation engaging but also connected their hard work to the company's fiscal health in a language they could relate to.

Use Visuals for Financial Transparency

I am a big advocate of transparency, which extends to our organization's financials. When I explain our monthly or quarterly financials to team members less familiar with this type of data, I break numbers down to their simplest terms and utilize clear visuals, often sharing my screen while I guide them through various pieces of information. I show how small changes and improvements compound to produce excellent results over time, and I avoid jargon and instead use simple terms. This approach has helped demystify the numbers and show how each department's efforts contribute to our success. Ultimately, it's about simplifying the complex and connecting the dots from what we each do daily to our collective goals.

Communicate Budget with Clear Language

I had to present to a local community organization planning a new community center that would highlight a new space for a culinary arts education center for all ages. I needed to present the budget proposal to the community members, many of whom didn't have a financial background.

Key Points to Communicate:

1. Purpose of the Budget: Explain why the budget is important and how it will help achieve the community center's goals.

2. Breakdown of Costs: Use simple terms to describe major expenses, such as construction, equipment, and staffing.

Visual aids like charts or graphs can help make the information more accessible.

3. Funding Sources: Clearly outline where the money is coming from, such as grants, donations, or community fundraising efforts.

4. Impact on the Community: Highlight the benefits of the community center, such as providing a space for culinary events, classes, and social gatherings.

5. Call to Action: Encourage community members to support the project, whether through donations, volunteering, or spreading the word.

By focusing on these key points and using clear, simple language, you can effectively communicate financial information to a non-financial audience.

Focus on Relevant Financial Metrics

When explaining our quarterly financials to a team unfamiliar with the details, I identified the key metrics that mattered most, such as cost savings and sales performance. I focused on these areas to make the information relevant and engaging.

By using simple examples and linking the data to their daily tasks, I helped them see the direct impact of their work.