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@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.

2. 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.

3. Objectives and Highlights • Sifting the chaff-- what does and does not need to be communicated • Lighting the path—relating to your audience • Pointing out the potholes—emphasize the critical data • Walking together—establishing ongoing communication helpful to all

4. 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 children’s homes nationwide. $369M in assets, $293M of liabilities, now in Chapter 11

5. Who Cares? Integral role in financial communication • Both internal and external communications • Departmental budgets • Investor/constituent relations

6. 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

7. 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

8. 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

9. Instructor Definition of Communication “the transfer of an idea, concept, data or other information from one person to another”

10. Instructor Definition of NOISE “Unwanted sound, or the FAILURE to successfully transfer an idea, concept, data or other information from one person to another”

11. 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

12. Intent of Financial Communication • Report card of activity and status • Provide credibility • Stimulate thought or action

13. 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

14. 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” ….

15. Communicating with the Experts • Ask questions your audience will likely ask of you • Define terms in common language • Determine your communication goals

16. Poor Preparation by Recipient (audience) Homework • Data supplied by communicator Knowledge base • Lack of training/experience

17. Environment for Delivery not Conducive • Time and place for every communication • Distractions (i.e. audit report at end of long agenda)

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

19. Biggest Issue in Communicating • Every audience starts at one place • WHY should I listen? • Does it affect me? • Does it affect someone I know?

20. 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?

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

22. MORE Pitfalls • Using accounting to explain accounting • Failing to explain relevance • Overuse or improper use of technical terms

23. 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

28. Explain Some Terms • Depreciation • Deferred Taxes • Deferred Revenue • Budget Variance • Extraordinary items

29. Audience Examples • Biggest complaint from audience • Worst experience from audience • Best tip from audience

30. Objectives and Highlights-AGAIN • Sifting the chaff-- what does and does not need to be communicated • Lighting the path—relating to your audience • Pointing out the potholes—emphasize the critical data • Walking together—establishing ongoing communication helpful to all

31. 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