1 communicating financial information to a non-financial audience iabc international conference june...
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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 [email protected]
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