How do you communicate P& balance sheet and cash flow statements to non-financial audiences?

Start with the end in mind. What does your audience care about? Do they need detail or summary data? Do they care about departmental performance or the entire company? These questions will help shape the type of reporting and breakout data you want to share.

A great way is to know your audiences. You should cater to the audience based on their assumed lived experiences. Use analogies that align with what they know best, and keep it simple stupid (KISS). You DO NOT want to talk over their head. Use stories about things they know to convey your point, and focus on specific items that are of note. If CAPEX was a big thing this quarter, focus in on that. If COGs mitigation was something your team worked hard on, showcase that. There is oftentimes no need to look at every single line item. This can be very dry, and overcomplicate something that does not need that much detail. Have a solid Q&A session after your report and take your time to make sure they understand your responses.

Understanding your audience is crucial when communicating financial statements to non-financial stakeholders. Identify their roles, familiarity with financial concepts, and their primary interests. For example, an HR manager may be interested in how the company's financial health affects hiring and benefits, while a marketing executive may focus on budget allocations and sales performance. Tailor your communication to their specific concerns and level of understanding to ensure relevance and engagement.

Example: If you're presenting financials to a marketing team, focus on how changes in cash flow or balance sheet figures impact their campaigns and budgets. Critical Insight: Tailor your communication to what your audience cares about. Non-financial teams may not need to know technical accounting terms but should understand how financial data affects their decision-making. Knowing their priorities helps translate the numbers into meaningful actions, like highlighting how cash flow affects project funding.

Communicating P&L, balance sheet, and cash flow statements to non-financial audiences can be simplified by focusing on the core insights these documents provide. For the P&L, highlight revenue, expenses, and net profit to show how the company is performing. For the balance sheet, emphasize assets, liabilities, and equity to illustrate financial health. Lastly, for cash flow statements, underscore operating, investing, and financing activities to demonstrate how cash is being managed. By translating these elements into everyday language and connecting them to business outcomes, you make financial data accessible and relevant to everyone.

Translate complex financial data into simple, digestible information. Use plain language and avoid jargon. For example, instead of saying “liquidity ratios,” explain it as “our ability to pay short-term bills.” Provide key takeaways and focus on the most critical numbers like revenue, profit, and cash flow. Visual aids such as charts, graphs, and infographics can help illustrate points clearly. For instance, a bar chart showing revenue growth over time can be more impactful than a table of numbers.

Simplify and Summarize: Example: Instead of presenting the entire balance sheet, summarize key takeaways like “We have $500,000 more in assets than liabilities, meaning we’re financially healthy and can fund new projects.” Critical Insight: Non-financial audiences are often overwhelmed by too many details. Focus on key points—like profit, asset strength, or debt levels—using simplified language. Use visuals like graphs or charts to convey the relationship between assets, liabilities, and equity to make it more digestible.

The presentation should be clear on how the business is measuring up to the goals and strategies both current and long term. Present in a way that makes sense to the audience you are addressing. Be sure to include any relative industry trends and market changes that may be impacting the business. Don't just put a bunch of numbers on paper and expect non-financial people to get it. Make it meaningful to the audience. If merchandise show overspending, inventory turns, margin and other relative KPIs. Use a mixture of financial and operational measures. Make it brief and colorful so it isn't overwhelming.

A financial report has to necessarily highlight what the figures speak. To interpret what numbers talk about is essentially the job of a presenter. Ex, low net margin for a quarter, why did it happen? What were the additional investments, what were the reduced sales/delivery factors, what were limitations? what were the operational inefficiencies. Every number speaks, and we have to tell them about it. A P&L statement doesn't just happen, it speaks of a history of collective actions of an enterprise.

Frame the financial information within a narrative to make it more relatable and engaging. For example, explain how a successful marketing campaign increased sales, boosting revenue and improving the bottom line. Use real-world examples and anecdotes to illustrate the impact of financial metrics on the business. Narratives can help connect abstract numbers to concrete outcomes, such as how cost savings in operations led to higher profit margins and allowed for reinvestment in new product development.

Example: “Last quarter, we invested heavily in product development, which is why you’ll see a decrease in cash flow. But those efforts are leading to a stronger asset base, which positions us for higher revenue next year.” Critical Insight: Storytelling makes abstract financial data relatable. Link the financials to business actions and outcomes, such as investments or cost-saving initiatives, to illustrate how numbers translate to real-world scenarios. This approach keeps non-financial audiences engaged and helps them see the broader business picture.

Encourage questions and be prepared to address them in a clear and concise manner. Anticipate common queries such as “What does this mean for our department?” or “How does this affect our future plans?” Provide straightforward answers and, if necessary, follow up with more detailed explanations or visuals. For example, if asked about the impact of a high accounts receivable figure, explain it in terms of cash flow timing and potential risks, and outline steps being taken to manage it.

Example: When asked, “What does a negative cash flow mean?” explain, “Negative cash flow this quarter reflects our capital investment in new equipment, which is expected to boost production and profits next year.” Critical Insight: Encourage questions to ensure understanding and bridge knowledge gaps. Simplify complex terms by tying them to operational realities your audience can relate to, like explaining cash flow in terms of funding future growth.

Plain Language: Avoid technical jargon and complex terminology. Explain financial terms in simple language and provide context to aid understanding. High-Level Summary: Start with a high-level summary of each statement, highlighting key metrics and trends. Focus on the most relevant information for the audience. Narrative Explanation: Provide a narrative explanation of the statements, discussing the meaning and significance of key figures. Comparative Analysis: Compare current performance to previous periods. Highlight improvements or areas for attention. Relevance to Audience: Tailor the communication to the interests and concerns of the audience. This way, you can ensure greater understanding of financial information.

When communicating financial information to non-financial audiences, consider using visual aids like charts or graphs to further simplify complex data. For example, a pie chart showing the breakdown of expenses can quickly convey how resources are allocated, making it easier for the audience to grasp key points. Additionally, be mindful of the tone and language you use, avoiding jargon and focusing on clear, concise explanations. By consistently applying these practices, you ensure that your communication is effective, engaging, and tailored to your audience’s needs.

Example: Use tools like interactive dashboards or real-time Q&A sessions after presenting the financials, allowing the team to explore specific sections of the balance sheet or cash flow statement in detail. Critical Insight: Consider ongoing education or using digital tools to make financial data more accessible. Training teams on how to read simplified financial reports can empower them to better understand the business implications of P&L, balance sheets, and cash flow data over time.