Do you find it difficult to communicate crucial financial information to stakeholders? You’re not alone. Bridging the gap between your financial knowledge and experience and the knowledge and experience of stakeholders who may not be familiar with finance or financial language is a challenge for many. According to one study on effective communication:

"Various capital market constituents, including regulators, standard setters, professional accounting bodies and auditors, have criticised the quality of information provided by listed firms."

The biggest criticisms levelled against the way in which finances are communicated were:

Needless to say, these are issues that many organizations' finance departments struggle with. But they don't need to be! Read on for 8 top tips to communicate financial information to stakeholders more effectively.

Being succinct means getting to the point quickly and with clarity. There's no point beating around the bush. Say what's most important and say it simply.

"Many stakeholders from outside the finance department simply don't have the knowledge or training to understand much of the technical jargon that is typically provided in financial reports. This can make presentations feel intimidating, confusing and, quite frankly, rather dull to non-finance professionals." - Angelina Webb, writing for Ambition.

Bear this in mind when you present your information. Follow the KISS principle - i.e. Keep It Simple, Stupid.

As you've heard a million times before, a picture is worth a thousand words. In an increasingly visual world, many people find it much easier to understand their finances when looking at graphs or highlighted reports than at your typical financial statement.

It's not enough to export your profit and loss or balance sheet straight from your accounting software. You need to provide a clear illustration of your financials. Summary insights, graphs, charts, and reports can be far more effective than financial statements as they help the stakeholder to make visual sense of what your financials are, rather than allowing them to draw their own conclusions.

However, you don't want to overwhelm the stakeholder with pages and pages of information. Condense what's most important and if the stakeholder has specific queries, explain those.

Focus on key performance indicators (KPIs) that are unique to your business. And be specific about the objectives of the meeting.

This links back to tip number one as clearly stating your objectives will make it easier to stay on track. It will also allow you to get the stakeholders to focus on what's most important.

What is relevant for these particular stakeholders to know and understand?

Open communication means giving your opinion without fear of negative consequences. You should exchange information regularly with your stakeholders.

This kind of transparency enables you to maintain trust and ensure that stakeholders are kept in the loop on every important issue.

Looking at past financials is important, but so too is looking towards what's yet to come. What goal are you striving for? What might the future look like?

"Discussing financial information as it relates to desired future outcomes or the accomplishment of past goals helps users answer the question, “Why?”" - Ali Barnes, CPA, CGFM, writing for Yeo & Yeo

It can be helpful to take a look at short-term cash flow forecasts to prevent future cash flow problems, or to create longer term forecasts which focus on all areas of your profit and loss, balance sheet, KPIs, and cash flow statements.

Fully integrated forecasts like Syft's 4-Way Forecasts help you to create robust, transparent, integrated forecasts for management teams, clients, investors, and financial institutions. These, once again, present a visual representation of crucial financial information.

Which are the history lessons you remember best? For me, it's the ones where my teacher told us what happened in the form of a story. And this isn't just an anecdote. We retain information better in story format than we might otherwise.

Storytelling is a powerful mechanism for conveying important information. According to one study:

"Being easily digested by the human brain, stories help bridging between our logos and pathos; when an audience becomes emotionally receptive of facts, chances increase that they will respond and act on the knowledge."

In Jungian psychology, logos is the principle of reason and judgement, while pathos is an appeal made to an audience's emotions so as to evoke feeling. So, in other words, stories bridge the gap between reason and emotion. Stories inspire emotion in us that makes us more likely to engage with the facts being presented.

Different stakeholders have different expectations and different levels of financial understanding. For employees, there are certain areas you may want to focus on that pertain to their performance, sales, and so on, while for external stakeholders, your approach will necessarily be different.

For instance, if you're after a line of credit from a bank, you need to be able to distil your entity's financial results into a simple format that illustrates why they should loan you money. The bank will want to know that you are able to pay your bills and that you have reliably collected payments from customers in the past. They will also want to see evidence of consistent and stable profitability. If you need to explain the details of any of these aspects of your business, do so.

On the other hand, when it comes to investors, you'll need to show how your business can generate a return for them and let them know that their capital isn't in peril in your hands.

Similarly, for strategic partners, you need to show that their commitment to providing resources to you will bear fruit down the line.

Lastly, it helps to be prepared to answer any difficult questions your stakeholders may have. Think of what kind of questions may arise before-hand and practice answering them. Remember to keep your answers as short and simple as possible so that they are more easily digestible. Being able to explain with clarity and brevity will reassure stakeholders that you know what you are talking about.

Communicating financial information to stakeholders is crucial to the healthy functioning of your organization. While it can be daunting or even frustrating to explain things that you find easy to understand to those who know nothing about the subject, this doesn’t have to be a chore. If you stick to simple explanations, use visualizations and storytelling techniques, clearly state your objectives, and tailor your explanations to suit the stakeholder in question, the results will be much better for everyone involved.

As always, it’s vital that you are transparent and have anticipated any questions that may arise. Looking towards the future, and not only at past trends, can also help shift stakeholders’ perspectives and think about how your organisation will move forward.

This article was originally written for Stretto Strategies. You can read the original version on their site here.