Our profession clearly plays a critical role in the economy. CPAs often work long hours and produce significant amounts of documentation. However, unless the result of our efforts is properly communicated to the appropriate people, the entire process loses much of its effectiveness. Communication of financial information plays a critical role in the life of every accountant.

I have witnessed many CPAs frustrated from the stress of attempting to communicate financial information to non-CPAs. A majority of the attendees at a session of the Third Annual VSCPA Industry Conference indicated they had experienced such frustrations.

While much of our profession's attention focuses on the formal presentation of financial statements, audit opinions and other reports, there are more mundane (and numerous) opportunities that we have to communicate with non-CPAs. In truth, most of our communication is one-on-one, rather than in formal boardroom settings.

CPAs often forget some basic elements of human communication in speaking about financial information. We must understand that communication can produce three primary results in the audience:

• A decision to proceed with true information.
• A decision to proceed with false information. 
• A decision not to proceed (often coupled with a decision to stop listening).

Clearly, results two and three are ineffective and can cause stress among all parties, most especially the person initiating the communication.

As with many problems, the inability to properly communicate information begins with poor planning and inadequate preparation. Our profession considers planning one of the 10 basic standards of our "fieldwork." However, we often fail to prepare properly for our communication efforts. If we planned communication as well as we planned engagements and other work, we could greatly enhance our effectiveness.

Communication is the transfer of information from one person to another. If the listener does not receive the same information that was transmitted by the speaker, then we simply have noise, or unwanted sound. Humans do not enjoy listening to noise. This "transfer" process is not always given the attention it deserves.

Planning

Clearly, you must understand information before attempting to communicate it to another person. However, we have all seen or have personally experienced the stressful point at which a CPA is "stumped" for an answer. This embarrassing moment could arrive during a financial presentation to a board of trustees, to a supervisor or to a colleague or client. This situation can often be avoided by using the following steps:

1. Before communicating information, develop a thorough understanding of the financial data, its source and how it was developed.
2. Determine in advance the overall intent or goal of your communication effort. What do you want to achieve?
3. Understand the audience's expectation of the communication effort. What does the audience want to achieve?
4. Understand the audience's perspective.

We sometimes take for granted that we understand the data, since we may have personally compiled it. However, "knowing the numbers" does not equate to "understanding the numbers."

The best method I have found to check my knowledge of the material is to quiz myself -- trying to "stump myself." Why did payroll taxes go down when salaries increased? Who provided the budget or forecast estimates and what assumptions were used? How are the data sources for my information related to the audience? Ask yourself if information presented to one department was based on an assumption from another department, and if that will be acceptable to the audience.

CPAs often fall into a communication trap: because of our training, we want to disclose far too much. Determine ahead of time the basic elements that must be communicated. I am not arguing that full disclosure, such as with financial statement footnotes, is not necessary. I simply feel that many CPAs try to add "footnotes" to every communication effort, to the extent that it just becomes noise. There's a nasty thing about noise -- it causes people to stop listening.

Winston Churchill said, "Courage is what it takes to stand up and speak. Courage is also what it takes to sit down and listen." Above all, do not try to communicate a number, but rather an idea. I know that is difficult for us to believe, but the idea of an increase in sales, a decrease in net profit for the first time in a year or a spike in raw materials cost, is much more important to get across than the actual numbers or percentages.

What does your audience want from the information? We often forget that not everyone has the same concept of "the bottom line." Accountants rarely differ; we think the "bottom line" is the line at the bottom of the page -- net income, for example. Our reports are designed that way and we will often bias our communication toward what we print on the bottom line of the page.

But, to the sales manager, our "top line" (sales or revenue) may be the "bottom line." The "bottom line" for the manufacturing director may be cost of sales. The "bottom line" for the county treasurer may be taxes collected. Effective communication planning requires an understanding of the audience's intent.

Similarly, we often forget the perspective, both professional and personal, of the audience. We can sometimes use our verbal discussion of written data to achieve desired results. If a CPA meets a manager who is also a baseball fan and explains that the information shows a "home run," the details will not matter -- but the point will get across. Pointing out to a marathoner that the department will likely struggle across the finish line to meet the sales budget is more easily grasped than reporting that the department achieved only 70.3 percent of the budget in the first 11 months. Understanding how you can use key words and phrases can make communication a lot easier.

Pitfalls

Avoid the following pitfalls in communicating financial information:

• Overuse of acronyms -- Watch your alphabet soup of FASB, GASB, RevProc, etc.
• Technical complexities -- Do not try to prove your knowledge by boring your audience.
• Footnotes -- You can always point out special notes and disclosures, even review one or two, but remember they are like salt on food -- don't overdo it.
• Small font -- Increase the default font size in your software; everyone will appreciate it.
• Endless lists of data -- Use this tactic if you really want to create a sleep aid.
• Pennies on reports -- Detailing cents makes no sense. After all, what would a penny buy?
• Defining accounting terms or answering questions by using accounting terms -- Most people do not flavor their speech with "accrue," "defer" and "debit," and they relate the word "record" to music, not to financial data.
• Remember that you do not win a prize for proving how exact you can refine a number; better to communicate the sense of what the number means to the audience.
• Do not add more description after the audience says "okay, I understand."

Techniques

Use the following techniques to enhance communication efforts:

• Use overviews or executive summaries, but resist the urge to make the summary longer than the data it summarizes.
• Use charts or graphs, but only when the colors show large and distinct differences -- otherwise, summarize first, then graph the summary.
• Use plain language -- Try hard to use simple terms that are universally understood by non-accountants, i.e. "income is down" is better than "our financial activity for the six months ended June 30, 2004 was 6.2 percent, or $23,123.39 less than for the comparable period in the prior fiscal year."
• Perform a "dry run" to an uninterested non-CPA -- Assistants or friends work well in this role; better yet, use that inquisitive staff member.
• In situations of repetitive communication, learn about your audience, what they want, what questions they ask and how they think. In short, LISTEN to learn how to communicate.
• Use the KISS theory -- Keep It Short and Simple.
• Above all, keep the energy level up and maintain a positive attitude, even in the face of having to convey "negative" information.

JIM COLE, CPA, is director of development for the Masonic Home of Virginia. His 25 years of experience with corporations and nonprofits include roles as a founder, officer, consultant and auditor. He regularly speaks on topics including financial reporting, communicating with non-accountants, accounting and auditing issues, endowment administration, tax, fundraising, planned giving and organizational structures for nonprofits and their taxable subsidiaries. He can be reached at Jdcole2001@aol.com.