Estimated reading time: 6 minutes, 32 seconds

Communicating Numbers Effectively to Clients

Randall Bolten, LucidityNumbers are the cornerstone of knowledge for accountants and other financial professionals, but for many of your business clients, numerical information can be confusing or worse yet, meaningless.  Consider how many clients admit they file away their financial statements or tax returns each year without ever looking at them again.

But unfortunately, clients who don't understand the numerical information are less likely to seek advice on handling opportunities or challenges revealed in the numbers.

Furthermore, they may be skeptical of additional advisory services offered by their accountants, because they don't see evidence of a need for action. This equates to lost opportunity for the accounting firm, and it certainly doesn't cement your role as a trusted advisor to the client.

Randall Bolten, a former Silicon Valley CFO, CEO of Lucidity consulting and author of Painting with Numbers: Presenting Financials and Other Numbers So People Will Understand You, says that accountants and other financial professionals have a unique opportunity to build trust with clients by ensuring the numerical information provided is understood.

"There's a close relationship between your personal credibility and the credibility of the information you're providing, and this is true in every human relationship," he says.

People believe the information of people they trust. Similarly, if they come to believe some information, they come to trust personally the person who provided it. "How much your audience trusts both you and your information," he says, "starts with having people understand what the information is. If your audience doesn't understand you, how can they trust you?"

Bolten says that how accountants and other financial professionals present numerical information is as important a part of client communication as is the way you use words when you write a note or speak to an audience.

"Every good communicator has a unique personal style that helps them be recognized and by extension, be trusted and respected and appreciated for their ability to communicate," he says. "We all remember people who are really good communicators. We remember the way they choose their words, the way they stand up and face their audience, the way they use humor and analogies."

It's vital to develop a style of communicating numbers, so that when people look at your presentations of numbers, they know how to read them, according to Bolten. When your client knows how you typically present numbers, the things you consider important and where to look, they are several steps closer to understanding and trusting not just the data but the direction you provide.

Here are three tips from Bolten for communicating numbers effectively:

Avoid "GAAP-speak"
Understandably, accountants have to present numbers in accordance with GAAP when it comes to engagements such as audits or financial statement preparation for investors. But Bolten notes that only a small share of financial information produced by companies has to be presented in accordance with GAAP. Most numerical information is used to manage the enterprise and not simply for compliance, and it won't achieve that purpose if management doesn't understand it. One way to help clients understand the numerical information is to avoid the jargon associated with GAAP.

"'GAAP-speak' is the equivalent of talking down to your audience or demonstrating to your audience that you know things that they don't know," he says.

Many small- and medium-sized accounting firms work with day-to- day financial information of companies that don't have large financial staffs to help them produce management information, so it's up to outside accounting firms to go beyond complying with GAAP and to help management understand the numbers.

Using words like "accretion" or discussing the finer points of expensing stock options doesn't help the business owner understand the company's future cash-generating ability. Remember your audience when you are presenting numerical information.

Provide Context
Regardless of your audience, each member is pressed for time and needs contextual information to make sense of numbers when you give financial presentations. Producing an income statement with one column showing just the current period's actuals is meaningless, Bolten says, "unless the people in your audience have photographic memories about the budget and about how they did last year."

Providing comparative numbers from previous accounting periods, forecasts or estimates can provide the context that clients need to make sense of the numbers. Contrasting the client's information with industry benchmarks or industry averages are additional options. Bolten also recommends providing metrics so that your audience can immediately make better sense of the numbers.

"Don't make your audience do work that you can do for them, like showing profit margins," he says. "Ratios are an immensely powerful tool for adding meaning and context to the raw numbers. Dividing one number by another is something we all learned to do in grade school, and we should do more of it in our numbers presentations."

Remember That Looks Matter
Bolten notes that many financial reports are nothing more than giant monolithic blobs of numbers, and that's inexcusable. It's like getting a three-page memo with no paragraph breaks.

Taking care of the appearance of every memo, note or presentation of numbers to the client will make the information easier to understand and sends a message that you care about and respect the client, Bolten says.

This means paying special attention to how your information is laid out visually on the page, and  choosing carefully the words that run across the top and down the side of a spreadsheet. "It's true that making information look good does take a little extra time. You may not need to be as obsessive as I am about how you present information, but you definitely need to pay more attention to the look and feel of your reports than most people do," Bolten says.

No matter how unimportant or ad hoc a report may seem, Bolten suggests, always imagine that you are preparing it for a board meeting. You will develop habits that will enable you to produce coherent, effective and great-looking reports even when you're under time pressure.

"Roger Federer hits 2,000 practice serves every week. That's not because he doesn't know how to serve a tennis ball," Bolten observes. "He does it so that muscle memory will help him hit great serves even under the pressure of the fifth set of a U.S. Open final. Or, as Aristotle said, 'We are what we do repeatedly.'" And as an added bonus, that throwaway report sometimes actually does end up in a board package.

Making information more understandable takes effort and time, but the information provided in the process will result in great value to the client.

"That information will get used, not only by the internal accounting staff that you interact with directly, but also by non-financial people inside the enterprise, like the sales people and the manufacturing organization. And it will be used by stakeholders like the banks lending or approving a line of credit or the board of directors trying to understand the business," Bolten says. When these internal players are able to tell the board or outsiders which firm helped them accomplish their goals, Bolten says, then this is how the firm actually becomes known as meaningful and trusted advisors.

"Accounting is a very technical discipline," he notes. "It's hard. But you don't get any credit for doing something that nobody else understands. You don't become a trusted advisor that way. You become a trusted advisor by giving people advice they understand."

More articles from industry experts can be found in the SageWorks ebook Next-Level Accountants: Your guide to growing a firm of trusted advisors.



Mary Ellen Biery
Mary Ellen Biery is a research specialist at Sageworks, a financial information company that provides accounting and audit solutions.  She is a veteran financial reporter whose works have appeared in The Wall Street Journal and on Dow Jones Newswires, CNN.com, MarketWatch.com, CNBC.com and other sites.
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