Communicating the Connection Between Finance Metrics and Business Success

 

As a finance executive, it is your job to understand the importance of finance metrics. Working capital, operating cash flow, debt-to-equity ratio — all of these measures and more are critical to understanding your company’s financial health and performance. For a seasoned finance executive, finance metrics can paint a picture and tell a story.

But what do finance metrics mean to others in your company? What about other members of your finance team or non-finance executives, such as the CEO? Do they grasp the importance of these metrics? Or do their eyes glaze over when you bring them up?

The truth is that finance executives need to do more than understand and work with finance metrics. They also need to communicate the connection between finance metrics and business success to others in the company. Here we outline why this is so important and how it can be done.

Why Do We Need to Communicate the Importance of Finance Metrics?

You need to be able to convey the importance of financial metrics for a number of reasons. The two main audiences here are (1) your finance team and (2) everybody else.

Your finance team needs to understand how their actions fit into the bigger picture of the company’s finances and overall success. This will inform how they formulate strategies and make decisions. It is better not to assume the entire finance team understands the main takeaways from the latest balance sheet or income statement. Instead, it is your job to ensure those takeaways are clear for everyone.

Then there is “everybody else.” Executives, board members, and investors all want to know the financial health of the company, as well as its future potential. The narrative you construct can tell them how to finance metrics prove your business is already successful — or how it can be more successful in the future. With your accompanying explanation, business metrics can inform company-wide goals and benchmarks. 

Your communication surrounding finance metrics can help determine which of those metrics become key performance indicators (KPIs) for your company. These KPIs will then help you communicate with board members and investors and be used within the company for internal auditing and process improvement. This makes your finance metric communication all the more important to the company.

Know Your Audience and Provide Context

In presenting finance metrics, you should keep the audience in mind. Consider first their level of financial knowledge. Other finance team members will not need to brush up on terminology and can absorb a more numbers-based presentation.

You will likely need a different strategy for the CEO, board members, or those from non-finance teams such as sales. These audiences will require a more straightforward and simplified approach, with plenty of explanation. Avoid acronyms, give brief definitions of technical terms, and be open to questions.

Also, consider the personal styles of your audience and their specific place within the company. Some will respond better to visual representations, such as slide decks. The marketing team may respond better to compelling graphs that “pop” and grab their eyes, highlighting the key information. And be sure to only provide the information necessary to their jobs, to avoid drowning them in financial data.

Non-finance professionals will also generally need much more context for any finance metrics. An increase or decline in net profits or return on assets will likely mean little to them without your explanation of long-term trends, as well as how these metrics relate to company performance.

Use Financial Data to Tell a Story

Your primary goal is to use dry financial data to tell a compelling story. This means you will communicate your insights gleaned from finance metrics, but you will do so by using narratives and visualizations.

To make finance metrics come alive, you will first need a thorough analysis of your company’s financial data. Ideally, you would also add visual elements to make that analysis clear — charts, graphs, and diagrams are some of your potential tools. With analysis and visualization taken care of, it is now possible for you to construct your narrative.

When building your narrative, keep in mind its underlying purpose. Yes, you want to communicate your insights from the financial data. But you also want to include the actions you wish to recommend or inspire.

Like any good story, this will require your narrative to include a conflict and a resolution. The conflict could be with your company’s competition. But it could also be the gap between your company and where it potentially could be. The resolution is your proposal to close your company’s performance gap or beat the competition.

Seek Out Tools to Assist with Finance Metric Communication

One of the best ways to optimize your finance metric communication is to seek out the best technological tools. Fortunately, there is software available that can assist with running your finance operations, gleaning financial insights, and giving you the ability to communicate the stories you need to.

The right software can first help you to formulate the story you think is being told by the finance metrics. It does so by providing visibility and reporting capabilities that allow you to see clearly the interrelationship between different finance metrics and your company’s overall performance. Ideally, your software can create and display real-time insights into any relevant finance metric. 

The second way a software platform can assist is by allowing you to present your findings to others, especially those not on the finance team. By creating visual representations of the finance metrics you are focused on — both present numbers, projections, comparisons to industry benchmarks, and more — the story you have created can unfold in living color.

Consider these elements carefully in crafting your communication around finance metrics. And don’t neglect to look into the right tech tools to further your efforts.

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