Business Fluency Refresher: How comms should interpret financial documents
A business fluency refresher for communicators.
You already know that being an effective communicator starts with speaking to the needs of the business with authority and expertise, but everyone can use a business fluency refresher now and then — especially as budgets for 2023 are currently being negotiated. That’s why Karen Vahouny, communications consultant and adjunct professor at George Washington University, offered the Ragan community some reminders during a recent business fluency bootcamp.
Here are Vahouny’s tips for how communicators can interpret the core trifecta of financial documents: the income statement, the balance sheet and the statement of cash flow.
- The income statement
The income statement shows what an organization earned from its operations. This should illustrate where your income is coming from, what you are spending and what’s left.
Vahouny emphasized how crucial the income statement is for tracking performance. “It’s not the numbers by themselves,” she said. “It’s what’s the what are the numbers telling you. And it’s very, very helpful for budgeting for future planning for tracking, for asking the right questions when there’s differences between what you expect to get and what you did get in the various categories of revenues, costs and earnings.”
Looking at numbers may allow you to determine where a budget was overstated, where you were overly optimistic and how you missed the mark.
- The balance sheet
The balance sheet shows the financial condition of an organization at a specific point of time — a snapshot of where your cash flow is today or tomorrow that can change day to day depending on the investments you make. Balance sheets are typically developed at the end of a quarter or the end of a year.
“If there’s more and more left, and we’re able to save more that’s going into our balance sheet, we’re investing more in our own short-term or longer-term investments or retirement or real estate, etc.,” said Vahouny.
Balance sheets typically feature three categories:
- Assets, which lists what you own
- Liabilities, which lists what you owe
- Equity, which lists what you’re worth
“A balance sheet is called that because a balance sheet always balances assets minus liabilities always equals equity or net worth,” Vahouny said.
This full post is available exclusively to members of Ragan’s Communications Leadership Council, which offers best-practice sharing, networking and team training on internal and employee communications. Learn more about becoming a member here.