Financial reporting can give your business more than just a mere repetition of facts, numbers, and trends. When done right, financial reporting can be critical to your overall communications platform because it can enhance your ability to communicate with stakeholders. To achieve this goal, you need a clear understanding of your organization's current status, a robust knowledge of what information you must communicate, and a willingness to always be transparent with your stakeholders.
Provide Clear and Concise Financial Reports
When done wrong, financial reporting can obfuscate. It can hide bad news, mislead stakeholders, or paint an otherwise falsely rosy picture of an organization's financial future. This happens when a report is overly detailed, misleading, or confusing. Even if the intent is nefarious, the result of an overly complex financial report is the same: Stakeholders reading the report will have more questions than answers.
For appropriate levels of communication with your stakeholders, your financial reports should do all of the following:
- Clearly explain the financial status of your organization, listing all relevant information about your current financial stake.
- Perform a robust SWOT analysis that lists your organization's current status, potential threats, and how you plan to mitigate those challenges.
- Contain information that legal or regulatory authorities require.
- Have their accuracy confirmed by a qualified third party.
Engage with Stakeholders on Financial Results
Financial reporting is not the end of your commitment to your stakeholders. Instead, it's just the beginning. Financial reporting can create a starting point for a longer conversation that will enable you to engage with your stakeholders on your financial results and the overall goal of your organization.
For example, upon publishing any financial or annual report, you can have a major event that discusses the report's findings. Such an event can be in-person or virtual. You can use the event to emphasize the strengths the report finds, address any weaknesses, and answer questions from your stakeholders. As such, a financial report can serve as a springboard for deeper stakeholder engagement.
Address Concerns and Inquiries Promptly
Your financial reporting should be transparent about your organization's state. As such, it allows you to preemptively and proactively address any potential concerns before your stakeholders wonder if they were being intentionally misled.
First, your report should list any potential areas of financial concern. For transparency's sake, you need to explain the problem. In the reporting you provide, you will have to be able to specifically address the potential issue. Use clear language, and do not attempt to sugarcoat anything. If an issue is major, say so. If it is minor, clarify why and how you will address it.
As noted above, financial reporting is the start of a conversation with your stakeholders and investors, not the end of one. If you outline major challenges in your report, your stakeholders will likely ask additional questions. You need to be prepared to address those concerns. To that end, you will need to do all of the following:
- Ensure that any inquiries get pointed to the right individual.
- Have prepared answers to address any questions related to an item in your report.
- Prep related staff to manage any questions, and ensure that other staff know who to ask when it comes to addressing these inquiries.
Build Trust and Credibility
Trust and credibility don't come from sharing good news. Instead, they come from sharing honest news. If the news is great and you can demonstrate why your organization is in such a strong position, that would be wonderful. However, if you are in a weaker position, you need to be upfront with your challenges, how your organization found itself in a problematic position, and how the problems will be addressed.
To maximize trust and credibility, you need to do all of the following:
- Be honest with any potential concerns and how you arrived there.
- Appropriately explain the causes of your problems and how you will address them.
- Assure your stakeholders that you will deal with these problems. You can do this by laying out a detailed plan to address any remaining concerns.
- Be willing to answer any questions from your stakeholders in a patient and honest way.
If you are upfront about bad news or problems, stakeholders will likely believe your future statements.
Align Financial Reporting with Stakeholder Interests
Your stakeholders want to know how you are moving towards fulfilling their goals and interests.
This is a two-step process. First, you need to understand your stakeholders. Who are they? What are their goals, and what are they interested in accomplishing? Why do they have a stake in your organization's future, and what can you do to help them achieve these goals?Once you understand your stakeholders and their interests, you need to determine whether your business is moving towards fulfilling those interests. For example, if your stakeholders are interested in how your organization serves a certain population, you'll need to report data from that population. If your stakeholders want to ensure that you are implementing an appropriate hiring strategy, you will need to be able to explain exactly how those donations are used, what positions they are being used for, and how that staff slot will enhance the success of your organization.
Ready to Build a Better Business with Effective Financial Reporting?
Financial transparency and openness are unquestionably trends in Canadian finance and best practices for any organization. These days, stakeholders expect transparency from any business that they engage with. Failing to communicate properly may mean you lose a client. On the other hand, open communication with your clients often leads to better business relationships. At Enkel, we understand the importance of open and honest financial relationships. We also know that financial transparency is about more than just meeting a moral obligation: Doing it correctly comes with real business advantages. Ready for more information on how our cloud-based accounting services can help you build a better business? Contact us today to learn more about how we can help your business grow.
