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COMMUNICATE OR DIE!

Let me be as frank and blunt as possible to start this book, keeping in mind that the following statement is coming from an accounting and financial professional that has spent the better part of his entire career, almost 40 years, primarily "crunching numbers" (for lack of a better term) and on occasion, writing a book or two.

Writing a financial report cannot be achieved unless you can effectively communicate. Period!

When I mean communicate, I mean it in the broadest sense possible as communication skills extend far beyond what a typical financial or accounting professional may view as representing essential communication skills such as simply stating that 2 plus 2 equals four. What you will quickly learn from this book is that in order to effectively communicate, you must be able to speak, listen, observe, write, read, calculate, educate, lead, interpret, analyze, and direct, all equally well, and be able to package and present your financial report and deliver it via a story to your target audience in a format that they can understand, trust, and believe.

As you work through this book, a primary goal will be to find the proper balance between helping you (in the role of producing a financial report) understand how to prepare best in class financial reports as well as assisting you (in the role of student attempting to learn more about financial reports and financial statements) to expand and improve your knowledge of accounting and financial concepts and topics.

To start, I'll warn you that I tend to emphasize using acronyms to remember key concepts, so out of the gate keep in mind the acronym FIK, which stands for fundamentals, interest, and knowledge. That is, you must have the proper fundamentals to write and communicate (e.g., can you structure a sentence?), have an appropriate level of passion and interest in the subject matter (nothing more painful than reading content that the author has limited interest in), and have advanced knowledge in the subject matter (to ensure your target audience understands the financial report and the conclusions you're drawing).

To help you navigate the book, I have prepared this simple summary of the book's structure that covers the how, who, what, where, and why of preparing financial reports:

• Chapter 1, How to Communicate Financial Information: To start, I dive into the subject matter of How to Write a Financial Report, focusing on strategies, techniques, etc. that are essential to the process of communicating financial information in financial reports. Further, I expand on the "how" to communicate concept by diving deeper into a simple but powerful acronym CART (covered in Chapters 4 and 5). This stands for providing Complete, Accurate, Reliable, and Timely financial reports.
• Chapters 2 and 3, Who Are You Communicating Financial Information To?: Next up, I then turn the book's attention to gaining a better understanding of your target audience, both between external users of financial reports and information and internal parties such as board members, the management, and others. If you don't have a clear understanding of who you are communicating to, not only do you run the risk of having your financial report get lost in translation but more importantly, you may be preparing financial reports that contain vital and confidential financial information that falls into the wrong hands.
• Chapters 6 through 10, What Financial Information Are You Communicating?: An entire section of the book has been dedicated to gaining a better understanding of what financial information you will be communicating by providing a thorough understanding of the big three financial statements (i.e., the income statement, balance sheet, and statement of cash flows), why developing best in class financial forecasts should always be a priority, and closing out our discussion on revisiting the importance of gaining a handle on how financial statements and financial information are connected.
• Chapter 11, Where Does Financial Information Come From?: In this chapter, I move my attention to gaining a better understanding of where critical financial information comes from that will be presented in a financial report. Simply put, I spend some time helping you as a reader understand basic concepts associated with accounting and financial reporting systems, basic accounting principles and concepts, and other critical information.
• Chapters 12 through 15, Why Are You Communicating Financial Information?: Finally, I cover the subject of why you are communicating financial information. Of course, this should be obvious as any type of business, organization, governmental entity, etc. needs to ensure it has CART financial reports on which to base sound economic decisions. In these chapters I offer real-life examples of different internal and external financial reports, as well as tips and tidbits on making sure your financial statements are more effective in delivering the Why!

Finally, I would like to mention that throughout this book, I sometimes will use the phrases of financial information and financial reports interchangeably. To be clear, financial information really represents the source accounting and financial data that needs to be communicated in a financial report. Or thinking of it differently, you cannot produce a reliable financial report without having quality financial information and vice versa; having quality financial information unto itself does not mean a business will have access to a reliable financial report. Both are highly connected and are dependent on one another, but it is important to not confuse these two concepts as one does not automatically produce the other.

Remember the Basics

To master the art of preparing the most effective financial reports, you will gain a new appreciation of just how important developing communication skills is and why, in all the books I've written by myself and/or in partnership with my late father, five critical concepts should be kept in mind at all times:

• Accounting - Art vs. Science: Accounting is just as much an art form as it is a science. I, along with my late father, have driven home this concept, time and time again, in the books we've published including our sister book to How to Write a Financial Report, How to Read a Financial Report (10th edition), Accounting for Dummies (7th edition), and others. As you will discover reading this book, writing a financial report is often even more of an art form than having to apply generally accepted accounting principles (i.e., GAAP) to produce financial statements. Examples will be provided throughout this book.
• Financial Report Range: The concept of a financial report is extensive, broad, and extremely diverse. Financial reports range from something as big and complex as preparing an annual financial report for a publicly traded company such as Microsoft (most recent, 83 pages for 2023) read by thousands of external parties to something as small and simple to understand as an e-commerce company selling products online and trying to understand how much they can spend on advertising and promotional expenses (one page of information, read by two executives). Which brings me to the third critical concept.
• Financial Report Audience: Similar to understanding just how broad the range of financial reports is, the audience for financial reports is even broader. Financial reports are read by all types of parties, ranging from some of the most sophisticated financial professionals in the country to small business owners, managers, sales professionals, staff, lenders, lawyers, students, etc., etc., etc. that are on the opposite end of the technical spectrum. That is, these parties are not experts in financial and accounting matters and as such, need to be treated in a completely different manner (when financial reports are prepared) than the top financial minds and experts spread across the financial centers around the world. Translation - you better be keenly aware of and know your target audience for the financial report (a topic covered throughout this book). A much deeper dive on this topic is provided in Chapter 2, "Target Audience 'E' - External Users."
• Never Assume: Being direct as possible again, assumption is the mother of all f-ups. Don't just assume that after you've produced a financial report that you deliver old school via paper or new school in an electronic file, your job is done. This represents an absolute fatal error as after a financial report is produced, delivered, and discussed, you will almost always need to respond in a follow-up fashion that encompasses verbal discussions, listening attentively, reading feedback, observing reactions, etc. For example, if you provide a financial report to a party that is not professionally trained in the field of accounting and finance, assuming that this party understands the financial report and its primary financial message or critical output, without discussing the financial report with them, often represents a significant mistake. To combat this potential problem, direct discussions should be held with the target audience to walk through the financial report (line by line if needed), help educate the party(s) as to the structure and findings of the financial report, and confirm that...