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The Importance of Communication in Accounting

Finance professionals communicating in meeting
  • 29 Jun 2022
Catherine Cote Author Staff
tag
  • Accounting
  • Finance
  • Financial Accounting

When you hear the phrase “financial accounting skills,” you likely think of creating and analyzing financial statements, poring over spreadsheets, and using formulas to calculate ratios.

These are all vital skills for finance professionals. Yet, one accounting skill that’s often overlooked is communication.

Communication is the act of relaying information; some argue it’s accounting’s core purpose. Your work creating and drawing insights from financial statements—including balance sheets, cash flow statements, and income statements—is most impactful when you effectively communicate it to others.

Here’s a breakdown of key communication skills, why they’re important for accounting, and how you can build yours.


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4 Communication Skills for Finance Professionals

1. Explaining Complex Topics

If you’re an accountant or other financial professional, you likely have strong financial literacy and have adopted finance terms into your vocabulary. Effective communicators break down complex topics into easily understood language to relay important information to those with less experience.

For instance, when communicating financial statements’ content, refrain from using acronyms, give brief definitions of technical terms (when appropriate), explain which line items factored into your calculations, and be open to questions.

2. Understanding Your Audience

Along the same lines, a successful communicator must take their audience’s perspective into account to distill information and determine the most effective method for communicating with them.

Questions to ask include:

  • What’s their level of financial knowledge?
  • What do they need to know to do their jobs effectively?
  • What information is unnecessary?
  • What method of communication would be most helpful to them?

For example, if your audience is fellow finance employees, sending a financial statement in an email with a brief note about what you want to highlight may suffice.

If your audience is your firm’s marketing and sales teams, the best way to communicate with them may be by creating a slide deck with visuals highlighting points on each financial statement. You could present how each metric impacts the company’s overall financial health and what that means for those teams.

3. Providing Context

When communicating financial trends and ratios to non-finance professionals, it’s important to provide context. For example, what does a decline in return on assets mean for their daily work? How do their specific team goals impact the line items you’re presenting?

When everyone understands accounting information’s context, the meaning behind the numbers can come through.

4. Data Storytelling

Data storytelling is the ability to take raw numbers and communicate insights through narrative and visualization. This is an effective communication skill because it prompts you to consider key ideas:

  • What’s the context?
  • Who are the stakeholders?
  • What’s the problem?
  • How do you suggest the problem be solved?

This action-oriented narrative structure can be helpful for non-finance professionals who need a big-picture perspective.

Related: 7 Finance Skills Employers Look for on a Resume

Why Is Communication Important in Accounting?

1. Aligns Your Internal Team

As the keeper of your organization’s finances, you’re uniquely responsible for aligning your internal team. Regular, clear communication can help all managers have an accurate picture of their company’s financial health, which informs how they communicate with their teams, formulate strategies, and make decisions.

This can happen verbally and visually, such as when presenting at your company’s all-staff meeting, or in writing, such as sending a periodic email update.

2. Informs Company Goals and Benchmarks

Financial statements hold key information for goal- and benchmark-setting on organizational, team, and individual levels. By providing everyone with accurate, up-to-date information about your organization’s finances, you can enable them to make decisions that consider its current standing and the broader impact of their specific goals.

Additionally, you can communicate progress toward those goals over time, articulating how efforts impact the company’s financial metrics. Having this deeper understanding of how goals affect the organization can empower employees at any level.

3. Reports Financial Health to Stakeholders

As an accountant, you must relay information about your organization’s financial health to its stakeholders, including executives, board members, and investors.

In the online course Financial Accounting, Harvard Business School Professor V. G. Narayanan notes why it’s important to use accounting to communicate with investors.

“Accounting is how we represent—in a concrete way—the past performance, future potential, and value of an organization,” Narayanan says. “It’s crucial to gaining investor trust.”

Summarizing and highlighting important financial information both verbally and in writing enables you to effectively communicate with stakeholders whose decisions impact your company’s future.

4. Stands Out in the Job Market

Communication skills can not only help you excel in your current role but land a new job.

Graph shows increasing demand for communication skills
Source: Emsi Burning Glass 2022

Data from Emsi Burning Glass shows a steady increase in finance job postings over the past year that require strong communication skills. Having both hard and soft accounting skills can increase your job prospects and set you apart from other candidates.

A Manager's Guide to Finance and Accounting | Access Your Free E-Book | Download Now

How to Improve Financial Communication Skills

Although it may seem contradictory, accounting knowledge and communication go hand-in-hand in business. To become a better financial communicator, Narayanan says it’s imperative to build basic accounting skills.

“A sound understanding of accounting is essential to successfully communicating in the business world, regardless of the job function you’re performing,” Narayanan says in Financial Accounting.

A strong foundation in accounting fundamentals can give you the confidence to communicate effectively.

With your accounting knowledge, you can practice breaking down complex topics, considering your audience’s perspective, and telling actionable stories with financial data to inform your colleagues and boost your career.

Do you want to take your career to the next level? Explore Financial Accounting—one of three online courses comprising our Credential of Readiness (CORe) program—which can teach the key financial topics you need to understand business performance and potential. Not sure which course is right for you? Download our free flowchart.

About the Author

Catherine Cote is a marketing coordinator at Harvard Business School Online. Prior to joining HBS Online, she worked at an early-stage SaaS startup where she found her passion for writing content, and at a digital consulting agency, where she specialized in SEO. Catherine holds a B.A. from Holy Cross, where she studied psychology, education, and Mandarin Chinese. When not at work, you can find her hiking, performing or watching theatre, or hunting for the best burger in Boston.
 
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