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Communication approaches for reporting

In this article, you will learn about the communication approaches of reporting to ensure you meet the requirements of the key stakeholders.
Once you identify your target audience, you need to construct a strategic communication plan that targets your audience in order to achieve the intended objectives.
While financial communication requirements could vary from one jurisdiction to another, you could leverage the following principles—published by the International Accounting Standards Board (IASB)—to effectively communicate insights and customise your communication to the target audience:
Entity-specific Tailoring information to a company’s own circumstances.
Simple and direct Using simple descriptions and sentence structures without omitting useful information.
Better organised Ranking pieces of information to help users of financial statements understand their importance.
Better linked Linking information to help users of financial statements understand the relationships between pieces of information.
Better formatted Selecting a suitable format for the type of information companies provide.
Free of duplication Avoiding unnecessary duplication that obscures communication.
Enhanced comparability Disclosing information in a way that enhances comparability among companies and across reporting periods without compromising its usefulness.
Source: IASB
McKinsey recommends the following approach to build and execute an integrated communications approach.
Diagram shows the Six steps to help build and execute a robust integration-communications approach
Source: McKinsey

Step 1: Identify the key stakeholders or the target audience

We have already discussed the different types of stakeholders and their objectives/interests in the previous topic.

Step 2: Identify the major milestones and trigger events

An effective communication plan should identify key milestones and trigger events. A key milestone would be financial year-end and the reporting of financial results of the organisation. A key trigger event could be the merger with another organisation and reporting of financials post-merger.

Step 3: Set up governance and resourcing

Sufficient resources and funding should be available to fund projects. In addition to resourcing, a proper governance and compliance structure should be put in place to cater to different audiences.
Financial information is heavily regulated and should comply with the relevant accounting standards and regulations. Such information should support informed judgements about an organisation’s financial performance and position. In addition, there should be a process for approving and disseminating financial communications.

Step 4: Develop core messages

Core messages such as profitability, cash flow position, and financing of growth strategies would appeal to different target audiences. Hence, developing core messages based on financial reports and their associated insights would make financial communication more appealing and relevant.

Step 5: Develop a step-by-step communication plan

Your detailed communication plan should address the following questions:
  • Who is the target audience?
  • What is the key message(s)?
  • How frequent should financial communication be?
  • Why is the organisation communicating this information?
  • Where would this information be available?
  • How would such financial information be communicated to the target audience?

Step 6: Establish two-way communications

Two-way communication helps to address information gaps. In most situations, feedback is either not collected or no action is taken based on the feedback collected. If there is feedback from external investment banks and organisations (who review a business’s financial information) to include, for example, commentary on projects, then you should provide such information in a structured manner so as to close any potential information gaps.

Before you move on

Recall a situation where you had to tailor communication for a target audience. This could be at work, in education, home or even in your day-to-day dealings with people. Share your experience with others by responding to the following questions:
  • How did you identify the target audience?
  • What factors did you take into consideration?
  • What steps did you follow to communicate an effective message?
  • What were the benefits of tailoring your message?
Share your response to the questions in the comments section below. You are encouraged to:
  • Review at least two other comments and share what you have learnt through them
  • Share one new strategy you might adopt to improve your communication approach
Next, we explore the process of developing analysis and reporting to meet business needs and objectives.
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Financial Analysis for Business Performance: Reporting and Stakeholder Management

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