The Art of Financial Storytelling
Financial storytelling is a crucial skill that enables financial professionals to convey complex data in a way that resonates with stakeholders. By crafting a financial narrative around financial information, you can transform raw numbers into insights that drive strategic decisions. For those interested in mastering this approach, understanding the principles of data storytelling can provide a solid foundation for creating impactful financial stories that engage and inform.
Financial statements tell an important story, but they rarely tell the entire story. It often requires a sharp eye and a healthy measure of experience to elicit meaningful information from the numbers.
Even people with keen financial acumen will have questions, and they can easily overlook important realities that lay buried somewhere within the details. For those with less experience reading financial reports, this task is far more difficult. Both groups can benefit from added context and expert guidance to help them fully grasp the underlying realities of the financial statements.
The numbers don’t lie but understanding them is easier when those numbers offer context with meaningful commentary. By adding depth and meaning to the numbers, you can help everyone in your organization, as well as important external stakeholders, to better understand the realities that drive the business. In doing so, you can bolster the financial competency of your peers and improve business results. You can also elevate the standing of your finance team within the company, shedding light on the strategic importance of your department.
A crucial part of CFOs’ jobs is presenting data to others. Every C-level executive is a brand ambassador, and the CEO the chief storyteller. That means instead of just delivering plain reports, aim to make your reports come to life by putting the numbers in context for key stakeholders outside of finance.
That’s not always easy to accomplish, especially when you’re limited to using traditional tools like static spreadsheets. And no longer can your team simply report on what has happened but now you are expected to provide real-time data and numbers as they happen. To achieve excellence in financial reporting and storytelling, you’ll need a set of tools specifically designed to support that mission.
What is Financial Storytelling
Financial storytelling is the practice of transforming financial data into a narrative that is both engaging and informative. It involves interpreting complex financial metrics in a way that highlights their significance within a broader business context. By becoming a financial storyteller, professionals can make financial information more accessible and meaningful to stakeholders who may not have a financial background.
How Financial Storytelling Works
Financial storytelling works by combining data with narrative and visual elements to create a cohesive story. The process often involves using tools like CXO storyboards to boost collaboration and storytelling. These tools help in visualizing the data, while the narrative explains the “why” behind the numbers, making the information more relatable and easier to understand.
Key Steps in Financial Storytelling:
- Data Collection: Gather accurate and relevant financial data.
- Contextualization: Place the data within a broader business context.
- Narrative Development: Create a compelling story that ties the data to business goals.
- Visualization: Use charts, graphs, and other visuals to illustrate key points.
- Presentation: Deliver the story in a clear and engaging manner to your audience.
Why is Financial Storytelling Important?
Financial storytelling is crucial because it bridges the gap between raw data and strategic decision-making. It helps non-financial stakeholders grasp the significance of the data, leading to better-informed decisions. For example, mastering the art of FP&A storytelling can significantly enhance the effectiveness of financial planning and analysis, ensuring that insights are communicated clearly and persuasively.
Benefits of Financial Storytelling:
- Improved Decision-Making: Helps stakeholders make more informed decisions.
- Increased Engagement: Makes financial data more accessible and engaging for non-financial audiences.
- Better Communication: Facilitates clearer communication of complex financial information.
- Enhanced Strategic Alignment: Aligns financial data with business objectives, making it easier to see the big picture.
Key Components of Financial Storytelling
The key components of financial storytelling include accurate data, relevant context, and a compelling narrative. Additionally, great financial storytelling begins with great tech, as the right technology tools are essential for gathering, analyzing, and presenting financial data effectively. Visuals such as charts and graphs are also crucial in making the story more engaging and easier to understand.
Essential Elements of Financial Storytelling:
- Data: Accurate and relevant financial data forms the foundation of the story.
- Context: Providing background and explaining the circumstances surrounding the data.
- Narrative: Crafting a compelling story that connects the data with the company’s goals and strategy.
- Visuals: Using charts, graphs, and infographics to illustrate key points and make the data more accessible.
- Clarity: Ensuring the story is clear, concise, and easy to understand for all stakeholders.
Examples of Financial Storytelling
Financial storytelling can take many forms, depending on the audience and purpose. For instance, a 5-step guide to financial storytelling can help structure presentations to investors by highlighting key financial achievements. Another example is using financial data to tell a compelling story in annual reports, where the goal is to communicate the company’s financial health and future outlook to shareholders.
Real-World Examples:
- Investor Presentations: Structuring data to highlight growth and future potential.
- Annual Reports: Using narratives to explain yearly financial performance and strategic direction.
- Budget Proposals: Justifying financial requests by connecting them to expected outcomes.
- Internal Communications: Simplifying financial data to show how it impacts overall business success.
The Narrative Behind the Numbers - Utilize Technology to Uncover and Share a Hidden Story
Download ResourceHow to Educate and Inform With Financial Storytelling
Financial storytelling educates and informs. It enhances the financial literacy of the target audience. There are some key ingredients to a good story, and It’s important not to skip any of them. Here’s a brief overview of the elements on which finance leaders should focus:
Set the stage. Like any good story, financial narratives begin with setting the stage. Effective communication begins with a background understanding of where the business has been, what it is aiming to accomplish, and what has led to the status quo. This might include a recap of the company’s strategic priorities, a summary of major events that have occurred over the past year, and a brief overview of market dynamics for your industry. Setting the stage provides a common starting point for understanding the rest of the financial story.
Use visualizations. It’s often said that a picture is worth a thousand words. When summarizing or presenting numeric figures, that is especially true. Modern executive dashboards provide a wealth of information in easily digestible formats, often in mere seconds. Instead of poring over reams of columnar data, users can intuitively grasp what is happening in the business with just a glance. The best dashboard software enables users to drill down to the details in the ERP system to further explore what is happening and why.
Highlight key takeaways. Great financial storytelling enables the audience to ponder the results, ask questions, develop a deeper understanding of the situation, and ultimately to draw their own conclusions. But financial storytelling must also offer team members a head start in that process. By highlighting key conclusions, finance leaders can move their audience toward a deeper understanding, giving them a better foundation for good business decisions and actionable insights.
Propose a path forward. When finance teams engage others in strategic thinking, they naturally elevate the role of their department within the organization. Key takeaways typically imply the existence of opportunities or threats to the business. Those, in turn, call for a response. That might include increased marketing spend in an organization suffering a downturn in sales, for example, or expansion of sales resources to capture market share from a struggling competitor. The finance team is uniquely positioned to understand and communicate the implications of such decisions with respect to cash flow, profitability, and capital allocation.
Add an exclamation point. Like any good story, your financial narrative should culminate in a sense of urgency. Whether you’re highlighting an opportunity or a threat, this is your chance to spell out the consequences of inaction and to highlight the powerful need to move forward decisively. A forward-looking conclusion drives your audience toward alignment around a positive outcome for the organization, based on your recommended plan of action. Clearly articulate what you’re proposing, ask for agreement, and align around next steps and responsibilities.
To Tell Great Stories, Upgrade Your Toolset
To achieve the desired results, financial storytellers need the right tools. Many rely on static data exported from ERP and other software systems, then imported into a spreadsheet. Microsoft Excel offers flexibility, but it’s missing so many of the elements required to assemble data quickly and easily for powerful (and accurate) financial narratives.
The reports created within static spreadsheets are based on a snapshot of reality, taken the moment the data was exported from ERP. That means there’s a lag between real-time events in the business and the moment that information becomes available to your stakeholders. Information delayed is information denied, and in today’s fast-paced business world, that isn’t good enough.
CXO from insightsoftware delivers complete integration with EPM systems to create financial reports for group companies. Unlike most other financial reporting and EPM systems, CXO allows finance users to add key messages, annotations, line-item comments, and more. It offers real-time collaboration via a conversational chat interface, speeding the pace at which finance teams can develop and refine their financial narratives.
Unlike static spreadsheets, CXO offers roll-up of comment threads, locking comments, and a clear audit trail indicating who made each change, and when.
When it is done effectively, storytelling helps organizations to respond more rapidly to opportunities and threats. It helps to create strategic and tactical alignment, from investors and executive management to department level leaders. With a better understanding of their own financial story, everyone in the organization can have a clear picture of what drives success and failure. To learn more about CXO from insightsoftware, contact us today for a free demo.
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