How to Talk About Your Business’s Financial Statements - dummies

How to Talk About Your Business’s Financial Statements

On many occasions, a business manager has to discuss her business’s financial statements with others. Many business managers look at preparing the annual financial report of the business like they look at its annual income tax return — it’s a task best left to the accountant. This is a mistake. You should take an active part in preparing and discussing the annual financial report with others.

Business managers must be prepared to discuss their business’s annual financial report with others on occasions such as the following:

  • Applying for a loan: The loan officer may ask specific questions about your accounting methods and items in your financial statements.

  • Talking with individuals or other businesses that may be interested in buying your business: They may have questions about the recorded values of your assets and liabilities.

  • Dealing with the press: Large corporations are used to talking with the media, but even smaller businesses are profiled in local news stories.

  • Dealing with unions or other employee groups in setting wages and benefit packages: They may think that your profits are very high so you can afford to increase wages and benefits.

  • Explaining the profit-sharing plan to your employees: They may take a close interest in how profit is determined.

  • Putting a value on an ownership interest for divorce or estate tax purposes: These values are based on the financial statements of the business (and other factors).

  • Reporting financial statement data to national trade associations: Trade associations collect financial information from their members. You should make sure that you’re reporting the financial information consistently with the definitions used in the industry.

  • Presenting the annual financial report before the annual meeting of owners: The shareowners may ask penetrating questions and expect you to be very familiar with the financial statements.

You should carefully think of what to say in the letter to stockholders that accompanies the financial statements. Be sure to come across as very knowledgeable and be very persuasive in what you say. You should help craft the footnotes to the financial statements. The annual report is a good opportunity to tell a compelling story about the business.