Talking about finance with non-expert clients and colleagues

How do you make difficult technical concepts accessible for people without your expertise?

Accountants are increasingly tasked not just with understanding numbers, but explaining them too. How do you break down technical terminology and complex systems to clients or colleagues who don’t have your expertise?

Technical terms, and jargon

Accountancy is full of technical terms with precise meanings. In many circumstances using the right terminology is essential – for example language used in the Financial Reporting Standards (FRS) is very specific.

But when you’re speaking to colleagues and clients without a financial background, technical terms are off-putting and confusing. It doesn’t help when corporate jargon and buzzwords creep in to business settings, too.

• 20 ways to rephrase common accounting terms to build trust with your clients

This difficulty is compounded by low levels of financial literacy in the UK. A report by AAT and Grace Hardy found that less than half of 16-25-year-olds received financial education in school. The same research found only half understood how interest is applied to credit card balances.

Samantha Lynch, Director, Samantha Lynch Official Ltd, finds that “It’s rarely the numbers themselves that are the problem – it’s the language around them that can make things seem much more complicated than they are. We’ve had the training and get it but not everyone else has, and sometimes we forget that!”

Problem areas for non-financiers

So which topics come up the most?

Samantha reports “Cash flow vs profit is the obvious one – how can they be making a profit and still have no money in the bank?!”

“Revenue recognition is another. ‘But I’ve had the cash in!’ Yes, but you haven’t actually done the job yet! It’s about when you’ve actually earned the revenue rather than simply when the money hits your bank account.”

Libby Walklett FMAAT, Founder, The Ethical Bookkeeper, says “Some topics come up repeatedly. Directors think the money in the company bank account is theirs. It isn’t. It belongs to the company.

“Dividends confuse people too. They think if there’s cash in the bank, they can take it out as a dividend. Loosely, it has to come from profit the business has actually made after tax.

“Payments on account for personal tax trip people up more than anything else. The minute someone starts making them, they get confused. As someone with an industry background, it confused me the first time I had to explain it!”

Communication strategies for accountants

Methods that can help:

• try plain English
• use analogies and examples
• explain why you are doing certain things.

Make it personal

For Libby, “Nothing works without trust. If a client trusts you and knows they won’t be judged, they’ll tell you when they don’t understand something.”

Her top tips are to never assume a client’s level of knowledge, let them know there’s no such thing as a stupid question, and make them feel respected.

Connect ideas to tangible things: a mortgage or a loan is an example of a liability; while cars, houses or savings are examples of assets.

“Make it personal. A balance sheet means more when you connect it to their life”.

Keep language accessible

“You need to break information down into short steps, use bullet points, keep the words to a minimum, and use simple numbers like £100 rather than the client’s real figures,” says Libby.

Samantha says “It depends on the person. I listen to how they describe the problem in their own words and then explain the finance in the same language. If they can explain it back to me without using finance jargon, I know they’ve got it!”

Reframe ideas

“Gross margin… some people really struggle with percentages. I’ll explain it as: For every £1 you sell, how much do you actually have left after the direct costs’,” says Samantha.

“With things like accruals and prepayments, I tend to bring it back to timing – when is ‘the thing’ actually happening?”

“I do get a lot of ‘why has nobody explained it to me like that before?’ moments”

Cat Hall is Content Specialist at AAT.