As with any industry, the entertainment business has grown and changed drastically over the last decade. Streaming content, which was once considered a niche part of the entertainment industry, has now become an integral part of how we consume television and film. This change has posed a significant challenge as executives and C-level leaders want to know how their company is performing, what segments or product lines are profitable and even which regions or territories are driving the business or adding pressure to overall revenue and operating cash flow. As such, the skill of storytelling in finance has become an integral part of FP&A in recent years. Good finance teams have embraced financial and other data to tell stories that resonate with leadership and external stakeholders.
The Components of Storytelling in Finance
Senior management, and the teams that report to them, are continuously expanding their roles to provide visibility into company performance and add valuable insight to the constant changes as the business moves forward. To be better partners to the business, finance teams must increase their capacity to communicate effectively. More specifically, they must bridge the gap between the company’s financial performance and the company’s strategy and day-to-day tactical decisions. Storytelling is a vital component in bridging that gap and building understanding that supports strategy and decision making.
To better understand storytelling in finance and how it can add value, we must first identify the different components of the information and separate them in different categories:
Data is the fundamental foundation upon which the story is built. In the world of financial reporting and forecasting, a vast amount of information needs to be analyzed, whether it’s in the form of a summarized report or a mass unfiltered data dump from the organization’s software systems. Data is measurable and gives the best approximation of the performance of a business from a financial perspective. However, the process of interpreting and drawing conclusions from this information can often be very challenging. For the finance team, an integral function is to vet the data to ensure its accuracy and integrity.
Trends & Patterns
Trends and patterns often evolve over time in the data of a particular business or segment. Understanding and identifying these trends can lead to specific conclusions and provide guidance to management to draw upon for important business decisions. Data visualization tools such as spreadsheets, charts and tables provide an accessible way for a broader audience to grasp the meaning of the data with relative ease.
Actionable insights emerge from the knowledge and understanding of the trends and patterns in a broad context of how a company operates. The role of finance is to use the detailed information to provide a high-level interpretation of what that data means. Storytelling is a powerful approach in communicating the actionable insights to the decision makers of the organization without getting lost in the details.
Know and Understand Your Audience
A good story begins with a complete understanding of the audience. The storytelling is often directed towards senior leadership who are looking for answers about their business. Knowing their needs and what they care about is essential to crafting a compelling narrative.
Tailoring not only the content, but the manner through which it is told, is critical to meaningful storytelling. Be short and concise when speaking to leadership, as they do not need to be inundated with various facts and figures. They understand their business and are only looking at a few key items to gain confidence that the organization’s strategy is in line with the business or needs corrective measures going forward. When speaking with the leadership of an organization, it is always important to be succinct in the message.
Best Practices for Great Storytelling in Finance
It’s important to follow some best practices for gathering information to effectively use storytelling in the FP&A process:
Use the best tools.
Transforming data into meaningful and actionable insights requires the right reporting and data visualization tools for any FP&A team to be successful. Utilizing software such as Tableau, Infogram, and even Microsoft Excel will help automate manual tasks and provide real-time updates so that more time and resources can be spent analyzing the data instead of inputting and manipulating the information.
Use one source of truth.
Many organizations run multiple business applications, each with its own way of reporting information. The general ledger may be used by one application whereas, the forecasts uploaded by the specific sales teams or territories may use another software. These systems may be convenient for what they are but may fall apart when a more refined analysis is required. Having one system that is the single source of truth eliminates any debate about which numbers are correct and provides a single perspective to view an organization’s financial information.
Use good visuals to support your storytelling.
The adage a picture is worth a thousand words is extremely important in the FP&A storytelling process. By leveraging the power of data visualization some insights that otherwise may have been missed can now be uncovered using pictures, graphs, charts, and models. Trends and projections can be easily illustrated in charts and graphs so that anyone can quickly understand and process. Great visuals must accompany great stories.
Refine the message.
Sometimes the story does not align with the data and the message needs some refinement. It’s important to be agile in finding the right story even if it requires some trial and error. Use colleagues to get a different perspective to test other strategies that may align more with the story. In the end, it’s important to draw a logical conclusion about which message works.
How Communication Improves Storytelling in Finance
When FP&A fails in its role, it is primarily due to a preoccupation with the data itself. For example, they might focus on increased revenue or decreased costs and their certain percentages, rather than the reason(s) the numbers moved—which are the crux of the story.
Along with implementing the best practices noted above, it is important for FP&A leaders to have a very strong relationship with their business partners, who are essentially the owners of the data. The FP&A team should meet with the various department heads on a consistent basis, usually monthly, to discuss not only the needs of the Finance team but also the financial needs, strategies and goals of the individual department. These are important to know, so that the story being told can align on a divisional as well as organizational level.
The Finance department, and more specifically, the FP&A team, is unique in that it touches every aspect of the organization along with every business leader of each department. This is because each area has a budget and strategic goals defined by company’s executives. By analyzing the results generated by each division and how that data syncs to the financial results, FP&A professionals can connect the two to tell a more impactful story. Having consistent conversations with department heads will also help shape the story should the data change over a specific period.
It is important to understand that Finance and FP&A does not drive the business of an organization; they are there to assist the business leaders who are charged with that task. They don’t create strategy, promote the organization through marketing efforts or generate new customers. Building trust and communication with the organizational leaders – and gathering information and business insight about their functional areas – will help the FP&A team tell a story in a very sharp and concise manner.
Improve Storytelling in Finance in Your Organization
FP&A storytelling is one of the most powerful forms of organizational communication. By adding a narrative that is supported by sound financial analysis the finance teams can bridge the gap between very detailed information and the actionable insights that drive good business decisions.
If you’d like support improving your organization’s FP&A efforts, or need additional bandwidth to achieve your strategic objectives, we invite you to reach out! Our growing consulting team is ready to help you in whatever you need. You can visit the services area of our website to learn more about how we can help. You might also be interested in the guide below if you’d like to learn more about forecasting process: