FINANCIAL REPORT WRITING SKILLS – BEST PRACTICE WRITING PRINCIPLES

AND PROCESSCHARLES COTTER

TRANSNET ENGINEERING, DURBAN SOUTH

11-12 MAY 2015

PRESENTATION OVERVIEW

• 20 FUNDAMENTAL, BEST PRACTICE BUSINESS WRITING PRINCIPLES

• THE “LOOK AND FEEL” COMPONENTS OF AN EFFECTIVE FINANCIAL REPORT

• THE 6-STEP, FINANCIAL REPORT WRITING PROCESS

CAKE-BAKING ANALOGY

• BEST PRACTICE BUSINESS WRITING PRINCIPLES - INGREDIENTS

• THE “LOOK AND FEEL” COMPONENTS OF AN EFFECTIVE FINANCIAL REPORT – PICTURE OF THE CAKE

• THE 6-STEP, FINANCIAL REPORT WRITING PROCESS - RECIPE

DOES THIS LOOK FAMILIAR?

LEARNING ACTIVITY 1

• From your experience and perspective, as both a writer and a reader, identify ten (10) common errors that you’ve observed with Financial Reports.

• Match each of these 10 errors with a set of 10 best practice criteria/guidelines to counteract/improve these errors, thereby promoting effective financial report writing.

20 FUNDAMENTAL, BEST PRACTICE WRITING PRINCIPLES

• A – B – C (ACCURACY – BREVITY – CLARITY) – “BE ON POINT AND TO THE POINT”

• A – I – D –A (ATTENTION – INTEREST – DESIRE – ACTION) – “TELL THE READER WHAT YOU’RE GOING TO TELL THEM; TELL THEM AND THEN TELL THEM WHAT YOU TOLD THEM.”

• “THINK BEFORE YOU INK” – USE 80 (THINKING)/20 (INKING) PRINCIPLE

• HARMONIZATION OF THE BEST FIT METHODS – FIT FOR PURPOSE/MESSAGE/READER

• BE STRATEGIC AND SELECTIVE - PROVIDE ONLY VALUE ADDING AND RELEVANT FINANCIAL INFORMATION

20 FUNDAMENTAL, BEST PRACTICE WRITING PRINCIPLES

• “LESS IS MORE” – HAVE AN EFFICIENT AND ECONOMICAL WRITING STYLE

• EMPATHIZE - “CUSTOMIZATION IS KING/QUEEN” – CONDUCT A READERSHIP ANALYSIS TO ACCOMMODATE THEM AS MUCH AS POSSIBLE – “SPEAK THE LANGUAGE THAT YOUR READER UNDERSTANDS”

• INTEGRATE RATIONAL (LEFT BRAIN) AND CREATIVE (RIGHT BRAIN) THOUGHT PROCESSES

• MARRY BEING METICULOUS (“EYE FOR DETAIL”) WITH FINDING CREATIVE WRITING SPACE (PSYCHOLOGICAL, EMOTIONAL AND ENVIRONMENTAL)

• USE OF VISUAL STIMULI AND TECHNIQUES TO COMPLEMENT, SUPPORT AND PROMOTE A HIGHER LEVEL OF UNDERSTANDING

20 FUNDAMENTAL, BEST PRACTICE WRITING PRINCIPLES

• ENSURE QUALITY ASSURANCE E.G. PROOF-READING; EDITING; SPELL CHECKING AND VERIFICATION OF FINANCIAL INFORMATION

• USE THE PURPOSE AS YOUR WRITING “GPS” – TO CONCENTRATE/DIRECT FOCUS TO THE ACHIEVEMENT OF OUTCOMES/OBJECTIVES

• “DON’T WRITE TO IMPRESS, WRITE TO PROMOTE A HIGHER LEVEL OF UNDERSTANDING.” – BE A AGENT OF EFFECTIVE COMMUNICATION

• EMPLOY A “COMMUNITY OF WRITERS” APPROACH – THE VALUE OF CONSULTATION AND ENGAGEMENT

• PROPER STRUCTURE - USE THE PYRAMID (CASCADING) METHOD – INITIALLY PRESENT LESS IMPORTANCE INFORMATION AND CLIMAX WITH MOST CRITICAL INFORMATION

20 FUNDAMENTAL, BEST PRACTICE WRITING PRINCIPLES

• APPLY THE WATERFALL APPROACH – VERTICAL ALIGNMENT AND SYNERGY BETWEEN THE FINANCIAL REPORT FINDINGS, CONCLUSION AND RECOMMENDATIONS

• “TOUR GUIDE” MENTALITY – DIRECT; NAVIGATE; ORIENTATE, INFORM; ADVISE, ENLIGHTEN AND CAPTIVATE THE READER

• ADOPT A STORY TELLING MODE – LOGICAL AND COHERENT FLOW OF FINANCIAL INFORMATION – NO SURPRISES!

• THE REPORT SHOULD GENERATE BUSINESS INTELLIGENCE – ENABLING SMART OPERATIONAL AND STRATEGIC FINANCIAL MANAGEMENT DECISION-MAKING

• ADOPT A STRATEGIC MIND-SET – DEVELOP STRUCTURED, HOLISTIC AND WELL-PREPARED BUSINESS WRITING HABITS

THE BEAUTY OF SIMPLICITY

BEST PRACTICE FINANCIAL REPORT WRITING (COMPETENCE)

CONTENT

CONTEXTPROCESS

EFFECTIVE FINANCIAL REPORT CONTENT

TYPES OF REPORTS

• Informative

“Telling”Examples

• Evaluative

“Selling”Examples

APPROACHES TO FINANCIAL REPORT WRITING

• Dash-boarding

Data-driven and derived Report-generatingMS Excel

• Key-boarding

NarrativeReport-writingMS Word

“LOOK AND FEEL” COMPONENTS OF AN EFFECTIVE FINANCIAL REPORT

• SCOPE

• STRUCTURE

• STYLE

• TONE

• READABILITY

• CONVENTION

SCOPE OF FINANCIAL REPORTS

• Profitability

• Liquidity and Working Capital

• Equity

• Cash flow management

• Investment

• Solvency

STRUCTURE

• EXTERNAL STRUCTURE – FRONT-END AND BACK-END

• INTERNAL STRUCTURE

EXTERNAL STRUCTURE – FRONT-END

• Title page

• Table of Contents

• Executive Summary: Overview of Financial Performance Highlights

• CEO Report

EXTERNAL STRUCTURE – BACK-END

• Glossary of Financial terms and Acronyms

• List of Sources/References

• Appendices (Annual Financial Statements - AFS):

Income (Profit/Loss) Statement Balance Sheet Cash Flow Statement

• Notes/Narrative to Financial Statements

• Attachments:

Audit Committee Report Independent Auditor’s Report Accounting and other relevant policies

INTERNAL STRUCTURE• Introduction

• Financial Contextualization/Background

• Research methodology and process

• Financial review:

Overview Profitability Operating income and expenses Asset Management Risk Management Equity and Financing Activities Investment portfolio and management

• Forward-looking information: Future-directed financial strategies and forecasts/projections

• Conclusions

FINANCIAL REVIEW• Overview

• Profitability

• Operating income and expenses

• Asset Management

• Risk Management

• Equity and Financing Activities

• Investment portfolio and management

FORWARD-LOOKING INFORMATION: FUTURE-DIRECTED FINANCIAL STRATEGIES AND FORECASTS/PROJECTIONS

• Include all relevant information in this sub-section e.g. medium-term and long-term financial projections and targets and business forecasts.

• Direct reference and extraction (where appropriate) should be made to the organization’s approved Strategic Plan.

APPENDICES (ANNUAL FINANCIAL STATEMENTS - AFS)

• Income Statement

• Balance Sheet

• Cash Flow Statement

NOTES/NARRATIVE TO FINANCIAL STATEMENTS

• Present information about the basis of preparation of the financial statements

• Provide the specific accounting policies used and the details of the accounting practices you use e.g. policy for procurement or levels of payment authorization.

• Disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and

• Provide information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them.

• Furthermore, make notes of any financial items that may require explanations.

FINANCIAL REPORT WRITING CONVENTION

• Generally Accepted Accounting Principles (GAAP)

• International Financial Reporting Standards (IFRS)

• Public Finance Management Act (PFMA)

• The Companies Act (2008)

OTHER CONVENTION

• USE OF TABLES AND FIGURES – LABELLING, NUMBERING AND REFERENCING

• APPENDICES AND ANNEXURES - LABELLING, NUMBERING AND REFERENCING

• CITATION AND REFERENCING – HARVARD METHOD – ALWAYS ACKNOWLEDGE SOURCE AND AVOID PLAGRIASM AT ALL COSTS

• FORMAT, DESIGN AND LAY-OUT – INDUSTRY AND ORGANIZATION-SPECIFIC GUIDELINES AND TECHNIQUES

• GRAMMATICAL AND LANGUAGE RULES

OTHER CONVENTION

• USE ACTIVE VOICE (AS OPPOSED TO PASSIVE) – WRITTEN IN THIRD PERSON

• USE OF ACRONYMS AND ABBREVIATIONS

• AVOID JARGON AND UNFAMILIAR FINANCIAL TERMINOLOGY

• SENTENCE AND PARAGRAPH STRUCTURING

PROPER SENTENCE AND PARAGRAPH STRUCTURING

• VARY THE LENGTH OF SENTENCES

• EASY TO UNDERSTAND CONCEPTS – SHORTER SENTENCES. COMPLEX CONCEPTS – LONGER SENTENCES TO ENABLE EFFICIENT ASSIMILATION OF INFORMATION

• DON’T SUBSTITUTE A FULL-STOP FOR A COMMA – “IF YOU CAN USE A FULL-STOP USE IT!”

• ONE CONCEPT/KEY POINT, ONE PARAGRAPH. DIFFERENT CONCEPT, DIFFERENT PARAGRAPH. “DON’T MIX ‘N MATCH – AVOID LIQUORICE ALL-SORTS WRITING STYLE”

• CREATE A MEANDERING AND MESMERIZING WRITING STYLE AS YOU TRANSITION FROM ONE PARAGRAPH TO THE NEXT. AS YOU EXIT ONE PARAGRAPH START INTRODUCING THE NEXT ONE.

• MAKE USE OF SIGN-POSTING (TO NAVIGATE THE READER)

STYLE

• STYLE IS REGARDED AS THE DEGREE OF FORMALITY

• THE APPROPRIATE STYLE IS:

FORMAL (NOT INFORMAL) FACTUAL (NOT OPINION-BASED) RATIONAL (NOT EMOTIONAL) – “Connect intellectually

with your reader, disconnect your emotions and personal feelings.”

OBJECTIVE (NOT SUBJECTIVE)

TONE

• TONE IS REGARDED AS THE WRITER’S ATTITUDE – DIRECTED AT READER AND SUBJECT MATTER

• TONE SHOULD BE:

RESPECTFUL (NOT PATRONIZING)ASSERTIVE (NOT PASSIVE OR AGGRESSIVE)PROFESSIONAL

READABILITY• REFERS TO ALL THE ASPECTS THAT MAKE A FINANCIAL REPORT MORE

NOTICEABLE AND EASY TO READ - “SOFT ON THE EYE AND SOFT ON THE MIND”

• MUTUAL DEPENDENCE - THE WRITER RELIES ON THE READERS' ABILITY TO READ EFFICIENTLY AND TO UNDERSTAND THE (INTENDED) MESSAGE.

• WRITER NEEDS TO DO EVERYTHING IN THEIR POWER TO ENABLE AND FACILITATE A COMMON UNDERSTANDING

• TECHNIQUES TO ENHANCE THE READABILITY:

LAY-OUT USE OF WHITE SPACE HEADINGS/SUB-HEADINGS NUMBERING

LEARNING ACTIVITY 2

• Develop the best practice criteria and convention (rules) of an effective financial report. Focus on the following elements:

Structure

Style and tone

Readability

Convention

FINANCIAL REPORT WRITING PROCESS

• STEP 1: PLANNING

• STEP 2: RESEARCHING THINKING (80%)

• STEP 3: ORGANIZING

• STEP 4: WRITING THE FIRST DRAFT

• STEP 5: QUALITY ASSURANCE INKING (20%)

• STEP 6: SUBMIT FINAL DRAFT FOR APPROVAL AND ADOPTION

STEP 1: PLANNING (7-W’S)• DEFINE THE PURPOSE (WHY?)

• FORMULATE THE OBJECTIVES (WHAT?)

• SUBMISSION TARGET DATE (WHEN?)

• SUBMISSION AND APPROVAL PLATFORM/COMMITTEE (WHERE?)

• SCOPE OF THE FINANCIAL REPORT (WIDTH?)

• ESTIMATED LENGTH/VOLUME OF FINANCIAL REPORT (WEIGHT?)

• CONDUCT A READERSHIP ANALYSIS (WHO?)

READERSHIP ANALYSIS (RELATED TO A-B-C)

• LEVEL 1 READER/S: APPROVING AUTHORITY (NON-TECHNICAL) – INFORMATION NEED: BREVITY

• LEVEL 2 READER/S: TECHNICAL/SUBJECT MATTER EXPERT – INFORMATION NEED: ACCURACY

• LEVEL 3 READER/S: IMPLEMENTER/FUNCTIONARY – INFORMATION NEED: CLARITY

STEP 2: RESEARCHING

• METHODS – TO ACHIEVE THE SCIENTIFIC RESEARCH PRINCIPLE OF VALIDITY

• PROCESS – TO ACHIEVE THE SCIENTIFIC RESEARCH PRINCIPLE OF RELIABILITY

• COLLECTIVELY: VALIDITY + RELIABILITY = CREDIBILITY

RESEARCH METHODS

• QUANTITATIVE – NUMERIC E.G. STATISTICS

• QUALITATIVE – SUBJECTIVE E.G. SURVEYS AND FOCUS GROUPS

• SOURCES OF DATA:

ELECTRONICDOCUMENTARYEXPERIMENTALHUMAN

RESEARCH PROCESS• STEP 1: DEVELOP A DATA COLLECTION PLAN/STRATEGY

• STEP 2: DATA COLLECTION

• STEP 3: DATA COLLATION

• STEP 4: DATA ANALYSIS LEADS TO FINDINGS

• STEP 5: DATA INTERPRETATION LEADS TO CONCLUSIONS• STEP 6: VERIFICATION

• STEP 7: PUBLICATION LEADS TO RECOMMENDATIONS

STEP 3: ORGANIZING – 3-S FORMAT

• STRUCTURE (OF FINANCIAL REPORT)

• SEQUENCE (OF FINANCIAL REPORT)

• SPACING (POSITIONING OF TABLES, FIGURES, ATTACHMENTS TO THE FINANCIAL REPORT)

• RECOMMENDED ORGANIZING TOOL: MIND-MAPPING

• OBJECTIVE: TO ENSURE FLUENCY AND EFFICIENCY IN WRITING WHEN TRANSITIONING FROM THINKING (STEPS 1-3) TO INKING (STEPS 4-6)

MIND-MAPPING EXAMPLE

LEARNING ACTIVITY 3

• By following steps 1-3 of the report writing process, develop a framework/skeleton of a financial report for your organization.

Step 1: Planning

Step 2: Research methodology and process

Step 3: Organizing the financial report structure

STEP 4: WRITE FIRST DRAFT

• APPLY THE BEST PRACTICE WRITING PRINCIPLES

• USE THE APPROPRIATE FINANCIAL REPORT STRUCTURE AND FORMAT

STEP 5: QUALITY ASSURANCE

• PROOF-READ AND EDIT THE FINANCIAL REPORT

• PERFORM A SPELLING AND PUNCTUATION CHECK

• CONSULT WITH LANGUAGE AND SUBJECT MATTER EXPERTS AND RECEIVE FEEDBACK

• MAKE THE NECESSARY REVISIONS

• REFER TO THE EVALUATION CHECKLIST (PAGES 66-68 IN THE LEARNER MANUAL)

STEP 6: SUBMISSION AND APPROVAL OF FINAL DRAFT

• MAKE THE NECESSARY AMENDMENTS AND WRITE THE FINAL DRAFT

• SUBMIT TO HIGHER MANAGEMENT TO AUTHORIZE, APPROVE AND ADOPT THE FINANCIAL REPORT FINDINGS AND RECOMMENDATIONS

LEARNING ACTIVITY 4

• By using the following format (as a guideline), write the first draft of a financial report for your organization (step 4 of the financial report writing process)

• Step 5: Review the report (Submit this report to a fellow learner to get feedback). Readers should use the checklist on pages 66-68 to evaluate the financial report.

• Step 6: Writing and submitting the final draft (Based on the feedback from the fellow learner, make the necessary amendments and write the final draft)

CONCLUSION

• SUMMARY OF KEY POINTS

• LEARNING “TAKE-AWAYS"

• QUESTIONS

• TRAINING ADMINISTRATION

• CERTIFICATION

• THANK YOU!

CONTACT DETAILS

• CHARLES COTTER

• 084 562 9446

• charlescot@polka.co.za

• LINKED IN

• TWITTER: Charles_Cotter