TAKEAWAYS
Recent geopolitical conflicts and economic developments have driven business communities around the world into a frenzy. Against the backdrop of the war in the Middle East and the imposition of tariffs by the United States, the global economy has been shrouded in a cloud of uncertainty and hit by pessimistic sentiments. Stock markets have nosedived while oil prices jumped to their peak since 2023.
As business organisations prioritise staying afloat amid the volatility surrounding them, astute financial acumen is a trait in demand to address pertinent topics such as financial risk management and stewardship. Hence, it is imperative for business leaders to clearly understand financial numbers, know what they mean and adopt appropriate measures to tackle impending issues.
In this regard, professional accountants have a major role to play in assisting business leaders navigate the sea of technical jargon, and complex accounting and financial concepts. They can add much-needed clarity and direction to facilitate decision-making by business leaders.
To achieve financial clarity, James Leong, Adjunct Professor, National University of Singapore, and Founder, Financial Storytelling – a training consultancy firm that helps non-finance individuals understand financial statements in a simple, easy and fun way – advocates a storytelling approach to learning financial concepts more effectively. For example, Mr Leong posits that the technical concept of liquidity can be explained using this approach.
Under the traditional accountancy education approach, the learning process usually entails a definition of liquidity, a formula to calculate liquidity and a worked example to illustrate the calculation of liquidity. However, this may not be the most useful starting point for a learner due to the lack of context and relatability around the concept.
By contrast, using a financial storytelling approach, the learner thinks of his business as a tree. The profits of the business are equivalent to the fruits borne by the tree. While the bearing of fruits may be an indication of success, it is not the fruits that keep the tree alive. Rather, it is water and nutrients that sustain the tree. In business, liquidity is the water and nutrients that keep the business going.
Therefore, learning through storytelling adds relevant meaning and context to enhance the experience. It explains to the learner why a concept is important and why it needs to be managed.
Mr Leong is also a firm believer that finance does not have to be complex in order to be clear. “There is a distinction between complexity versus the ability to communicate a topic clearly,” he says.
The key to financial clarity is to keep it simple. When something is explained in simple terms, the audience will understand it better. This is because when language is simplified, clarity in messaging naturally comes along with it.
It is worthwhile to remember that business leaders may not necessarily be well-versed in the field of finance. When interacting with them on finance-related matters, adjustments may need to be made to the language used to ensure that there are meaningful discussions and all are on the same page.
Accuracy in numbers is a non-negotiable attribute in accounting and finance, and storytelling does not compromise accuracy.
Storytelling is not about fabricating information; it is also not about introducing ambiguity. On the contrary, it is about establishing an appropriate context so that business leaders can better appreciate the financial numbers and have clarity to make the right decisions. According to Mr Leong, every number tells a story of choice, behaviour and consequence (that is, the context) behind the number. With this context, business leaders will then have to assess and decide what it means for their organisations and their next course of action.
At the end of the day, numbers are the single source of truth. The storyteller must stick to this “truth” to ensure that accuracy and financial storytelling can co-exist.
To bring financial clarity to the fore, business leaders need to stop viewing financials as a mere spreadsheet of numbers. Instead, they need to look at it as a decision-making framework.
Before making a decision, pause for a moment and ask the following questions:
In this manner, business leaders will have a good idea of the impact of their decision even before it unfolds in reality. Furthermore, they will no longer be reactive to the financial numbers as they would have gone through all the possibilities. It becomes very clear what the pros and cons are with each option, and they can start to work towards the numbers they want to achieve. This is how business leaders can turn financial clarity into a leadership advantage.
In summary, financial clarity is essential for business leaders to make informed decisions and simplicity is a pivotal element of it.
Though it may sound challenging to turn a complicated topic into an easy-to-understand matter, as Albert Einstein once said, “If you can’t explain it simply, you don’t understand it well enough”.
