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What’s Your Story? Paint a Clearer Picture Using Financial Data

Posted March 28, 2019 by Susan Bell

Accounting Today published an article a few weeks ago entitled, “Why accountants need to be data storytellers.” Now, the storytelling concept might be familiar to people in a marketing context—it’s a technique commonly used in that field to convince you to take that next step in the sales funnel—but personally, I’ve never considered storytelling to be part of professions like accountant, financial planner, or banker.

But as this article explains, storytelling—and more specifically, data storytelling—is indeed crucial to being effective in your conversations with clients in numerous finance-related roles.

The article describes how today’s business owners and business decision-makers are looking at their company’s financials and trying to understand what exactly they foretell. Data storytelling is one way that financial professionals can make this information clearer and easier to digest for their business clients.

The article continues: “Data storytelling is when we communicate what the numbers mean. It means using effective, relatable stories to convey the information in those numbers to the people who need that information. When we’ve succeeded in communication, they understand and remember what those numbers mean, and they can make the right decisions for their business or their financial future.”

In short, professionals like accountants, financial planners, and bankers may be fluent in financials, but to many business owners, it's just a baffling mass of numbers. Visuals like charts and graphs can help, but as the Accounting Today article notes, it’s more helpful to tell a compelling, relatable story about the data and the context behind the numbers in order to inspire action on the part of the business owner or decision-makers.

And this is exactly where Vertical IQ can help.

Incorporating industry knowledge into your storytelling

Let’s take a building materials distributor as an example of a business client you might have. It’s easy to look at their individual business financials and see that their sales have gone up or down, but what are the industry trends that could impact their business in the future?

Looking at the Vertical IQ Industry Profile for building materials distributors, you can tell them the story about the growth of the industry as a whole—how sales within that sector increased 6.3% in 2014, 3.7% in 2015, 6.3% in 2016 and 9% in 2017, and a major contributor to that growth is housing starts, which increased 8.4% in 2014, 10% in 2015, 5.6% in 2016 and 2.5% in 2017.

Non-residential construction spending is also up overall, increasing 10.6% in 2014, 9% in 2015, and 4.6% in 2016, but it fell a slight 0.3% in 2017. Using the Industry Profile’s Industry Trends section, you can add to the story that while experts predict continuing growth, some companies approach the future with cautious optimism, given lumber trade uncertainty, labor issues, and potential changes to business rules and regulations.

Then, turning to the working capital section of the Vertical IQ Industry Profile, you can further flesh out the story of the building materials distribution sector, where gross margins average 22-23% of sales. You can include in your data storytelling that because of the seasonality of the industry, cash flow increases significantly during the spring and summer when construction activity peaks, and sometimes companies experience losses during the off season. Working capital requirements increase just prior to the construction season to fund inventory builds. On average, companies carry between 43 and 60 days of inventory, and inventory averages 30-32% of assets.

Turning a data story into solutions

Using the Vertical IQ Industry Profile to tell this data story to a hypothetical building materials distribution client can help you advise them on a variety of topics, offering your professional solutions to their real-world business issues. For example:

  • For bankers, you can suggest that due to the seasonal nature of the building materials distribution industry, a line of credit or term loan could help supplement your client’s working capital needs. You can also offer them advice on commodity services to guard against market volatility.

  • If you are a financial advisor, you can discuss with the business owner how to take advantage of the upward spending trend in the industry, and guard against potential uncertainty around supply and labor issues, to strategize a secure retirement and/or succession planning.

  • Accountants who are working with building materials distributor clients might discuss the bottom-line risks associated with extending too much credit to contractors or how timely collections can improve their cash standings and ability to forecast and budget.

Be an expert data storyteller

In order to succeed, businesses need to be proactive, not reactive, to their data trends, as well as trends within their industry as a whole. But too often, business owners don’t know how to effectively interpret all of the facts and figures that are at their disposal; they feel overwhelmed, creating a bias toward inaction.

As a banker, accountant, or financial advisor, using Vertical IQ to become a better data storyteller helps you give your client important financial information in a more digestible, easier to understand way. This approach allows you the opportunity to offer your client ideas for tailored solutions that can positively impact their company’s data points, both now and into the future.

Tags: bankers, banking, customer satisfaction, small business owner, business banking, business owner, advisor

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