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It’s a moment many communicators dread. The annual financial report lands on your desk, it’s your job to tell employees what’s in it – but it looks like a blur of figures and phrases you don’t understand…

September’s InsideOut – the free online magazine for IoIC members – talks to finance expert Ted Wainman to try and find a way through the numbers.

So, where would you look to discover the financial state of your organisation? A quick look at the profit and loss (P&L) account will tell you, right? Wrong.

For those of us who find account sheets baffling but have to explain them to others, heading straight to P&L would be a mistake, according to Ted, a veteran of Ernst & Young and JP Morgan, and author of How To Talk Finance.

Head instead to the balance sheet.

“A cursory glance at the P&L account will tell us if we’re making a profit or loss – but the balance sheet tells you the financial strength of the company,” says Ted. “When you get the annual financial report, that’s the first place to head to understand what’s really going on.”

He then produces an analogy to help the financially illiterate.

“When you see someone driving a really nice car down the street, you might think ‘I bet he’s got a lot of money’,” he says.

“However, maybe he spent all his money on the car, or maybe he’s borrowed lots of money to buy the car and he’s in massive debt because the value of the car is now less than the money he borrowed.”

When you get to the balance sheet you’ll soon become aware that it’s a sea of numbers, but Ted insists there’s a very simple formula for breaking it down.

There are five key elements:

1) Non-current or fixed assets

2) Current assets

3) Current liabilities

4) Non-current or long-term liabilities

5) Shareholders’ funds or capital in reserve.

He tells how to identify these five and explains what they are in September’s InsideOut, along with detail on what questions to ask when looking at an organisation’s financial health and why it matters that communicators understand all this.

Oh, and there’s also good news if you have only a vague idea about cash flow, ROCE and EBITDA…

Also in this month’s edition, IoIC's new head of commercial Jennifer Sproul explains why members can expect better value in the future, we ask why employer brand matters and look at ways to make your enterprise social network work.

Plus former Radio 1 DJ Bruno Brookes (pictured right) talks about employee radio and the Sector Spotlight falls on Surrey agency theblueballroom.

IoIC members can read more in the September edition of InsideOut, the Institute’s free monthly magazine. Members should log in at the top right of this screen. You’ll then find InsideOut in ‘IoIC Knows’ – simply click on ‘Publications’ in the drop-down menu.
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