How to Explain Financial Information to Users & Non-Finance People

You know the moment.

You have finished the pack. The numbers are right. You have checked them twice. You walk into the room, start on slide four, and within ninety seconds the Sales Director has picked up his phone.

He is a smart bloke. He runs a business unit. He just has no idea what you are talking about.

That is the problem this post solves. Learning how to explain financial information to non-finance people is the highest-paid skill in our profession, and almost nobody teaches it.

There is a line usually credited to Einstein. If you cannot explain it to a six-year-old, you do not understand it yourself. Nobody has ever found the source, so treat it as folklore rather than physics. The idea still holds.

If you want help building this skill rather than working it out alone, The Leaders Lab spends a year on it with senior finance people, through group workshops and one-on-one coaching.

Why Finance Loses the Room

We are trained in a private language.

EBITDA. Accruals. Variance to plan. Contribution margin. Working capital cycle. Every one of those words means something precise in a technical setting. Every one of them empties a room.

Here is what makes it worse. Most of us believe the long words help. We think they signal command of the subject. Research says the opposite.

Daniel Oppenheimer ran five experiments on this at Princeton and published the results in Applied Cognitive Psychology. He took writing samples and swapped simple words for longer ones with the same meaning. Readers then rated how intelligent the author was.

The authors using longer words were judged less intelligent.

The reason is fluency. When text is hard to process, the reader feels the friction, and they attribute the friction to the writer. Your jargon does not read as expertise. It reads as struggle. The paper is called Consequences of erudite vernacular utilized irrespective of necessity, which is either the best or worst academic title ever written, depending on your mood.

The usual objection arrives fast. My audience is senior. They can handle it.

The Nielsen Norman Group tested that objection with doctors, professors and IT managers. Highly educated readers still preferred short, scannable, plain writing. They are busy, so they want the point. You can read their write-up on plain language for experts.

The Real Problem Is the Curse of Knowledge

Here is the part most people miss.

You are unclear because you know too much.

Economists have a name for this. Colin Camerer, George Loewenstein and Martin Weber called it the curse of knowledge in a 1989 paper in the Journal of Political Economy. Their finding was blunt. People who hold private information cannot ignore it, even when ignoring it would serve them. They assume everyone else knows what they know.

You have lived inside the numbers for two weeks. You know why the freight line moved. You know the rebate accrual was released in March. So when you say “the margin variance is largely phasing”, it sounds complete to you.

To the Sales Director, it sounds like weather.

That gap is invisible from the inside. Which means clarity is a discipline rather than a talent. You have to build a habit that catches the gap for you.

Here is the habit.

Finance Jargon and What to Say Instead

Before anything goes out, run it through a translation pass. One column is what we say. The other is what they hear.

The last four look trivial. They are the fastest wins you will get. Change nothing else and your writing improves this afternoon.

How to Test Your Own Writing With the Gunning Fog Index

You need a measure, because your own ear will lie to you.

The Gunning Fog Index estimates the years of schooling a reader needs to follow your text on the first pass. It uses two inputs. Your average sentence length and the share of words with three or more syllables.

Rough guide to the scores:

• 8 to 10 — the level a good newspaper writes at. Everyone follows you.
• 11 to 13 — comfortable for a general business audience.
• 14 and up — you are asking your reader to work.
• 17 and up — academic. Fine for a journal. Poor for a board pack.

Paste your writing into any free Fog Index checker, or ask an AI tool to score it. It takes twenty seconds.

I ran a board report I was proud of through it a few years back. It scored 23.

Twenty-three. I had written a document that needed a doctorate to read, for a group of people who had eleven minutes to read it. I had spent three days making it worse.

That was the day this became a method rather than an opinion.

What the Fog Index Gets Wrong in Finance

The Fog Index is a blunt tool in our world, and you should know why before you lean on it.

Tim Loughran and Bill McDonald tested it on financial documents and published the results in the Journal of Finance. Their conclusion was that the measure is poorly suited to business writing. The reason sits in the syllable count.

Fog treats every word of three or more syllables as complex. In finance, those words are “company”, “operations”, “management”, “customer,” and “depreciation”. Every reader in your business already uses them. They are long, and they are easy.

So the index can flag a document that reads perfectly well. It can also pass a document that says nothing.

You can read the authors’ own summary of measuring readability in financial disclosures.

Here is how to use the tool well.

Trust it on sentence length. That half of the calculation holds up everywhere. Long sentences cost your reader working memory, whatever the subject.

Judge your vocabulary in a different way. Ask one question of every long word. Would the warehouse manager use this word out loud? “Depreciation”, yes. “Erudite vernacular”, no. That test beats the syllable count every time.

Use the score as a smoke alarm. Use your judgement as the fire brigade.

Five Ways to Cut Your Fog Score This Week

1. Cap your sentences at fifteen words. Where you find an “and”, “which” or “however”, there is usually a full stop waiting.
2. Swap the long word for the short one. Use, help, show, start, buy, end. You lose nothing.
3. Lead with the answer. Give the conclusion in sentence one. Give the workings after, for the people who want them.
4. Put a number next to every adjective. “Sales were disappointing” tells them nothing. “Sales came in $400k under, driven by two lost contracts” tells them everything.
5. Read it aloud. If you run out of breath, your reader ran out of patience earlier.

There is a related discipline worth learning alongside this one, which is knowing when to stop talking. I wrote about it in The Power of Silence.

Explaining EBITDA, Accruals and Variance in Plain English

EBITDA

What we usually say: EBITDA of $4.2m represents a 60 basis point margin improvement year on year.

What lands: We made $4.2m before the bank, the tax office and the wear on our gear. That is a slightly better result per dollar of sales than last year. Slightly. About sixty cents in every hundred dollars.

Accruals

What we usually say: We have accrued $180k for services received but not yet invoiced.

What lands: The consultants have done $180k of work. The bill has not turned up yet. We have put the money aside so it does not surprise us in June.

Variance to plan

What we usually say: The unfavourable variance of $310k is attributable to timing and volume effects.

What lands: We are $310k over. About $200k of that is a cost we thought would land in July, so it evens out. The other $110k is real, and it is freight.

Notice what changed. The words got shorter, and the honesty got sharper. That is the pattern. Plain language leaves you nowhere to hide, which is exactly why it builds trust.

If you want more on pitching this live rather than on paper, the 5-step presentation framework covers the delivery side.

Your AI Drafts Sound Clever, and That Is the Problem

This is new since I first wrote this post, and it deserves your attention.

Most finance teams now draft commentary with an AI assistant. The month-end narrative, the board note, the variance write-up. It is quick, and the output is polished.

It is also pitched about four reading grades too high.

These tools default to the corporate register. They reach for “leverage”, “facilitate”, “robust” and “strategic imperative”. They hedge. They write in the passive voice, so nobody owns anything. They produce a paragraph where a sentence would do.

Left alone, they will quietly raise the Fog score of every document your team issues.

Three habits fix it.

Prompt for the reader, rather than the topic. Ask for commentary aimed at an operations manager with no finance background, in sentences under fifteen words, with no jargon. You get a usable draft rather than a polished one.

Score the output before you send it. Run the Fog check on what the machine produced, the same as you would on your own writing. Machine drafts get the same test.

Do the last pass yourself. The tool has never met your Sales Director. You have. You know he cares about pallets rather than units, and that he will ask about freight before anything else. That knowledge is the part nobody can automate.

Used this way the tools are a gift. They remove the blank page and hand you time. The judgement about what your reader needs stays with you, which is where the value has always been. There is more on where these tools help and where they bite in The Risks of AI in Finance Business Partnering.

Clarity Is a Career Skill

There is a famous line about writing short, usually credited to Mark Twain. It was Blaise Pascal, in 1657, in his Lettres Provinciales, who wrote: “I had not made this longer then the rest, but that I had not the leisure to make it shorter then it is.” You can see the full trail at Quote Investigator.

The point that matters here is that short costs more. You have to know the subject cold before you can strip it back. Waffle is what we produce when we have run out of time or understanding.

Which is why this skill compounds. Explain the numbers plainly and three things happen. People believe you. People ask you back. People bring you into the decision earlier, when you can still change it.

That is the whole job. If you want the wider view of how communication sits at the centre of the role, start with Become a World Class Presenter.

By the way, this post scores about a 7. It would be a bit rich otherwise.

Common Questions