Error of Omission

(December 2024)

When communicating financial information, there needs to be both clarity and understanding.  Using financial jargon can quickly lose the reader.  More importantly, you must write for any and all audiences.

For example, if you are a publicly held company, your audience may include shareholders, government regulators, journalists, market watchers, your employees and the general public.  On the other hand, if you are held by a private equity funded, you are interacting with your Board of Directors, other investors, the management of the PE firm, and your staff.  If you are a small business, you need to view what you communicate from the perspective of the business owner and, possibly, the employees.

Communicating with different audiences that have different levels of financial aptitude does necessitate a significant level of skill and the careful crafting of your message. 

If you are writing, it is challenging to pen something that is intended both for a skilled investor and your employee at the same time without your message going over the heads of some and/or appearing to talk down to others.

Recently, a client of mine who is public had already published budget information to their audience prior to commencing work with CFO On The Go.  Unfortunately, rather than their budget answering all questions, it created unnecessary ones due to information being omitted.  This is what I would call a cardinal error.

In a nutshell, they were missing vital pieces of information that would be contained in any annual budget. 

What was published listed their expenses grouped into logical, industry-based categories with sub-totals for each.  For reasons that remain unclear, there was no grand total of all expenses.  Therefore, after reviewing this document, you could not determine the total of how much they were planning to spend for the year.  Is this an issue?  Yes, but not the most serious problem.

The annual budget contained no line items with revenue.  None.  There was not sufficient information provided to determine if they were budgeting to make a profit or experience a loss.  Those in charge of the organization knew of the projected revenue, however, they had no one in the organization responsible for financial leadership, so this was overlooked when they published their proposed budget.

While this may not be a regular occurrence, it is an example of what can happen when there is not a professional versed in finance and accounting as part of the organization.  If these types of oversights become more common, this could result in a loss of confidence in the management of the organization.  Of course, this is easily avoidable because it was caused not by what was communicated, but rather what was not.

So, be careful what you say and what you do not say because omission can sometimes be a serious problem even when you are intentional in your communications.