The Importance of Financial Communication in a Business

by Ian Linton; Updated September 26, 2017
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Effective financial communication bridges the gap between financial experts and investment decisions makers. In the research paper, “The Financial Communication During a Period of Transition,” authors A. Heldenbergh, C. Scoubeau, L. Arnone and M. Croquet argue that financial communication is concerned with more than financial figures and data – it plays a key role in building an organization’s image, reputation and confidence.

Partners

Financial information is important to an organization’s business partners. Customers need to have confidence in a company. They need to know that a company manages its finances effectively so that it can continue to provide a reliable source of supply for the long term. Suppliers and other business partners want to know that they will have a continuing profitable relationship with the organization.

Employees

Employees should think and act like long-term shareholders, according to investment firm Goldman Sachs. Keeping employees informed about financial performance encourages a culture of stewardship for the firm. Financial communication also ensures that employees play their part in maintaining regulatory compliance. Better informed employees raise awareness of compliance issues and show regulators a company is serious about compliance, says consultancy firm Firehouse Communications.

Investors

Access to funding is vital for growth and survival. Effective financial communication plays an important role in shaping the attitudes of shareholders, investors and their advisers. As consultancy firm Ernst & Young points out in "The Financial Communication Challenge," financial stakeholders want a cohesive story about company performance. They report that, although companies provide a great deal of financial-performance information, stakeholders continue to find it difficult to get a clear story and are less trusting as a result of the financial crisis.

Value

Financial communication is no longer seen as a burden or something that requires formal compliance, according to Professor Pierre Di Toro and Dr. Alessandra Stefanoni in “Business Entities and the Environment.” Instead, they argue, it represents an opportunity to make information available about the economic value an organization produces. That information can generate further value by opening new relations or strengthening existing ones.

About the Author

Based in the United Kingdom, Ian Linton has been a professional writer since 1990. His articles on marketing, technology and distance running have appeared in magazines such as “Marketing” and “Runner's World.” Linton has also authored more than 20 published books and is a copywriter for global companies. He holds a Bachelor of Arts in history and economics from Bristol University.

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