Introduction to Accountants’ Jargon
Accounting literacy is the language of accountants
As an accountant, can you think of examples of when you tried to explain an accounting concept to a client or someone in the business who is not from a financial background? How did that work out?
- Did they just nod and go along but you sensed they did not really understand?
- Did they ask you any questions?
- You may think you are approachable but perhaps they did not want to look silly in your eyes, or
- Did not want to feel stupid asking you to explain something for the third time?
As a Chartered Accountant I sometimes find I have to dig really deep to be able to explain something that might be obvious from my perspective. eg- The other week working with a sole trader client from a non-financial background I had to work really hard to find the words to meet him where he was at to facilitate his understanding. It’s not easy.
As accounting professionals, we have all been trained a certain way including learning our own jargon- the language of accountants. It sometimes does not occur to us that those we are serving do not understand this language.
As a boutique accounting practice owner said to me recently: “I want to be able to speak the language of my clients, and not my speak.”
Fear of finance
“Daunted” “overwhelmed” “anxious” “confused” “don’t know where to start” “makes my stomach flip” or “my head spin” are typical responses when I ask my clients from a non-financial background to describe how they feel when they look at a profit and loss account and balance sheet.
Common Accountants’ Jargon and Plain English Definitions
And when I ask is there anything specific that they do not understand here are some common responses:
- “Equity- I don’t really know what that is”
- “Provisions – what might that be”
- “Depreciation – heard of it but I don’t know how that works”
- “EBIT and EBITDA- what is that?”
- “I just don’t know where to start”
- “What should I be looking at”
Makes me realise what a hash the accounting profession have done of being able to explain their craft!
In addition, as accountants we are frequently stereo-typed as bean counters. Generally speaking, let’s be honest with ourselves, accountants are not known for being great people-people or the best communicators!
I am passionate about changing that. Busting the myth that all accountants are boring bespectacled spreadsheet jockeys!!
How to Communicate with Your Accountant in Plain English
Speak in plain English
So what’s this all about? It’s about us as the accounting profession accepting some responsibility to rethink about the words that we use when talking with others from a non-financial background.
Why would we do that?
- Improving client service for a start.
- Providing more value to those that we are serving (be they internal or external clients).
- Leading to a more rewarding working relationship.
- Equipping our clients with the knowledge to ask meaningful and insightful questions.
- Ultimately enabling them to make better informed business decisions.
Definitions redefined
Below is a diagrammatic representation of the Balance Sheet and Income Statement with definitions for the major categories of transactions.
With reference to the Colour Accounting Learning System TM
- Assets are Valuable things that the business has rights over and can be measured.
- Liabilities are an Obligation to third parties; an “IOU”.
- Equity is an Obligation back to the Owner; another type of “IOU”.
- Revenue is a Value Generating Activity. It is a verb – this is where the action happens- the business has to do something, and in doing so generates more value for the business.
- Expenses are a Value Sacrificing Activity – meaning value is consumed, or in a recent participant’s words “Value Sucking Activity”. The business has to be prepared to expend some value in order to generate more value.
How to Communicate with Your Accountant in Plain English
I have found that using this language and visual format of talking about accounting concepts has enabled me to connect with my clients and help them to understand accounts in some cases for the first time. And that could be the first time after being in business for many years.
A recent workshop participant Tania Broome Miller-Jones said:
“I have felt fear when faced with a balance sheet, the numbers swimming before my eyes as I struggle to make sense of it. Well no more! I have a new sense of confidence, well equipped with the foundational principles that underpin assets, liabilities, equity, revenue and expenses.”
If you read this far and you would love to be able to better communicate with your peers and clients from a non-financial background – I would love to hear from you. Reach out and connect.
