Want to tell a better story? Learn accounting.
When I joined my first venture-backed startup in 2017 as the only finance person, I quickly realized there was a lot I didn’t know how to do. While I understood fundamental concepts like reconciling payments and balancing transactions, I lacked the technical vocabulary (i.e. GAAP) to own and build a revenue forecast or a three-statement financial model.
But I assumed I knew how to tell a story. After all, I graduated from a liberal arts college with an esteemed English department. While my professors had always encouraged me to be more direct, precise, and to the point, it wasn’t until I stepped into this finance role that I truly learned how to write and, more importantly, how to tell a story.
Let me explain.
In my role, I was responsible for providing insights into three key financial areas: (1) burn rate (how much money we were spending), (2) runway (how much money we had left), and (3) the variance between our forecast (or budget) and actual performance. By owning both finance and accounting, I had all the data necessary to answer these questions, but it wasn’t just about the numbers—it was about telling the story behind them.
Accounting tells us about the past: what happened, the financial history—what revenue we earned, what expenses we incurred, which bills we didn’t pay. Finance then builds upon this data to make an informed projection about the future, and more importantly, how we’ll get there.
For me, my biggest gap was understanding key accounting concepts, like cash vs accruals. Only when I became more comfortable with my debits and credits and understood the dynamic relationship between the balance sheet, income statement, and statement of cash flows could I build a foundation from which to then craft a narrative around what the future looked like.
A storyteller is born.
Humans understand information better when it’s framed as a story.
Let’s take changes in runway, for example.
Story 1: "Hey CEO: Our runway changed by one month because we missed our revenue target." While this version gives us the basic data from accounting, it’s minimal. It provides the what, but not the why or the potential future impact.
When we marry the past with the future—accounting with finance—we can tell a more comprehensive story. And for startups, where the speed to make decisions can determine survival, more information is always better.
Story 2: "Our runway changed by one month because we delayed hiring additional salespeople, which impacted our forecasted revenue for the month. While our expenses were lower than expected due to the headcount delay, we didn’t experience the revenue jump our model forecasted. Our runway now depends on the cash flow we expected from that revenue. This means we need to ramp up to meet our revenue goals, or we’ll continue to be a month short on runway." This second story provides more actionable insights for the CEO—if revenue can’t be recaptured, they’ll need to start fundraising conversations earlier than expected. It also surfaces critical issues around hiring: Why was the salesperson hiring delayed? Is it a recruiting challenge? Are other key positions being filled that are essential for achieving our goals?
The key takeaway here is that while the numbers themselves may remain unchanged, the way we present them can significantly influence how we interpret the story they tell. By framing financial data as a narrative, we connect the dots between past performance and future expectations, transforming raw data into actionable insights.
In business, as in life, the story is what truly matters. Learning how to tell that story well has been an invaluable skill in both my professional journey and personal growth. So, whether you’re in finance or any other field, remember: Behind every number, there’s a story waiting to be told. Understanding and sharing that story can make all the difference.
(Originally published on January 10, 2023)
