Common Terminological Pitfalls in Financial Communication

aet toots
A good knowledge of financial terminology is crucial for managers and specialists to effectively communicate with international business partners, foreign investors or employees, ensuring accuracy in financial reports, formal letters, and invoices prepared in English. What are the pitfalls and typical mistakes causing misunderstandings in financial communication due to terminological mistakes, inaccuracies, or the ambiguity of terms?

Aet Toots

EBS, Head of International Business Administration BA programme, Lecturer


Mistakes often arise when you try to translate expressions word-for-word from your native or another foreign language. Many terms sound similar in different languages, but their meanings might be entirely different. The following highlights a few of such “false friends”. 


For example, in several continental European languages the terms for parts of the balance sheet are similar to the English words ‘active’ and ‘passive’ (Aktiva/Passiva in Estonian and in German, l’actif/le passif in French, etc). However, the English words 'active' and 'passive' have no connection to the balance sheet. These words are not used in the accounting context but refer to eagerness to participate or be engaged in some activity. In addition, they are also used to denote the active or passive voice in grammar. When talking about the balance sheet, we should use the terms 'assets,' and 'liabilities and equity’ respectively. Another example of misused terms is related to tangible and intangible assets. The equivalents of the English words 'material' and 'immaterial' are used in some languages to denote ‘tangible’ and ‘intangible’, e.g. materiaalsed ja immateriaalsed varad in Estonian, materielle und immaterialle Güter in German. However, in the accounting context the English words 'material' and 'immaterial' mean 'significant' and 'insignificant' respectively, and intangible assets can be material, which means they are significant enough to be recognised in the balance sheet.


Misunderstandings can arise from the regional varieties of English. The British and the Americans often use different terms to refer to the same item, or the same term can have entirely different meanings in the UK and in Northern America. As Oscar Wilde said, "We have really everything in common with America nowadays, except, of course, language" (1887). This quote is still relevant almost 140 years later, especially in financial language. For example, the word 'stock,' which means shares in the US, refers to debt, especially in the term 'loan stock', or ‘inventory’ in the UK. In addition, you have to be careful while using such a widely used word as 'income.' When discussing a company's financial performance, 'income' means revenue in British English (i.e. before deducting expenses) but profit in Northern American English (i.e. after expenses have been deducted). Expressions containing the word 'treasury' can be very confusing as well. Traditionally, 'Treasury' is associated with governmental institutions, e.g. in the US phrases for the government debt 'Treasury bonds,' 'Treasury notes,' and 'Treasury bills.' In a company's balance sheet the terms 'treasury stock' in the US and 'treasury shares' in British English are used for the company’s own shares that have been repurchased. 


The correct way of writing numbers is often overlooked. In English, a comma separates thousands. For example, 3,475 means three thousand four hundred and seventy-five. Where several languages use a comma, we have to use a point in English, e.g. 4.5 for 'four point five.'


English speakers love abbreviations and acronyms, both in writing and in speech. Therefore, it is not uncommon for professionals to say just PPE for 'property, plant and equipment' or PL for 'profit and loss (account),' COGS for 'cost of goods sold’, etc., which may sometimes be a challenge for non-native speakers, especially if they are not used to spelling words in English.


English is the lingua franca in communication between specialists who do not share a native language. How should one decide whether to use US or UK terminology in such cases? There is no definitive answer. In verbal communication, one can switch based on the preference of conversation partners, while it is crucial to maintain consistency in written texts and documents.


To help EBS students choose appropriate terms in professional communication and avoid misunderstandings, the Financial Communication course is offered within the Finance and Accounting specialisation of the Bachelor in International Business Administration programme. This course is also available as an elective for other students. The programme is accredited by EFMD!