Why some basic knowledge of finance is essential for managers

Rightly or wrongly financial measures are amongst the most common in organisations.  Sales, income, cash flow and costs are all of critical importance in a manager’s role.

The primary benefit of having a working knowledge of basic financial concepts is that you are better placed to put forward plans that are likely to win the support of those who have control over your organisation’s finances.  Knowing how they think, what’s important to them and particularly the language they use in their work helps you to put across your ideas and plans for the future more effectively.  Many plans for the future can have significant cash flow implications and in turn funding considerations that you really do need to take into account when planning ahead.  It’s not just a matter of understanding your cost budgets but also your sales and other forms of budgets (plans with numbers in them).

The impacts of your work are often measured in financial terms and knowing the jargon helps boost your confidence.  Finance and accounts is, in my experience, the most feared topic of non-financial managers and it really need not be.  Often the realities of managing the finances is dressed up in specialist language and concepts when in fact it is all rather simple.

What are the practical considerations for you as a manager?  How can you make life easier for yourself?

The most obvious place to start is with a good guide to finance for non-financial managers and there are many on the market.  The internet is full of free guides into such things as the income statement or profit and loss, the balance sheet, depreciation, cash flow and so on.  I used to recommend to my management students when they were taking units in finance and accounts that they seek out and go and talk to their organisation’s finance people.  Generally the reaction was very positive as finance people are often feared and when someone shows an interest in their area and their specialist work they are delighted to help!  I was often quite taken aback at how much detailed information about organisation’s finances was made available by just asking.

You just can’t leave finance to to the financial specialist as a manager – you will make your life easier by seeking out some of that knowledge.

I raise money for the Alzheimer’s Society in the UK – a very small donation at http://www.virginmoneygiving.com/everyonedeservesgoodmanagement would be most appreciated.

 

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