Opinion: The future of your business depends on your financial knowledge

0

The American Management Association is the oldest training company in the United States. It was founded in 1926 and has trained over 10 million people. Of the 160 corporate seminars it offers to business owners, executives, managers and frontline supervisors, the most popular learning program is a two-day workshop titled “Fundamentals of Finance and accounting for non-financial managers ”.

This program is not popular because it is the easiest to follow or the shortest (others do not require nightly homework as it does and usually last three or four days). It’s popular because it’s the most necessary training for business success for current and future leaders. To help you promote your career as a business owner or executive, you need to be able to “speak the language of business”. It involves controlling cash flow, understanding budgets, monitoring expenses, increasing income within existing or future staff levels, controlling costs, allocating assets, inventory and resources, and knowing how to read and interpret often interrelated financial reports.

People wishing to start a new business, especially those in need of a bank loan or an injection of venture capital, know that they need to develop a comprehensive business plan. But after getting funded, they pass the “financial stuff” on to someone else in the business, or worse, they ignore it until cash management and cash flow become problems. major for their survival. This is a common problem among business founders who describe themselves as “creative, technical, artistic, client-focused or relationship-oriented types” where their lack of financial sense outweighs other skills they consider more valuable.

If they don’t take ownership of the financial side of their business and rely on other employees – who may not be ethical or have a lot of numbers skills either – they run the risk of embezzlement. funds or financial ruin.

Many talented people who are new to running a business ignore the need to work ‘on the business’ and confuse it with working ‘in the business’. Both are necessary, but the former means they have to set regular schedules to do a thorough review of the company’s financial health – reviewing a reporting dashboard that should prompt them to make important decisions and even immediate. Too often, however, they focus on customer relations, sales, marketing, product research and development, hiring and managing employees, mainly because financial discussions are seen as tedious, confusing, stressful. or boring. In short, they are stepping out of their comfort zone.

They justify this reluctance or avoidance of regular financial reviews because it’s easier for them to spend their time doing the tasks they love – making money and interacting with co-workers, clients and clients – compared to those they don’t like. They rationalize the time they spend on marketing or product development as somehow more valuable than the time required for financial reviews.

Ask any financial management professional – chartered financial planner, stock broker, accountant, or tax preparer – how often a married or cohabiting couple should sit down and review their income, expenses, budget , savings and investment plans. Their responses may range from once a week to once a month, but these discussions – with reports, bank statements, receipts, etc.

As an employee seeking a supervisory, managerial or leadership role, it is essential for your success to acquire basic financial statement knowledge. You need to understand a few things: the accrual accounting process, the accounting equation and what generally accepted accounting principles mean; liquidity, leverage and profitability through understanding cash flow; fixed, variable, overhead and break-even analysis; balance sheets and income statements; operating and investment budgets; employee and payroll tax reporting requirements; and return on investment for departments, projects and strategic plans.

And even if the company you work or lead for is not publicly traded, you still need to understand how capital markets work and how to read a company’s or competitor’s annual report.

There are many approaches to improving your financial literacy. Some suggestions: online courses given by training companies specializing in one-day or multi-day seminars; local or online college and university courses, refresher courses or certificate programs; or self-study programs offered by financial education associations or non-profit organizations.

Seek mentorship from finance professionals in your business. Get instruction, lesson plan, and supportive career advice from your CFO, CFO, CPA, or similar experts. They recognize the value of the data they create and interpret; they will want you to like it just as much.

Steve Albrecht is a Springfield-based human resources trainer, security consultant and employee coach. He can be contacted at drsteve@drstevealbrecht.com.


Source link

Leave A Reply

Your email address will not be published.