Dr Jenny Chu shares five reasons why it’s important for senior managers to have an understanding of finance and accounting, even if their day-to-day role is non-financial. Read on if you are a manager that struggles with the language of finance…
You’re not alone if you don’t know the difference between your company’s assets or its reserves, or what goodwill really means on a balance sheet.
“You might be surprised by how many people have reached senior positions in their organisations either without a baseline knowledge of finance, or believe certain financial terms mean one thing, when in fact they mean something completely different”, says Dr Jenny Chu, University Senior Lecturer in Accounting at Cambridge Judge Business School, and Academic Programme Director on the Executive Education programme, Finance & Accounting for Non-Financial Managers (FNFM).
If your background is not in finance or accounting, it is likely that assessing how well your company is actually doing by reading its financial reports is a relatively difficult undertaking.
There’s no shame in not understanding the dark arts of accounting or being stumped by financial jargon. Unless you’ve had the opportunity to learn it, the language around finance can often seem impenetrable, inaccessible, and downright confusing.
Dr Chu shares five reasons why having a sound knowledge of all things finance can benefit anyone in a senior role.
- It will increase your confidence.
Whether you are working for a large multinational or a small start-up, grasping the figures your finance officer passes to you every Monday morning is the key to influencing decisions. By learning the language of budgets and forecasting you can confidently articulate a compelling point of view. Richard Hennessy, a recent participant on the Live Online version of the programme said: “The programme gave a good baseline understanding for finance and accounting – I’m not, nor intend to become a finance person – but as a Director it certainly provided me with a fresh understanding of models, concepts and principles used in many a board room.”
- It will help you create value by making informed investment decisions.
Financial accounting and value creation go hand in hand. Understanding the drivers of value creation in your business means you can make better investment decisions, pitch them more effectively and track performance.
- It will help you better understand your company’s accounts and how well your company has been performing.
Do you think your organisation is doing well? Wouldn’t you rather know? A sound financial grounding will empower you to find out. It also has many practical, real-world applications, even outside of your day-to-day role – “I’ve just become a school governor and am on the finance committee,”, says past FNFM participant Neil Green, “so can now understand the treasurer’s figures to see if we are making valid use of the money for the benefit of our pupils. To know what you’re looking at enables you to ask the right questions.”
- It will help you communicate how your products and services add to the bottom line of your clients.
By understanding your own organisation’s commercial models, as well as those of your clients, you will be able to more confidently articulate how you and your company can help them.
- It will help you ask the right questions of your colleagues in finance.
You don’t need to master the language of finance, but it can help to be more fluent. The more people can speak the same language, the more effectively they can work together. And if you know what you are looking at, you can ask the right questions. Past participant on the FNFM programme, David Williamson said: “Completing this course means I now know what to look for when assessing financial information, as well as the right questions to ask. The course has certainly given me more confidence in managing a budget, interpreting and understanding the information decisions are based on, and to ask challenging questions when necessary.”