Top 6 Financial Skills for Non-Finance Managers in 2024

I am a visionary business manager, my colleagues say, but I often struggle to answer the finance team’s questions in the board meeting. Why?Why is my marketing and sales drive getting dented by the finance restrictions from upper management?

I have a great business vision but my finances do not support my vision. What should I do?

These are some questions non-Finance managers face in their business career. Many entrepreneurs have to close their businesses overnight due to bad finance decisions. People get into business mostly to make a profit. However, if businesses are not backed by sound finance decisions, they are more likely to fail. This is when Financial skills for non-finance managers becomes essential. It is imminent for managers to develop some level of financial management skills to be successful.

Let us explore below, top 6 financial skills for non-finance managers that will help us be successful in 2020.

1. Financial Statement Analysis

In most non-finance forums, it is one of the most sought after finance related qualities in a manager. This is because, if you are a manager, irrespective of specialization, it is almost impossible that you will never come across a financial statement in your career. However, it becomes important to decipher it, when you receive one and use it in further decision making. It is where the knowledge of finance for managers comes into action and guides them through this process.

Financial Statements contain important financial data on various aspects of business. It is very important to take them into consideration during any decision that may affect future financial state of the business. Although it is recommended to be adept in GAAP (Generally Accepted Accounting Principles) analysis or IFRS (International Financial Reporting Standards) analysis of Financial Statements, having a basic understanding of the terminologies in the report also helps.

Financial statements provide trends information, available resources and dangling liabilities. This helps to read one’s current financial situation correctly and not run into unwanted poor decisions. While accounting rules may change with time, because of changing business models and ever evolving business transactions methods, we can rely on the Financial statements to provide us information on which we can rely.

Financial statements also provide an insight into a company’s finance profile. Understanding them ensures our strength in choosing correct partners and avoiding financially unstable business alliances. While we register some success, other companies also keep an eye on our financial decisions. More matured decisions we take, more reputation we earn and possibilities of collaborations increase.

2. Management Accounting and Cost Accounting

Cost accounting, a term that keeps quite an importance for almost as many companies, be it in retails, manufacturing, distribution or service is a skill every financial person will want in his/her non-finance colleague. Knowing this concept significantly increases the financial management skill of a non-finance manager. Learning how to manage the gross profit of a unit, division or the entire company makes that manager special. Gross profit pays for the running cost of the company and the profit of the company owners.

Keeping track of minute details of cost to the company may seem laughable when the company is large; however, when such minute costs are computed across many units of the large organisation, it will amount to a significant amount which could have been used for a better purpose.

Often financial tools like time-sheets, material acquisition forms, job cards etc seem a burden to non-finance managers. However, only if they develop some financial management skills by learning about cost management, they will understand the impact of using such tools. Such tools provide the actual picture of the labor and cost that was planned and what we incurred in real. This understanding will seamlessly bridge the gap between the non-finance managers and the finance team of the organisation to become more efficient as a whole team.

Note: Cost accounting and management accounting are sensitive information which should stay within the accounting and management teams of the company unlike financial statements which may be shared with external stakeholders.

3. Budgeting

Budget is a forecasting tool for predicting expenses to be incurred over a period of time. Historical data is often used to prepare a budget for activities to take place in the future. You need some level of financial management skills to prepare such a budget. 

This may not immediately be needed from an entry-level manager, but with some years of experience, it will be required of you to prepare a budget or to work closely with a finance team member and provide him all the details to prepare a budget for you.

Without a budget, undertaken projects deviate from goal and rarely end up being profitable endeavors. Even if someone claims their project to be profitable, there won’t be any chart to compare it with, for verifying if there is an actual profit.

Budget- Personal Financial Plan is not only for internal use but also serves as a formal document for business co-operations, bank loans, approving agencies (sometimes the Govt.). Thus it becomes important for obtaining such knowledge of finance for non-finance managers.

4. Reading the Balance Sheet

We often refer to a balance sheet as a snapshot to make it easily understood by a common man. It gives out the financial state of affairs to the reviewer of when the sheet was created.

We create it at the end of an interval of time, mostly around the end of the month. It serves as a quick look document for reviewers to understand what is the current status of finances flowing within the system. How much the company owes, how much liquid cash is available, how much the business owes its creditors, banks, etc. It is important to understand the terminology used in balance sheets, what parameter means what and how they are interpreted. Such readings in the sheet do not stop the project from execution but if there are negative indicators, your decisions leading to those indicators will be questioned besides questions raised on your financial management skills.

Consecutive balance sheets evaluation, reveal trends. If there was a negative sheet because of unavoidable circumstances then it is most likely not given much weight age. However, if the trend continues its downward spiral, top level interventions may come to your project and questions will be raised on your management decisions and style. Therefore, it is important to take up any available training that provides knowledge of finance for managers. Opt for a Financial Analytics Course to understanding the working mechanism in detail.

5. Organizational Strategy vs Financial Objectives

Being a non-finance manager, it may be more dear for you to follow the organization’s vision. However, if the financial objectives are not considered in such a strategy only to be revised later to answer for the incurred losses, then the strategy could be just a waste of time and money. 

To understand the financial objective and include them in your execution towards the organization’s strategy you will require some financial management skills. It is most important to line up the financial objectives in our execution because we are here in the market to register a profit.

It may be the case that the Chief Information Officer wants you to deliver world-class products with a lot of innovation, engineering and R&D. However, without sufficient commitments in terms of resources and finances, such goals are just short-lived. Once you have the backing of the finance team for your goals with a workable projection of profit,  then all you have to do is use your skills to achieve that goal. If your company provides ‘finance for managers’, you should seriously consider enrolling in it.

6. Cash Flow and Profit

To start off or sustain any business, an understanding of cash flow and profit is very important. Without cash flow, none of the business strategies, elaborate plans can stay relevant for long. This concept is important to understand as when you think all is well with business and everything is going well, you get hit by UniCredit issues that you never imagined. 

Not only that, but all the efforts put into the endeavour also may not lead to a cash benefit at the end of a cycle if you do not manage your cash, assets and liquifying such assets at the time of need. Managing your cash well over time increases your credibility which in turn brings more cash into your business cycle. This will increase your capability to invest more cash into your business, thus resulting in a larger profit share if you make one.

If yours is a large organisation, obviously the finance team will take care of such matters. However, they will need you to comply with their instructions. To avoid friction between your team and finance team and to keep synergy of making the business profitable, it is important that you become conversant with their terms and techniques. This will help in the achievement of organisational goals or even excel further. This is one of the major reasons for finance teams in large corporations to spend a lot of energy to give some insight into finance for managers.

Going through some ‘finance for non-finance training helps in understanding these not so obvious concepts. This will also add in an all-around improvement to your management career. 

Conclusion: Being a manager while you develop your soft skills, management skills, technical and other skills, it is eminent to understand how businesses function financially. Having a fundamental understanding of such concepts always adds to your overall management profile and helps in rising ranks when you highlight financial opportunities and risks. Your financial management skills will almost never go unnoticed.

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