Financial Literacy is Prestigious
Author: Lyubov Tsymbal, CEO of “ Finance Solutions Group ” Company
To be financially literate today is not only important, but also prestigious. After all, the correct management of finances is the right key to the financial well-being.
Financial literacy in the business
Founded by a non-financial entrepreneur, the company will grow up and develop to a certain level. Then at best the enterprise will be functioning with the same indicators as during the previous periods, and at worst the situation will decline because the growth of currency generates a rise in prices, and inflation negatively influences on the level of income.
How non-financial executives should behave under unsound economic situation in the country, in the world? To obtain special skills in the field of finance, which afterwards will effectively influence management of the company, performance indicators, making managerial decisions and business condition in general.
- Understanding of financial reporting: ability to read information that is presented in figures in the financial statements of the enterprise, identify weaknesses and predict further development.
Knowing the fact that a balance is a photo of a company’s status on a certain date is very important. At the time of balance sheet compilation, all financial and economic indicators are visible. Budget of revenues and expenditures shows the activity of the enterprise in dynamics, with all changes from one accounting date to another. Cash flow statement reflects where money is spent and when it will be received.
- Budgeting is understanding of the composition of the money supply not on the level of the household cash register (money is received – is spent), but from a more global view of income and expenditure.
- Adoption of a short-term and long-term financial managerial decision:
- Determination of the volume of production and sales according to the level of profitability – a short-term task;
- Choice out of several options of upgrading the company the more efficient and profitable one is a long-term task.
The acquisition of these skills is not the paramount and main goal of training. Sales director, production director, purchasing director, finance director, development director, technical director and other directors professionally speak the different languages. They use their language, slang and sometimes they do not understand each other at all. Therefore, the first goal of the need of financial knowledge is the creation of a common universal communicative language for cross-functional interaction of employees from all departments of the company.
At the same time, interests of the company should be at the forefront. You will be right if you say that not everything is decided by finance but the company’s interests are largely based on financial indicators. Therefore, the communicative language for communication of the employees from different departments should be based on financial knowledge, knowledge of financial terms. Only in this case it will be clear for all employees of the company what indicators they are fighting for, what profit they expect, what profitability they are striving for and where to take money for this.
The second goal of training finance for non-financial executives is the introduction into the single information space of the company. To understand where the information about the company’s processes comes from and where it can be found, it is necessary to be able to read the primary documents. These include internal invoices, acts, orders, journals and books of the report and other intercorporate documents.
It is necessary to avoid the mythological image of the boss: when manager thinks that employees do everything correctly and trust them, subordinates think that they do what they are entrusted with. The effectiveness of such method of management is equal to zero. In order to control profits and to assure its consistent growth, you must be able to handle internal documents.
Therefore, the third goal of training finance for non-financial owners is to harmonize narrowly-functional interests in favor of the company’s interests as a whole.
Only in case of complete mutual understanding of the head and subordinators, which interested and involved in the overall development of the enterprise, will have a beneficial effect on the functioning of the enterprise.
Thus, training of non-financial executives the finance is vital for the existence and effective development of their business. After training you will:
- Speak a universal communicative language;
- Integrate into the company’s single information space;
- Achieve the harmonization of the interests of all employees in favor of the interests of your company.
Challenge yourself, set the goal and get financial knowledge due to which your business will reach a new level! Only knowledge of the basic principles and basic concepts of financial accounting and bookkeeping, the methods of compiling the main forms of financial reporting, key financial indicators and coefficients will show the real picture of business for yesterday, today and tomorrow, and also provide an opportunity to quickly influence on performance and effectiveness.