Senior managers in well-known brands do not always have a fundamental grasp of key financial terms. I discovered this earlier this year while completing a graduate programme.
Business is a game and the method by which the score is kept is through finance and managers that do not understand how the score is kept are putting themselves at a serious disadvantage.
One common mistake made by managers is that finance is accounting, which is not accurate. Accounting does prepare books but accounting prepares the historical books of a company, by their nature they look back. Forward projections is where finance comes in.
Understanding and disseminating financial statements poses a challenge to some managers, especially if they graduate up the company hierarchy from a non-financial background.
Managers across company hierarchies should know key terms, including NPV, IRR, CBA, Time Value of Money and much more.
The reason for this is simple, their careers require it, especially if they hope to progress. For managers seeking funds for projects and future growth, as part of ‘lean’, capital budgeting is a must!
I have developed a programme for professionals and managers where they can learn to master a broad range of key financial terms.
I have also made a lot of interesting discoveries along the way, including some of the fears professionals and managers have of finance, many of which are irrational but powerful. For example, one manager with a PhD in a senior position was so afraid of “making an a**” of themselves, it was simply easier to not ask questions. Little wonder they never spoke up when they had legitimate questions on important trends.
Finance is not complicated…it has simply been constructed to appear so. With the right tools and a little patience, anybody can master it.