No Image Available


Read more from TrainingZone

googletag.cmd.push(function() { googletag.display(‘div-gpt-ad-1705321608055-0’); });

Managers Need to Understand Finance


In the business world post Enron, finance trainer John Kind of John Kind Learning argues that managers need to get to grips with the accounting basics.

Accounting and finance remain the ‘ugly ducklings’ of management subjects because they have a reputation for dullness and complexity, which many accountants fail to dispel in discussions and meetings with their ‘non-financial’ colleagues.

It’s not only the rising importance of corporate governance in the wake of the Enron, Equitable Life, Worldcom and Marconi debacles that makes it vital that organisations provide financial training to their non-financial managers; it’s also crucial to the bottom line.

In the post Enron/Worldcom environment, it is clearly very important that audit committees and directors not immediately involved in the finance function, are satisfied that there are no issues within the accounts.

Companies seem willing to provide training in subjects such as leadership and strategy, but mastering the intricacies of balance sheets, profit and loss accounts and cash flow statements can make an even bigger difference.

I have found that fewer than 50% of executives understand what a profit and loss account is all about and a similar proportion are hard pressed to explain the meaning of working capital.

Only about 30% of managers can talk about discounted cash flow with any confidence.

Sound financial control lies at the heart of business success and yet senior managers with a poor grasp of finance not only find it difficult to contribute when financial issues are being discussed, they actually feel inhibited from doing so.

But the input of analysts, engineers, HR Managers, IT specialists, lawyers, marketing and sales executives, scientists and technologists can be critical when financial decisions are being taken.

Typical questions non-financial managers should be able to answer include:

· What are the financial priorities we face?
· Is this project financially viable?
· Why is performance below or above budget?
· What can be done to improve cash flow?
· Why are profit margins under pressure?
· How can the return on capital employed be increased?
· Should we acquire this business or not?
· What’s the relative profitability of different products and different customers?”

I designed a two-day training programme for the sales force of a leading consumer goods company. We looked at all the factors affecting the profitability of different customers –size and frequency of the orders, discounts and so on.

It was extremely revealing. By pulling together customer profit and loss accounts, the sales reps really did get the message that there is ‘good’ business and ‘bad’ business. They reorganised their calls and time accordingly.

Above all financial training is about making better business decisions. That means all executives, not just the accountants, should feel comfortable using financial information as an essential part of their jobs.


Get the latest from TrainingZone.

Elevate your L&D expertise by subscribing to TrainingZone’s newsletter! Get curated insights, premium reports, and event updates from industry leaders.

Thank you!