Leadership That Gets Results - Finance For Non-Financial Managers

Managers need to deal with several kinds of reports each day. And with all the different data they need to review, most non financial managers often feel perplexed at the mere sight of financial reports. To most non financial managers, fiscal reports speak their own language - a language that is quite unfamiliar to them. And without a strong finance background, they often find themselves overwhelmed with what these reports are showing. These conditions make learning finance for non-financial managers a must in any type of organization, especially if the organization places much value in a leadership that gets results.

It truly is vital for an organization that values leadership that gets results to have its non financial managers learn the financial side of things, in the same way that financial managers must also be aware of the other aspects of the organization other than their area. The good news is there are now several programs on finance for non-financial managers and they can prove to be quite helpful in making managers become aware of how the organizational finances can greatly impact the direction that their departments would take, and that of the organization as a whole.

Some might have the notion that courses on finance for non-financial managers are dreadfully boring. What these managers are not aware of are the different ways for one to get more knowledge in this area. There are of courses short courses on this topic, and there are also reading materials that managers can review at their own pace. There are also seminars and workshops that provide a more interactive form of learning.

Regardless of the form that the course is delivered, what is important is for participants to learn how to understand and speak the language of numbers. In this way, they can better relate to fiscal data they have to review everyday and they can better see how these can significantly impact the business decisions they make every single day. It is also important to have the program how and why fiscal decisions can significantly impact the organizational and operational goals and objectives.

It is quite important that organizational leaders and executive should not take finance for non-financial managers for granted. If they are after a leadership that gets results, this is something that they must support and they must encourage their people to learn more about it so they can start applying the valuable lessons to real world scenarios.

Is a Lack of Financial Education the Reason for Poor Financial Management Decisions in America?

Americans study all of the essential things in school, algebra, science, history, languages and the arts. However, many people wonder why there may be a lack of financial management classes to learn basic financial planning strategies. Many students don't know the first thing about retirement, savings, credit cards, debt or even basic budgeting strategies. Although some might say this is something that should be taught by parents, today's parents are the byproduct of the credit card generation; therefore many parents only learned the cause and effect of their financial matters by trial and error.

It is not only the parents that are financially challenged. Even teachers lack the training because of an education system that lacks the teaching of fundamental skills needed to achieve fiscal responsibility. Some of those more savvy in the diligence of their finances may seek the services of a financial management advisor, however given today's economic turbulence, the very root of the problem has become apparent in our society's apparent financial illiteracy.

According to a recent survey, over 60% of all high school students failed certain questions about basic household financial management and were not given the proper role models for financial independence. Across the gamut, the media has highlighted examples of adults who have mismanaged their money, losing homes or severely damaging their credit by defaulting on their loan and credit card payments, as well as college students who default on student loans and many other examples. Even big businesses on Wall Street have gone bankrupt and the entire financial system of banking seems to be crumbling right before our very eyes. We expect our youth to learn about proper financial planning and financial management amid a society that has accepted financial failure as the norm?

Today's Financial Buzz attributes many of these economic problems not entirely to the fault of any one entity, enterprise, or government but instead to the theory that the need for financial management practices should be taught early on to our youth. By teaching everyone how to become financially literate, we could create a society of fiscal responsibility. Instead, it is becoming rare to see a young person who doesn't abuse credit by either racking up high debt, paying late or even bouncing their checking accounts time and time again by relying on unsafe measures, such as online banking. Some do learn these best practices in college through economics or financial courses, but those students are becoming far and few between.

Some critics say that in order to add any more mandatory courses to the education system would require dropping some other important classes. Other say that the public school system is not supposed to be a lesson in life training manual and that those types of learning exercises should be enforced by parents. However, there are two sides to every coin and with many parents now in deep financial troubles themselves, they may not be the best role models for kids to follow. Foreclosures have reached an all-time high while stocks and securities have reached an all-time low, indicating a big problem with the entire system of financial management and not just a few sprinkled examples here and there.

Financial Management and Budgeting in Business

Importance of Financial Management

Finance is a key functional area of business management. This area is commonly referred to as Financial Management. The term defines the achievement of key financial objectives by making investment and financial decisions. Essentially, it is the management of all the processes associated with the efficient acquisition and deployment of both short and long-term financial resources. Financial Management assists an organisation's management to reach its financial objectives such as the creation of wealth, solvency, liquidity, growth and return on investment achieved through a process of financial planning, control and decision-making.

Financial Control

Financial control consists of different strategies to manage finances necessary to achieve the primary purpose of every business; which is to earn profit. Budgets are the traditional financial control method and provide a measuring basis which performance can be assessed. By engaging in a yearly budgeting process a business can make plans and forecasts for the year ahead. Control action should be taken when actual performance appears not to be matching the outline of the budget. Therefore by monthly monitoring of expenses, controlling methods can be put into place when expenses becoming higher than figures stated in budget (such as spending cut backs or extra working hours). And by determining the reasons why figures do not match the yearly budget plan, a business can therefore make necessary plans for this not to occur in the future. Monthly monitoring of expenses is another example of a financial control. Such data includes cash balance, total wages costs and hours worked key sources of income, unusual or above budget expenditures.

Three Main Financial Statements

The 3 main financial statements necessary to analysis and improve on finance viability:

1) Balance sheet - 'A statement of financial position that shows the assets of a business and the claims on those assets'

2) Income Statement - 'A financial statement (also known as profit and loss account) that measures and reports the profit (or loss) the business has generated during a period.'

3) The cash flow statement - 'A statement that shows the sources and uses of cash for a period'

By analysing these three financial statements on a regular basis a business can proactively forecast problems or opportunities before they arise. The 3 main financial statements are also considered as financial controls as these statements are used to understand and interpret the financial conditions of a business as a means of management and control. The statements enable a business to set guidelines and policies that enable growth and business success. An annual Profit and Loss statement is considered the most important financial statement and UK businesses are legally required to lodge a Profit & Loss Account with Companies House. In regards to cash flow, cash inflows are payments for products or services and interest on savings and investments. Cash outflows are a combination of many things including purchasing stock, daily operating expenses, fixed assets and government taxes. A business is also required to produce a balance sheet annually for reporting purposes. It provides a report of assets or liabilities.

Budgeting and Budgetary Control

A budget as a qualified statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows. It is a short-term plan of working towards financial objectives. There are several styles of budgeting, these styles include -

* Fixed - does not allow for variations

* Flexible - Adjusts or flexes

* Continuous or rolling - continually amended

* Zero-based - needs assessed

* Incremental - uses previous budget with increment

Budgets are necessary to provide a basis for control, helping identify short-term problems and promote forward thinking. However, there is a need for budgets to be adaptable if they become unrealistic due to sudden changes in the business environment. This is known as 'Flexing the Budget' (which simply means revising the budget).

A variance report is required to indicate whether performance is below or above the budgeted level. It is the difference between the budgeted level of costs and revenue and the actual levels of costs and revenues also referred to as variance analysis. Budgets can also have a behavioural effect motivating the management team and staff to achieve better performance and help promote forward thinking.

Effective Business Planning

A business plan is made up of many elements but no business plan is complete without this financial information. For business planning to be effective, the budget and the three main financial statements (Profit & Loss, Balance Sheet and the cash flow statement) must be taken into consideration. A financial statement is the core of a business plan as they are used to identify various business strategies. Financial planning is interlinked with all elements of a business plan. Five key strategic plans interlinked with a budget (plan); 1) establishing mission and objectives, 2) undertaking a position analysis, 3) identifying and assess the strategy options, 4) selecting strategic options, 5) perform, review and control. By taking all of these elements into considering, a business can create an effective business plan containing financial data and projections.

The Importance of Finance For Non-Financial Managers

There are companies who are willing to have their employees be enrolled in courses that can help them gain a better understanding of the different aspects of the business. In this way, they too can have a grasp of where other departments are coming from, especially during meetings with different departments. And there are actually courses that can help employees gain basic knowledge about different areas of the business. One example of this are courses on finance for non-financial managers. Non-financial managers can truly learn a lot from this kind of course, especially in terms of having a better understand of different financial concepts.

It can prove to be quite helpful for non-financial managers to have knowledge about finance and accounting, especially that these two areas are quite significant in any kind of business. Through a course on finance for non-financial managers, they would be able to better understand the different concepts of finance and accounting, and use the knowledge in these concepts to make better decisions for the company that involve finances. And it can be good to note that this kind of lessons is especially designed to help managers who do not have backgrounds in the fields of finance and accounting.

One can expect that while enrolled in this kind of course, one can be given a crash course on the basic concepts and terms involved in finance and accounting, including trial balancing, financial decision-making models, cash flows, fixed assets, depreciation, budgeting, and financial strategies. But there is no need to worry, especially those who do not have a basic knowledge of these terms and concepts because these courses are designed to be easily understandable by people who are quite new to the world of finance and accounting.

Finance for non-financial managers can be seen as a great way to improve the skills and abilities of non financial managers, especially if the company places much value on leadership that gets results. This kind of course can help equip non financial managers so they too can better understand what financial reports really mean.

Through having an understanding of reports made by accountants and financial experts, managers will be able to better interact during management meetings as they can now make comments that they believe would be helpful in improving the of work being delivered by accountants. In the same manner, they will also be able to foresee financial problems that might develop in the future, enabling them to develop control measures to so these problems can be avoided.