Why Knowing Financial Statements Will Help You Advance in Your Career
By: Lianabel Oliver
Do you know the financial implications of your business decisions? Do you understand the financial results of your organization and how your actions influenced these?
While you may rely on your accountant to prepare and analyze your financial reports, as a manager or entrepreneur, you should be able to challenge, understand, and use financial information to make more effective business decisions. As you advance in your career, you need to understand how money is earned, managed, and reported in your organization.
Here are five good reasons to become financially literate.
1.Stand out against your peers and advance your career.
Many companies expect their management teams and high-potential individuals to have some degree of financially literacy. If you have a basic understanding of basic financial concepts and accounting terminology, it may help you stand out over other candidates in your organization.
2. Gain a solid understanding of the financial implications of your actions.
Every action you take has financial consequences for the organization. A direct action you take can result in increased costs or lower revenues, and if you understand financial statements, you can quickly determine if your actions are having negative consequences, instead of waiting for your boss to find out! There are also hidden costs, such as poor working conditions or employee turnover. If you know your financial statements, you should be able to make the connection between what you do and the financial consequences of your actions to the organization.
3. Take ownership of the financial results.
The accounting department is not responsible for the financial results. YOU ARE! Accounting is a facilitator of the process that gathers and reports the financial results of your decisions. They provide you with information for decision support. The responsibility to do something with the information provided resides with you — the executive, the manager, the entrepreneur, or the business owner.
4. Manage your financial performance more effectively.
Management and key professional employees should be able to explain the financial results of their business units, manage budget and forecasts, and use financial information for decision support. They should be able to act on the information provided with a clear understanding of how these actions will be reflected in their financial performance.
5. Detect accounting errors.
By becoming financially literate, you can raise a red flag when the numbers do not reflect your knowledge of the business operations. Many organizations have significantly downsized their accounting and finance personnel. They simply do not have enough people to do the handholding that they did in the past. As a result, accounting errors go undetected, resulting in unpleasant surprises at quarter-end or year-end when financial results are reported to shareholders, investors, government agencies, and banks.
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So what specific steps can you take to increase your financial skills? Here are my recommendations based on my experience providing live and online training to non-financial managers across a broad range of industries.
Invest the time to become financially literate.
Most medium to large companies offer some type of financial literacy training, whether voluntary or mandatory. Avail yourself of these opportunities. If your company does not offer these types of programs, search the Internet for financial training resources. Unfortunately, many financial training programs designed for non-financial managers are often too technical and cover too much material in a short timeframe. Choose the path that is right for you based on your own particular learning style. You have many options: self-study, online, instructor-led, or a combination of any of these three.
Refresh what you have learned.
After a training program, review the materials periodically. Identify those concepts that need reinforcement and look for resources within or outside your organization to fill the knowledge gap.
Practice your newly gained skills.
If you do not practice what you have learned, the knowledge gained will be lost over time. Ask yourself everyday: What key decisions did I make today? What about my team? What are the financial consequences of these decisions? How will these decisions be reflected in the financial results of my business unit? This continuous practice will help you become more financial savvy and identify your knowledge gaps that need to be improved.
Communicate with your accountants regularly.
Do not wait until the month-end or year-end to communicate with your financial liaison. S/he should be an integral part of your team. By increasing your financial literacy, you will be able to communicate more effectively with your accountants and understand the financial implications of your decisions before they are made.
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Improving or strengthening your financial skills can have positive outcomes for you and the organization. It is definitely a must for those individuals aspiring for supervisory, management, or executive positions, or starting up their own business.
So next time your accountants present financial results, don’t sit quietly in the meeting because you do not understand the basic financial concepts that underlie the numbers. Become financial literate and empower yourself to make better business decisions!