It’s time to wake up and smell the coffee – in an economic downturn, financial awareness really is crucial for non-financial managers as well accountants and financial managers.
Since mid-2014 when the price of crude oil began to fall dramatically, the decline in global economic activity that followed has had a significant impact on the financial position and financial performance of a large number of corporations, small companies and other organisations. It has therefore become vitally important for accounting and finance professionals, and perhaps even more importantly for non-financial managers, to refresh and update their knowledge and skills in the key areas of financial awareness.
Managers employed at all levels in the private, public and voluntary sectors, manufacturing and services, education, police, health service, etc., and in functions such as production, marketing and sales, engineering, distribution, customer services, and human resources, are expected to digest large amounts of financial information, make financially-supported business decisions, and carry out financially-oriented tasks. But many do not have the appropriate financial awareness and know-how, and may not have received the relevant training to undertake these responsibilities effectively. As a finance director, I witnessed many times the glazed look in the eyes of (non-financial) co-directors and managers at meetings when the finance part of the agenda was discussed. There is an often-quoted example of a managing director of a £250m annual revenue business for 20 years before realising that the numbers in brackets were negative!
Essential financial awareness for managers must include a knowledge of the topics, and tools and techniques relating to:
- Financial statements and other financial information
- Strategic financial planning, budgeting and costing
- Waste elimination and control of overheads and other costs
- Corporate excesses, fraud, and corporate governance
- Financial risk
- Working capital and cash flow
- Debt and equity financing
- Capital investment
During an economic downturn in particular, a lack of financial awareness exposes organisations to risk through a failure of managers to:
- Understand financial and economic indicators and read the warning signs
- Advise on appropriate actions and make correct decisions
- Identify opportunities to weather the current storm and provide the foundations for a return to ‘normal’ economic activity
‘Leave it to the bean-counters’ just will not do. Accountants and finance managers fulfill important functions in all organisations, but non-financial managers need to be able to interpret and use financial information effectively. The resources for appropriate training to acquire the required financial know-how, are readily available. World class training providers Glomacs and Oxford Management present worldwide public and in-house courses that explode the myth that accounting and finance are difficult subjects (a myth that has sometimes been fuelled by the air of mystery spread by the accounting profession itself). Their training courses encourage participants to openly express and discuss their opinions and experiences and flag up the areas in which they require further guidance.
In the current economic climate, it is essential that organistions provide ongoing and continuous investment in financial awareness training for their financial managers and non-financial managers at every level.