Financial Learning for Executives
Finance is a lifeline for organisations, and Individuals with a background in finance have been considered to be extremely efficient at managing day-to-day financial operations of any organisation. Finance for non finance Managers or executives who manage or executive their organisational operations must have an understanding of various financial aspects, which would help them in making important decisions to attain their firms’ business objectives.
Executives should have a greater understanding of financial information, especially for managing any operating scenario requiring good decision making. The term ‘finance’ as such is generally related with the study of investments, and in nonprofessional terms, it is the science of money management.
The managers or executives working in an organisation need to regularly interact with finance professionals of their organisations, and therefore they need to understand what these finance professionals are saying and their financial jargon in addition to understand how their actions (non-finance managers) would influence their numbers. The ability to interpret the financial information would help executives in understanding the resource acquisition and allocation for communicating more effectively with their firms’ finance managers.
Benefits of Acquiring Financial Knowledge for Non-Finance Executives
For non-finance executives, acquiring financial knowledge and being equipped with financial tools would help them in acquiring the following benefits:
Analyzing financial statements
Understanding costs and methods to reduce the them
Taking decisions regarding the price of the products or services, or both
Deciding the best product mix and opting for a viable option to meet the need
In communicating more effectively with key sources of financing such as bankers, lenders, and investors of their organisations
Utilizing the core terms, concepts, and techniques of finance and accounting for decision making
Learning financial fundamentals and concepts is quite beneficial for both junior- as well as middle-level executives working in sectors/divisions such as marketing, materials, human resource, and other non-financial domains. Companies prefer hiring those executives who have the basic knowledge of finance and accounting, because finance and accounting plays a prominent role in the existence of business entities.
Importance of Learning Financial Concepts for Non-Finance Executives
For non-financial executives, to learn the financial concepts is a great way to improve the skills and abilities of managing the financial aspects of a business entity in addition to helping them in understanding about the various financial reports for making important business decisions. There are educational institutions, universities, and training institutes that are helping non-finance executives in enrolling for various types of finance-related courses being offered by them on finance and accounting subjects.
Majority of training courses on finance being offered by the universities and institutions, both in terms of online and offline training, are in the form of workshops or day programmes, with much emphasis being laid on understanding the financial statements and analysis. The other area of learning involves knowing about financial tools for evaluating operating and strategic investments. The finance and accounting programmes would help non-finance executives in understanding the Key Performance Indication (KPI) of their organisation.
The financial KPIs are the key indicators for top management, and executives with financial knowledge would be able to develop KPIs, which help in the growth of the business of their organisations across the globe. The key areas of financial topics that non-finance executives should learn or have a grip on include as follows:
Financial Statement Analysis
Cost Accounting and Management Accounting
Evaluation of Projects
Financing, Leverage, and Options
Preparing and Presenting Financial Forecasts
Financial Tools for Evaluating, Operating, and Strategic Investments
Budgeting Processes and Audit
The changing landscape across organisations has resulted in non-finance executives to understand the financial aspects of their business organisations, and as such they must find a common ground to interact with the financial team of their organisation without involving any conflict of interests. An amicable cooperation between finance and non-finance executives would lead towards working together for the same goal for attaining the business objectives of their organisation.
Process of Conducting Finance Training Programmes/Courses
Some institutes are offering practical training courses and workshops for participants, often non-finance executives without financial background, to understand and be able to apply their financial knowledge when performing their management role. These training sessions may be in the form of interactive presentations, group case studies, and discussion sessions through both online or offline mode.
Some of the key topics that are covered under the finance training programmes, or courses, include as follows:
Topic on relationship between business management and financial management
Reading and understanding of basic financial statements
Reviewing periodic financial performance by interpreting key financial performance statements pertaining to profits and expenses
Topics on cost accounting for effective cost control of business expenditure
The basic finance-training programmes, as mentioned above, helps non-finance executives in enhancing as well as applying their knowledge on finance for making business decisions.
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Finance For Non-Finance Executives
By KnowledgeHut
Financial Learning for Executives
Finance is a lifeline for organisations, and Individuals with a background in finance have been considered to be extremely efficient at managing day-to-day financial operations of any organisation. Finance for non finance Managers or executives who manage or executive their organisational operations must have an understanding of various financial aspects, which would help them in making important decisions to attain their firms’ business objectives.
Executives should have a greater understanding of financial information, especially for managing any operating scenario requiring good decision making. The term ‘finance’ as such is generally related with the study of investments, and in nonprofessional terms, it is the science of money management.
The managers or executives working in an organisation need to regularly interact with finance professionals of their organisations, and therefore they need to understand what these finance professionals are saying and their financial jargon in addition to understand how their actions (non-finance managers) would influence their numbers. The ability to interpret the financial information would help executives in understanding the resource acquisition and allocation for communicating more effectively with their firms’ finance managers.
Benefits of Acquiring Financial Knowledge for Non-Finance Executives
For non-finance executives, acquiring financial knowledge and being equipped with financial tools would help them in acquiring the following benefits:
Analyzing financial statements
Understanding costs and methods to reduce the them
Taking decisions regarding the price of the products or services, or both
Deciding the best product mix and opting for a viable option to meet the need
In communicating more effectively with key sources of financing such as bankers, lenders, and investors of their organisations
Utilizing the core terms, concepts, and techniques of finance and accounting for decision making
Learning financial fundamentals and concepts is quite beneficial for both junior- as well as middle-level executives working in sectors/divisions such as marketing, materials, human resource, and other non-financial domains. Companies prefer hiring those executives who have the basic knowledge of finance and accounting, because finance and accounting plays a prominent role in the existence of business entities.
Importance of Learning Financial Concepts for Non-Finance Executives
For non-financial executives, to learn the financial concepts is a great way to improve the skills and abilities of managing the financial aspects of a business entity in addition to helping them in understanding about the various financial reports for making important business decisions. There are educational institutions, universities, and training institutes that are helping non-finance executives in enrolling for various types of finance-related courses being offered by them on finance and accounting subjects.
Majority of training courses on finance being offered by the universities and institutions, both in terms of online and offline training, are in the form of workshops or day programmes, with much emphasis being laid on understanding the financial statements and analysis. The other area of learning involves knowing about financial tools for evaluating operating and strategic investments. The finance and accounting programmes would help non-finance executives in understanding the Key Performance Indication (KPI) of their organisation.
The financial KPIs are the key indicators for top management, and executives with financial knowledge would be able to develop KPIs, which help in the growth of the business of their organisations across the globe. The key areas of financial topics that non-finance executives should learn or have a grip on include as follows:
Financial Statement Analysis
Cost Accounting and Management Accounting
Evaluation of Projects
Financing, Leverage, and Options
Preparing and Presenting Financial Forecasts
Financial Tools for Evaluating, Operating, and Strategic Investments
Budgeting Processes and Audit
The changing landscape across organisations has resulted in non-finance executives to understand the financial aspects of their business organisations, and as such they must find a common ground to interact with the financial team of their organisation without involving any conflict of interests. An amicable cooperation between finance and non-finance executives would lead towards working together for the same goal for attaining the business objectives of their organisation.
Process of Conducting Finance Training Programmes/Courses
Some institutes are offering practical training courses and workshops for participants, often non-finance executives without financial background, to understand and be able to apply their financial knowledge when performing their management role. These training sessions may be in the form of interactive presentations, group case studies, and discussion sessions through both online or offline mode.
Some of the key topics that are covered under the finance training programmes, or courses, include as follows:
Topic on relationship between business management and financial management
Reading and understanding of basic financial statements
Reviewing periodic financial performance by interpreting key financial performance statements pertaining to profits and expenses
Topics on cost accounting for effective cost control of business expenditure
The basic finance-training programmes, as mentioned above, helps non-finance executives in enhancing as well as applying their knowledge on finance for making business decisions.
Financial Learning for Executives
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Budgeting versus Forecasting : Finance
By KnowledgeHut
Modern business enterprises use a number of tools or functions to arrive at finance-related business decisions and goals. Budgeting and Forecasting are two of the financial planning functions, that are often linked within a business, but are technically not the same.
This article is aimed at understanding the differences between these two functions, and how each of them can contribute to a successful business.
Introduction
A company budget is a quantified estimate of what the company wants to achieve within a stipulated period, usually a year or even 6 months. Detailed aspects of a budget include the financial goals, financial position, and cash flow targets that the company management wants to achieve within the budget year. At the end of the budget period, the actual financial results of the company are compared to the budget estimation to calculate the deviations from the expected results.
Financial forecasting, on the other hand, is an estimation of the company’s financial future based on the historical financial data. Typically, forecasting is limited to the company’s major revenues, and does not include cash flow targets or financial goals. Forecasting is a more short-term activity, and is updated on the monthly or quarterly basis.
In short, the budget is the plan of the path which the company business wants to follow, while the forecast is an indication of where the business is heading.
Purposes
Budget planning and execution serves the following purposes:
• Implement any change in the performance-related employee compensation, depending on the budge-to-actual conversion.
• Implement changes in business overspending (or underspending) in certain company functions. The company management can determine if additional business expenses are linked to generation of additional revenues, or it is simply overspending.
• Identify redundant expenses that are not essential to the operation of the business.
• To implement a more realistic budget in the future, which is more in line with the company growth and market.
Forecasting, on the other hand, serves the following purposes:
• Achieve short-term goals such as staffing requirements, inventory levels, and production plan.
• Can be used as a tool to create more accurate company budgets.
• Determine the term and conditions of bank loans for the company.
• Make necessary changes in the company spending during the year, depending on the short-term cash flow and market dynamics. For example, if your customer is upgrading or downsizing their business, this can have a significant impact on your projected cash flow and operations.
Frequency
The process of budgeting can depend on the size of the company. In larger and well-established companies, budgeting is typically done once a year by the company’s top-level management, with inputs from the functional heads and managers. In smaller companies, budgeting is usually planned by the company owner, along with a few key staff members. While most company budgets do not change over the year, company in more dynamic markets can opt for a continuous budgeting process, in order to adapt to changing business environments.
On the other hand, forecasting can be done for a long-term and short-term duration. A long-term forecast can be for several years, and devise a robust business strategy plan. Short-term forecasts, which are for a quarter or 6 months, is done at an operational level. Forecasting is done by involving department heads of all key revenue-generating functions of the company, including sales, marketing, and operations. This is because functional heads are more in tune in daily operations and can provide better information for accurate forecasting.
Limitations
Depending on the effectiveness, budgeting and forecasting do have a few limitations.
Limitations of budgeting include:
• Unreasonable levels of targets that are just not achievable.
• Dynamic changes in market conditions that makes the budget estimates simply unachievable or obsolete in a short duration.
Limitations of forecasting include:
• Lack of deviation analysis tools that can measure the forecasts against the actual results.
• Forecasting, without any operational input, will be inaccurate and unachievable.
Which is better?
While technically, budgeting and forecasting are separate functions, they are not completely independent of each other. Effective forecasting technique can contribute to the development of an accurate budge.
In today’s dynamic business environment where companies need to be flexible to adapt to the changing customer and business needs, forecasting is a more effective tool that allows businesses to implement immediate changes in their plans. Budgeting techniques will prove to be insufficient in rapidly-evolving business environments. To keep its relevance in such a scenario, budgeting practices may need to be updated a couple of times each year, rather than keeping it as an yearly exercise.
Companies are also following the approach of a 12-month rolling forecast that is updated every quarter. This significantly reduces management time, and is a more realistic reflection of the business growth in each of the 4 quarters of the fiscal year.
