Whether you are in sales, operations, or managing technology in an organization, as you grow in your career, you will be required to make financial decisions. What’s the best way to allocate the team budget? How can the company maximize its return on investments? Can the company afford to make capital investments? These are some of the questions that are not limited to just the finance professionals.
As the world of business becomes more complex, all the employees of the company are expected to be able to speak the language of finance and accounting to make the system more efficient.
Lack of basic financial understanding can seriously hamper your growth prospects. Even if you have all the skills to become a CEO, if you can’t read and interpret a company’s balance sheet, you don’t stand a chance to get that coveted position.
There are various ways to equip yourself with what you need to know about finance as a business executive. The first step towards your finance education is to grab a book that teaches you the basics. There are plenty of good books that have been written with non-finance professionals in mind.
Most business schools offer part-time Executive MBA or other executive programs for working professionals. This is a good option as you study from the experts, and also earn a degree or certificate at the end of the program.
The objective is to get decent knowledge of finance and accounting and be able to apply it when required. Let’s take a look at some of the important concepts that you need to know as a business executive. First and foremost, you need to realize the importance of finance and accounting function and the difference between the two. You also need to know some basic accounting terminology, such as double-entry accounting, debt, credit, assets, and liabilities.
The most important thing that you need to know is how to read and interpret the key financial statements of a company. The three commonly used financial statements are balance sheet, income statement, and the statement of cash flows. As a senior business executive, you are expected to know these statements, and how they are interrelated with each other. Based on your knowledge, you should be able to pick up the key financial data from these financial statements and use it for making key decisions. For example, if you are in a meeting discussing a future project, you should be able to take a call on whether the firm is able to finance this new project, depending on how much the company already owes, or how much profit the company has retained. Apart from these you should also have some knowledge about costing and budgeting techniques.
In summary, having a grasp on the key finance concepts and your ability to interpret financial data can provide a significant boost to your career and enhance your reputation among your colleagues.