Financial Skills for Managers and How to Improve06/09/21
Throughout the business world, it's common for managers who are not finance professionals to think financial skills don't apply to them. However, every decision a manager makes has financial implications for an organization. Without that understanding and mastery of basic financial skills, the manager may make decisions to the detriment of the enterprise.
To be successful as individuals and enable success for the organization, all managers should have solid money management skills and financial knowledge on things like budgeting, investing, and personal financial management. What you learn may not be necessary to stay in your current role, but it could be instrumental in advancing to your next one. Here are a few tips that can help any manager improve their financial prowess.
How to Improve Your Financial Skills - 7 Tips Any Manager Can Use
1. Learn About Financial Management -The first and best investment a manager can make is in learning about finances. Familiarize yourself with key financial concepts and terminology, take a course on financial management, read articles or books written by finance experts, and network with financial professionals. Importantly, take advantage of any financial management resources – courses, seminars and learning tools – your organization may offer.
2. Manage Your Personal Finances - The ability to handle personal finances well can be a highly valuable skill for managers. Knowing how to set personal financial goals, create and manage a budget, oversee investments, handle credit cards and debt responsibly, and keep a balance sheet are all good practices for becoming a finance-savvy leader in business. Personal financial management also teaches good problem-solving skills.
3. Understand Company Financials - To set appropriate goals and make good financial decisions for your department and company, it's important to understand the company's financial well-being. If you don't already have access to this information, ask the senior leadership team if they can share the balance sheet or financial model with you. Some companies only share this information with executives and financial professionals, but more companies today understand the importance of transparency. Managers who know how to read financial reports will have an easier time analyzing them for key insights and using the information to make better financial decisions.
4. Set Financial Goals - Financial goals act as a guidepost for your team's financial operations. You may want to increase revenue, manage debt, decrease expenses, get more clients, invest for the future, or a combination of these. If the objective is to increase revenue by getting more clients, you may want to allocate more funds toward marketing. If the objective is to decrease expenses, you may choose to cut back on nonessential costs. Setting goals is an important step in developing a financial plan or budget. It's also a management skill you can learn and hone over time. Learning a new skill is always a worthwhile investment in yourself.
5. Develop a Budget - Managers should have a strong understanding of how to prepare a budget that aligns with the strategies and financial goals of the department and the organization. The first step is to gather financial statements, receipts, invoices, and other records and analyze how much money is coming in versus going out. Preparing a budget gives managers an opportunity to see where the department is spending money and see if they could be using funds more efficiently and effectively. This financial blueprint should include realistic estimations of expenses considering things like past expenses, number of employees, cost per employee and cash flow. You don't need to be a financial analyst with a degree in accounting to add this capability to your repertoire. Having the ability to utilize Excel or a budgeting software application is a basic financial skill that is crucial for every manager.
6. Manage a Budget - So you've created a budget, now what? Even more important than creating a financial plan is learning how to manage it. Managers need to keep track of money income and expenses, as well as any variations from the estimated cost. For example, you estimated $100,000 for marketing in the first quarter but spent $120,000. You need to first decipher whether this was a one-time occurrence or if it’s a long-term change. If the cost of marketing will continue to be more than expected you either need to adjust the budget – by making a cut from marketing or somewhere else – or readjust the marketing strategy to make it fit within the allocated amount. This doesn't need to be done day-to-day, but monthly or quarterly check-ins will help you stay on track and reach your goals.
7. Advocate for Your Department - Knowledge is power and when you know enough about the financial operations and goals of your company, you can impact its financial well-being, improve processes and advocate for your department's needs. Many managers are given funds at the beginning of a fiscal year or they make a proposal for funds. If you can communicate exactly how much you need and why, you can improve your chances of getting it.
8. Improve Leadership and Communication Skills - Having good leadership and communication skills helps managers understand and empower their employees, gather important information that effects finances and set and articulate goals. These skills will also help you align your goals with the goals of the company and other departments. Managers with good leadership and communication skills engage and motivate their team and are better able to affect change.
Financial skills are important for all managers, from leaders of entry-level team members up to seasoned veterans bound for executive roles. These skillsets empower you to contribute more to your organization's financial health and growth. It also gives you the competitive advantage of greater job prospects, increasing your chances of promotion. At Thunderbird, our graduate degree programs have courses on accounting and finance to equip future leaders and managers with the financial skills they'll need to excel. For managers already in the workforce, we have a broad selection of cutting-edge Executive Education programs, a life-long learning resource focused on building financial comprehension and other crucial management and leadership skills.