Working in management is all about making decisions.
You may need to make decisions to help your staff work more efficiently, or you may need to decide which products and services to promote to customers.
As a manager, you will often need to make complicated financial decisions too.
Even if you don’t work in the accounts, finance or purchase ledger department, knowing your company’s financial details can help you in your day-to-day work.
Don’t know the difference between a creditor and a debtor? This article will help.
Why do I need to know about finance in my role?
You may think that if you aren’t in the finance or accounting department, you don’t need to know how financial information will affect you and your team. After all, the accounts team don’t need to know about marketing, sales or project management… right?
Even knowing a bit about the ins and outs of a balance sheet can help you in your role.
Here are some of the ways being knowledgeable about finance can be of benefit to your career.
- If you are responsible for writing tenders or pre-qualification questionnaires, you are likely to be asked about your business’s finances. If a tenderer asks for your annual turnover or financial ratios, you’re more likely to be able to provide an accurate answer
- Being more aware of finances will help you become a more ethical employee. You’ll be able to provide reports that are in line with your company’s values, and be able to identify if someone is providing false or misleading information
- If you have a budget, knowing about finance will help you manage your outgoings more efficiently. Not only will you have a better handle on your departmental finances, but you’ll be able to report on your budget to senior management
- Being able to manage your finances effectively will help you save time in an external audit. If an accountant asks for your financial statements, you will be able to provide detailed documentation with confidence. Not only this, but you will be able to understand any terminology or jargon that they may use
- If there is an issue that results in your budget or cash flow being cut, you will be able to take control and reduce your finances accordingly. Costs may change as senior management make certain decisions, and you need to be prepared for this eventuality
Knowing about finance will help you in your home life too. Whether you are putting a family budget together or filing a tax return, a little financial knowledge goes a long way!
A quick guide to some financial terminology
Now you know why learning about finance is so important; you’ll probably want to know what keywords to look out for in the workplace.
Here is our guide to some of the terminology you might come across in your role.
- Assets. These are things that your business owns, like vehicles and buildings, as well as stock and money in the bank. A long-term asset may be known as a fixed asset
- BACS payment. Short for ‘Bankers Automated Clearing System’, this is a system that sends money electronically from one bank to another. Most companies pay their employees using BACS
- Balance sheet. A balance sheet shows a company’s assets and liabilities. You can use it to see what money a company has, and what they owe
- Benefit in kind. This is a perk that an employee may get from work, like a company car or shares
- Capital gain. If you sell an asset for more than you bought it for, this is a capital gain. If you are charged tax on the sale, this is known as capital gains tax
- Collateral. This is something that secures a debt, for example, a house that secures a mortgage, or a car that secures a loan payment
- Creditor. This is someone who is owed money by a company (for example, a supplier). Conversely, someone who owes the company money is a debtor
- Depreciation. This is when an asset’s value reduces because of wear and tear. For example, a company car will decrease in value as it gets older
- Dividend. If a company has shares, a dividend is the money that shareholders receive for each share they own
- Intangible assets. These are assets that can’t be touched or sold for money, like patent rights
- Liabilities. These are debts that a company owes
- Liquidation. This happens when a company closes for good (or is ‘wound up’). Creditors are paid, and money is distributed amongst the shareholders
- Net profit. This is a company’s profit after overheads have been taken off
- Peppercorn rent. This is a nominal rent. It is used when someone wants a property to be rent-free, but must charge a tiny amount to form a contract
- Profit and loss account. This is a report that shows the money a business has earned and the money it has spent
- Promissory note. This is a written agreement to pay someone a certain amount of money
- Statutory accounts. These are accounts that have to be filed with the Government by law
- Turnover. This is the total value of sales that a company has made over a specific period
How do I learn about finance?
If you want to learn about finance in the workplace, the easiest way is to sign up for a course.
At ITonlinelearning, we provide a course called Finance for Non-Financial Managers. This short course will teach you all you need to know about finance in the workplace, including reading financial documents and calculating important financial ratios.
The course is certified by APMG International, meaning that you will have a qualification that is recognised across the world, by several different organisations.
Plus, as this course is carried out entirely online, you can learn at your own pace, at a time that suits you.
Find out more about our Finance for Non-Financial Managers course.
If you want to know more about our Finance for Non-Financial Managers course, get in touch with us today and see how we can help upskill you in your role.
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