Finance for Non-Finance Teams: Importance and Approach
Financial data can be intimidating for people who don’t have to number crunch on a daily basis. At the same time, the decisions non-finance teams take have a bearing on the company’s financial performance. How do you make finance for non-finance teams appetizing and give them a financial voice? We break it down for you.
Why is finance important for non-finance managers?
Teams and managers not directly involved in financial management should be empowered to better understand the financial aspects of business. This is necessary as it helps them take more judicious decisions on project planning and get a complete idea of the rationale behind management actions. Moreover, financial awareness equips them to find creative solutions to problems.
You can’t have ideas or care enough if you don’t have the full picture of a situation. The availability of financial data isn’t enough – your team should know how to read it and connect it to their regular activities and decisions.
Financial knowledge is also important to take corrective actions and change course proactively. Non finance teams may be unaware of how their company is performing and how they are contributing to revenue. Conversations on performance tend to discuss the effects of individual and team efforts on the company in general terms. Numbers and quantifications do their bit to drive the message home. And for that, the non-finance folks must have, at a minimum, basic knowledge of financial terms and how they relate to their work.
So, what exactly is finance for non-finance managers and team members?
Financial data is a tool for making decisions, motivating teams and gaining a big-picture mindset. The basic financial knowledge that non-finance employees should work towards acquiring includes:
- Interpreting financial statements (balance sheet, income statement and cash flow statement)
- Cash budgeting and managing working capital
- Making pricing decisions
- Assessing project returns
As a result, non-finance employees can benefit in the following ways:
- Use information in financial statements to make informed decisions or align with management’s strategy.
- Determine the financial viability of a project or the company, such as by examining basic financial ratios.
- Understand the importance of working capital and cash flow for the business.
- Compile monthly budgets according to operational plans.
- Involve in the creation of financial plans and financial management of their team/department/unit.
- Make wise investment decisions.
Companies need a sound strategy to teach the basic fundamentals of finance for non-finance teams. Financial awareness training should be on the agenda. Here are a few effective ways to help non-finance teams imbibe financial literacy.
How to communicate financial information to stakeholders
Explain the numbers that matter most to the organization and individual teams
For a big picture view, non-finance employees need an understanding of how the company makes money, factors that affect profits, and its cash reserves, assets and liabilities. This apart, employees should be aware of the impact of their day-to-day actions and decisions on the company’s financial performance.
Say your marketing team has requested for new digital marketing tools and believes that the increasing workload necessitates hiring two full-time employees. The expenses incurred will affect profits, but how do you convey this effectively?
Have team members analyze the income statement to learn about the expenses and income for the quarter. Seeing how each expense impacts the company’s income can be eye-opening. Do a cost versus benefits analysis. What are the specific business benefits of investing in the tools? Can they lead to better customer satisfaction and more customer orders?
Explore alternatives – a cheaper tool, hiring freelance workers, using subscription services rather than buying a tool outright…? Are there opportunities to cut down on unnecessary costs that can make the purchase of new tools viable?
The income statement provides a baseline for understanding how your company stands financially. It can get your team thinking about expenses, outcomes and alternatives.
Be as user-friendly as possible
Jargons are new terms and words that your team must learn, adding to their cognitive burden. Focus on keeping things simple when explaining finance to non-finance managers. The goal is to help them assimilate the meaning behind the numbers.
We are visual thinkers, processing information based on what we see. Your team members may be used to dashboards, which means they will be quick to interpret graphs and bar charts. So, it is worthwhile to incorporate relevant images and words for an intuitive understanding of the meaning and significance of numbers.
Develop lesson plans that build financial knowledge steadily. Establish a firm foundation that teams can build on as they enhance their financial awareness, via either company-sponsored training or as a personal initiative.
The importance of establishing trust is a less discussed topic in planning lessons in finance for non-finance managers and team members. To build a bond with learners, the coach must – from the beginning – make trainings enjoyable, immersive and meaningful. It conveys that learners are at the heart of the financial awareness trainings, encouraging their interaction and effort.
Leverage experiential training
The use of simulations for teaching the fundamentals of finance and accounting has garnered attention and adoption steadily, and for good reason. People learn better when they’re challenged to experience, think, and do. Experiential training is active learning, involving the participation and interaction of people in the learning process through meaningful activities.
Implementing experiential training requires specialist knowledge and purpose-designed platforms. BALINCA™ bring this expertise in-house, providing a deeper understanding of finance for non-finance professionals.
Support your team in finding their financial voice
Financial education offers powerful benefits to the organization and establishes that every employee is a decision-making agent. For the best outcomes, create learning experiences that stick and make teams financially savvy and confident.