By: Cherry Birch On: September 4, 2019

Have you formulated this year’s financial strategy (whether for your company, business unit, department or organisation)? It could of course be that you are already halfway through the year and it has been well underway for some time. So how is it going?

What are the chances that you will reach your goals? Whilst you can endeavour to ensure your strategies positively impact profitability, growth and cash flow (and KPI’s) – it’s not all up to you. Strategies are after all, realised by people – so they need to understand them in order for them to achieve them.

Imagine if everyone in your team understood:

  • The key financial drivers for the business
  • How the business is really doing
  • What key ratios the business measures and why
  • How they as individuals, can positively influence the financial situation of the organisation?

Of course, there are lots of factors which are out of your (and their) control, but are you doing everything you can to help your team realise their full potential? Here are three key steps which are often overlooked when implementing your financial strategy:

1. Review the Financial Communication process

How user friendly are the reports that your team receive?

Ah… spreadsheets! With endless rows and columns, financial jargon and terminology that no one has ever explained. Does this sound familiar? Let’s face it – is the document to the right user friendly?

Add to this the number of different reports which are available – could something be done to communicate better? Do they really need the 4,000 line report when they can only influence the first 10 lines? Are you using dashboards which are well understood? Let’s do something about this communication barrier? When was the last time you reviewed this?

One approach which can be very powerful is the use of graphics. Most accountants are left-brained whereas it is more than likely that many people for whom the reports are intended are right-brained and therefore relate better to colours and shapes.

I’ve been using these colourful graphics for years from my partners, Bonanza. The reaction is always the same – ‘It’s fantastic!’ Most managers are visual and by showing them shapes and colours you will find they’ll learn faster and retain knowledge better. So let’s start being smarter about the way we communicate finance.

Can the Finance Team make the complex simple?

Business Partnering skills are vital for the Finance Team and they include understanding the business, being commercially aware and being able to demystify financial jargon. For more on this refer to our blog, ‘Financial Engagement’.

2. Do not assume that your managers are financially literate already.

Due to my early financial training, I used to think that everyone understood how to read financial statements. I am not sure how I imagined this happened – maybe by osmosis! What I have found is that so many managers, even at a senior level, have never been given the opportunity to learn even basic financial concepts and terminology, yet they are expected to comment on the financial performance of their department or business unit. After all, they know what is going on from an operational perspective, but can they then relate this to the monthly Profit and Loss Statements they receive and do they query or question the reports?

Do they fully understand the key cost and business drivers and the ways that they can influence the financial outcomes? I suspect that many managers feel vulnerable in this area and do not challenge the numbers due to their lack of confidence in their financial literacy.

3. Make financial training enjoyable

If you decide that there is a need to run financial training, there are some important things to consider:

  • Ensure it engages them – otherwise you are wasting your money,
  • Ensure it is relevant to your organisation – if you are able to run training on an in-company basis ensure it can be fully customised,
  • If this is not viable, then can I suggest you ensure there is adequate follow up coaching after attendance on a public course to relate the content to the specifics for your business.

One challenge you may set your staff is to get them to predict the monthly actuals before they get the reports from finance. It is a great test of whether they understand the key drivers and their reports. With coaching, this also builds their confidence.

And on that note, I wish you all a successful and profitable 2019/20!