Are you back to work, full of energy, passion and 2020 Vision?
Whilst it is early in the new year (and decade!) and it is still quiet in the office, you are taking the time to set yourself up for a big year. It is a great time to be strategic – to work on the business not in the business! There are fresh ideas you would like to kick off and some changes you would like made in key areas of the business.
It could of course be that you are already half way through the year. So how is it going?
What are the chances that you will reach your goals? Whilst you can 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.
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?
Here are three key steps which are often overlooked when implementing your financial strategy:
1. Communicate financial information in a simple way
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? Many managers wrestle with the confusion of traditional financial reports. Let’s face it – is the below document 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 4000 line report when they can only influence the first 10 lines?
So why don’t we do something about this communication barrier? When was the last time you reviewed this?
One approach which can be very powerful is when graphics are used. 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. And the reaction is always the same – it’s fantastic! Whilst we happily spend thousands of dollars on marketing, we often neglect our own internal communication channels. Most managers are visual and by showing them shapes and colours you will find they’ll learn faster and retain knowledge. You rarely see an advertisement without graphics.
Another option is of course to use Dashboards – to make sure you and your team focus on what is key to the business.
So let’s start being smarter about the way we communicate finance. Graphics can be created using inexpensive software and offer a great return on investment!
2. Do not assume that your managers are financially literate already
What I have found is that so many managers, even at a senior level, have not been given the opportunity to learn the basic financial and accounting 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 P & Ls 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 practical, relevant and enjoyable
If you were booked to attend a 2 day finance training session, would you leap out of bed with excitement early in the morning. I do not think so. Traditional finance training usually generates this image:
Okay, a little young you may say, but you get the point!
If you decide that there is a need to run financial training, ensure it engages them – otherwise you are wasting your money. Also make sure it is relevant to your organisation and of course if you are able to run training on an in company basis, it can be fully customised.
However, 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 reports and the key drivers and with coaching, it is a great way to build their confidence.
And on that note, I wish you all a successful and profitable 2020!