Regardless of the business niche or company you work for, money management is an essential component and driver of success. A functional and productive finance department is a sign of a healthy organization. It ensures every department is coordinated and on track to meet the company’s end goal – profitability. Considering how important financial management is to a company’s health, it makes sense for every employee to have some financial knowledge to increase productivity.
So, how does understanding finance help you in your professional life? Continue reading below to find the answer.
It helps you assess where your department lacks
If you hold a managerial position, you probably have a fair idea of how financial metrics can help evaluate your department’s overall performance and also that of individual team members. With the know-how of budgeting, resource allocation, and simple financial ratios, you’ll be able to calculate your department’s ROI. This will also help you identify cost sinks within your department’s routine work.
Once you know how finance and capital works, understanding financial reports can be easy and helpful. Insights from these monthly, or annual reports, will help you answer a lot of questions like:
- Are the monthly or annual goals being met? If not, where does the department lack?
- Which team members are performing well?
- Is your department contributing enough to the overall success of the company?
It’ll help you get better career opportunities
Obtaining additional certifications can be quite handy in this regard. Clearing the CPA and CFA will help you qualify for better jobs, especially those in senior management. You can grow professionally and earn better salaries. So if you’re interested, you can check out Wiley Efficient Learning for study material and exam dates to start preparing.
You’ll know what financial metrics and ratios to use
Comparing your department’s performance or your own, using financial metrics without knowing what they mean is a waste of time. Financial knowledge will help you understand what metrics like revenue increase, cost decrease, budgeting, etc., mean. Understanding these will help you set better goals for your team and manage projects.
It is easy to use financial metrics for jobs like a sales engineer whose performance is related to the number of deals they close. But when it comes to other value-intensive roles like that of a web developer, it may become difficult to assess their financial impact immediately. But it does help in the long run. For instance, by hiring a web developer, you can design a good website that increases monthly visits, leads, and conversions. Website performance can help get insights on lead generation – a useful financial metric.
So, by understanding different metrics, you’ll be able to identify those that matter and those that don’t. This will help you boost performance and generate better results.
Better coordination with your finance department
No matter which department you work in, other than finance, there will be times when a project will require approval from the finance department. Suppose you work in the marketing department and develop a unique idea for an ad campaign. It might be an amazing idea that could generate revenue for the company, but you fear the finance department might reject it in the first phase or never grant funding.
If that’s the case, maybe you’re not asking the right way. Maybe try approaching a finance professional in a different and more nuanced way they’re likely to understand. Instead of sending a 16-page wordy document on the project, why not talk in terms of numbers, stats, money, and ROI? This would authenticate the project and show your consideration for the finance department’s time.
To make a proposal that sits well with the finance folks, you must communicate in their language. With financial knowledge, you would be able to convince them how this project will benefit the factors they are concerned about. And this is why having a basic understanding of the subject matters.
It helps you create more value
Understanding which project will create value for the business involves understanding the ROI for that project. Projects and initiatives that seem irrelevant to your company’s goals are likely to create zero value. This implies they either have questionable metrics for calculating ROI or are just not worth the time and money.
To decide which project demands your utmost attention and time, you have to understand how it sits well with the company’s short-term and long-term financial goals. Financial reporting and analysis of the project will help secure better funding and identify which areas require more time and planning.
To understand the financial reports or conduct analysis, you need to have substantial financial knowledge. From forecasting and budgetary information to effective allocation of financial resources, every metric is important to assess the project’s worth and value.
A firm hold on your department’s performance will earn you recognition among C-level executives and other colleagues. Your understanding of the business’s finances and how your department can contribute to the company’s financial goals show how committed you are to change and development.
A better understanding of the financial sector
Apart from professional development, knowledge of finance can also help get clear on investment and capital. Every business and individual is closely tied with the capital market. Yet, not everyone has a clear idea of what it is.
Whether you’re planning on investing in property or would like to set up a retirement fund, financial knowledge can help avoid risks. For example, you’ll know whether to take out a loan right now or wait for the interest rate to decrease, given the economic situation. Sure, you can hire a broker to consult for most of your decisions. But wouldn’t it be better if you could rely on your financial aptitude for some very basic decision-making?
Self-learned financial knowledge will greatly benefit you through your professional and personal life. From gauging the ROI of a company project to deciding whether you should take out a loan, it can be helpful to know how finance works. So, consider upskilling yourself by doing some short courses.
Read also: Best Ideas To Start A Business In The Finance Sector