Financial Savvy

FinanceThis course will enable you to:

  • balance short-term profitability with long-term value creation. (For instance, cutting the marketing budget will most likely improve this year’s profitability and cash flow. But what will be the impact on next year's profits?)
  • build robust business cases and justify investment decisions for equipment, marketing, new staff, training …
  • recognise the critical importance of cash flow and working capital
  • understand the real performance drivers in the business – many of which don’t appear in the financial statements, such as relationships, culture, skills and knowledge
  • undertake what-if analysis to establish the viability of your proposals in different scenarios
  • develop forecasts and budgets
  • manage resources more effectively
  • know how to evaluate opportunities and when necessary cut the right costs
  • understand and interpret financial statements and KFIs (Key Financial Indicators); your performance will be evaluated according to these so it is essential that you understand the scoring system
  • learn the language of finance so that you can engage in constructive discussions with finance professionals
  • recognise the limitations of the so-called ‘hard numbers’ and the importance of non-financial drivers such as brand, relationships, expertise, culture and systems

FinanceSavvy is a word that encompasses not only knowledge but shrewdness and practical understanding. A savvy person is someone who sees beyond the obvious and the superficial and can quickly get to the nub of a matter. Financial savvy recognizes that the accounts are a poor representation of reality. The numbers help you to ask the right questions but they don’t provide the answers. Being savvy means understanding the story behind the number. Our emphasis throughout is on developing practical knowledge and skills that you can use day-to-day and that will have a tangible impact on your own and your organisation’s performance. 

What’s covered

We begin with a consideration of the main financial statements. These record the trading performance of a business, its assets and liabilities and how money has been used during the period. We build on this knowledge and look forwards, exploring forecasting and planning techniques. At the end of this section, you will understand how to build a flexible spreadsheet model incorporating sales and cash flow forecasts and projected income statement and balance sheet. Furthermore, your what-if model will allow you to change factors such as prices or expenses and see instantly the effect on the bottom-line. Such models are a valuable tool in the development of robust budgets.

In the Measurement section, we examine KFIs and the ratios that are commonly used to provide insight into financial performance. Then we conclude our sections on accounting finance by taking an holistic view and examining how the accounts can present a distorted picture of a business. Whilst the financial statements are regarded by many as the ‘hard’ numbers, the truth is that there are many subjective inputs and virtually every number is capable of being interpreted in different ways. Without the ability to question and challenge the numbers you will be at a severe disadvantage.

When purchasing capital assets or undertaking projects such as marketing campaigns or training programmes, one should take a longer-term perspective. We will review six investment criteria which take into account risk and the time value of money. They will help you to justify investments in, for example, brand, people, culture, systems, relationships and customer service. These are the drivers of shareholder value and yet appear only indirectly in the financial statements. Finally, we will examine approaches to business valuation and factors to consider when acquiring or selling a business.

The video below  is introducing a basic form of 'what-if' analysis, the kind you might undertake to see if a business is viable. It shows the financial impact of selling at a different price, changing the quantity sold and/or buying at a lower price. From this basic spreadsheet, we will move on to create a full forecasting model with profit and loss, cash flow forecast and balance sheet.

What isn’t covered

If you are seeking a course on the nuts and bolts of bookkeeping, how to do journal entries, prepare statutory accounts or undertake tax calculations, this is not the course for you. Just as you don’t need to know how your car engine works to be a good driver, as a business owner or manager, you do not need to know the mechanics of accounting. You should leave the details to your finance department or accountant.

The Edge Program will provide you with the financial perspective you need to make good commercial decisions.

Global

Each country has its own principles, rules and laws relating to accounting, financial reporting and taxation. However, at the commercial decision-making level at which we are operating in this program, the differences between countries are insignificant and have no material effect. Again, managing those issues is the role of your finance department or accountant. A little knowledge in these areas can be a dangerous thing and ignorance is not a good defence in the eyes of the tax authorities or the law.

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Face-to-Face Training may not be so effective …

A typical face-to-face training session consists of a presentation by a facilitator, followed immediately by an activity to apply the learning. There is little time for reflection or deeper analysis and, as a result, activities intended to deepen learning, like role plays, tend to be superficial. There’s a quick debrief and then on to the next topic. No chance to go away and experiment in the real world in situations where there is something at stake. At the end of the training day, you’re exhausted and any learning from earlier in the day is rapidly fading.

There is a limit to how much knowledge can be crammed into the human brain in a single day.

And then, when you return to work, you have to catch-up on all the stuff that accumulated while you were away. Often, you don’t even try to apply your learning – you’re too busy getting stuff done and within days the training is a fuzzy blur.

What a waste of your time – and money!

Face-to-Face Training is Expensive

The online content in each edge course, if delivered face-to-face, would normally require 2 to 3 days and cost several times our individual and group courses. Plus, if delivered off-site, there would be additional travel and accommodation expenses and time away from work.