Being in managerial position and level it is clear that every leader must be able to understand the financial aspects of their daily activities. With this
understanding, it is expected that every manager can analyze and make the
right decision for their unit and organization as a whole.

Every decision and every action taken by leaders will impact the organization’s financial situation. Truth is that every business action will impact its financial activity. For example, if we decided a different sales strategy that made huge revenue for specific period, it could be received as a positive financial investment.

The benefit when we understand finance, we can arrange our financial resources more on target. If managers and leaders do not arrange their resources efficiently and effectively, they would waste the company’s limited resources. By understanding finance, a manager can analyze and allocate the company’s limited resources to activities and strategy that would be most effective. When managers do not have such understanding, it would be difficult for them to perform their tasks in managing people and resources.

Brainyard’s complete Winter 2020 Outlook survey found that finance executives were 29% more likely to list better Key Performance Indicator (KPI) reporting as a priority than their non-finance counterparts. Furthermore, the study stated that the huge difference between finance and non-finance professionals is around the perception of importance of cash flow, with finance executives more worried about it compared to their non-finance executive colleagues. The study concluded that the ability of finance executives to make an early on target prognosis on their company’s strategy lies on their understanding of the financial data. Meanwhile, non-finance managers prefer to have the financial data translated into a narrative that tells what the numbers mean and what to do about it.

Non-fnancial managers in an organization can still benefit from understanding finance, because they will be aware of how their decisions impact the company’s overall financial health. In addition, they can become more detailed and thorough in their decision making and their operations in order to help the company’s bottom line.

Therefore, when non-financial managers are faced with situation where they know that they are lacking the understanding of finance, they must start to invest on elevating their finance skills. Understanding finance itself is not as difficult as it might seem, however it does take a bit more effort to overcome the mental barrier that finance is only for finance people, or people with finance backgrounds.

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