finance for managers

Below, we provide an example of a typical finance for managers course that we run. First, however, we would like to highlight some aspects of our courses:

• value management - the traditional financial statements and ratios were fine during the "industrial age"; nowadays they can give a very misleading picture. For instance, on average, 75% of the value of a company does not appear on the balance sheet. The real value in a company lies not in its balance sheet assets but in the skills of its people, its accumulated R&D knowledge, relationships, brand, systems. Managers must fully understand the concept of "value" if they are to make sense of "finance".

Visit HardSkills. Sign up for the Essentials Newsletter and find out about our Essentials courses for managers. And find out how gorillas are linked to competitive advantage.

Click here for our brand new site focusing on marketing, strategy and finance

performance drivers - many finance for managers courses focus on ratio analysis, showing managers the importance of gearing and such like. These ratios do have a place, but manager need in a much broader framework. Financial ratios are based on historical data and are therefore a crude indicator of future performance. In addition, they track "symptoms" not "causes". To illustrate: a reduction in profit margin tells you that you are making less on each sale but it does not tell you why. However, analysing "performance drivers" - for example, how many visits made by a salesman - will point towards "causes". This is the approach of the "Balanced Scorecard" and this "balanced" perspective is a recurring theme of our programmes. We demonstrate the links financial performance and the non-financial drivers of performance.

• a sophisticated enterprise model - a central component of our finance for manager s programmes is a spreadsheet showing how the various elements that drive financial performance fit together and affect each other. The impact of real world inputs, such as an increase in the average time it takes for customers to pay or reducing the number of sales people, can be seen throughout the financial statements - the impact on cashflow, the balance sheet, ratios and so on. As we progress through the programme, each new aspect is considered in the context of the model, thus helping delegates to "fit the pieces together".

• more than numbers - we emphasise that the "numbers" are only representations of a much more complex reality. As an example, a revenue forecast should not be simply last year plus 10%, it should be constructed from a deeper analysis of the factors that influence customer buying behaviour.

• practical tools - the primary objective of our courses is not to teach finance; it is to give managers a balanced financial perspective and a set of practical tools that they can use to generate sustainable competitive advantage.

• marketing expertise - so many finance for managers courses focus on "costs". We balance the picture and because of our marketing expertise (click here for more information about marketing training and services), we can ensure that managers have a realistic view of revenue inputs - market segments, product lifecycles, promotion campaign response rates, impact of brand recognition .....

A Typical finance for managers Course

All of our programmes are bespoke and tailored to the specific needs of your organisation. As mentioned above, we use a spreadsheet model to tie the concepts together. Delegates also spend a substantial proportion of the time working on practical problems, "discovering" for themselves the uses and drawbacks of different techniques.

The following is a list of the areas that we would normally cover:

Section I

• Financial Statements

• Profit & Loss
• Balance Sheet

• We then introduce cashflow and examine how profitable businesses can fail through lack of cashflow (and vice versa).

• Working capital, Fixed and Current Assets, Creditors and Debtors

• Introduction to the concept of Value Management

Section II

• Analysing Financial Performance - the financial "barometers" are critical tools for managers. Additionally, managers need to understand these measures since they are often the same measures used to assess managerial performance.

• profitability
• financial status
• financial management
• resource management

Section III

• Performance Drivers & Intangibles

Ratios are useful but they are based on accounting data. Accounting data is historical; it tells you where you have been and the ratios are a very crude indicator of future performance. A further difficulty with ratios is the accounting classification of expenditure and investment. Advertising is an expense and immediately reduces the profit for the period and yet its benefits may not be seen until much later and tend to be cumulative - eg KitKat is an international brand because of almost a century of advertising. Ratio analysis can induce myopia!

• The Balanced Scorecard

The Balanced Scorecard, as its name suggests, was a reaction to the over-reliance on purely financial measures that often present a "too-late", distorted picture (eg no recognition of key drivers such as brand and relationships) of a business. The Balanced Scorecard does not remove financial measures and objectives - it places them at the top! However, the emphasis is on identifying what drives performance rather than measuring the results and managing causes rather than analysing symptoms.

• Overview of Activity Based Costing

A popular approach developed over the last decade or so to help companies to think about the forces that drive the consumption of overhead resources. Non-volume allocation bases known as cost drivers are identified, giving managers a better understanding of the forces that drive overhead costs in their departments. ABC improves the allocation of overhead costs, thus enhancing the accuracy of ratios analysis!

Section IV

• Project Finance

• payback period
• discounted cashflow and IRR
• discounted payback
• risk analysis
• accounting versus economic profits

• Business Planning, Budgeting, Forecasting

Many of the elements discussed above are brought together in this section. It introduces the concepts of resource planning and constraints. Each component of the overall budget is considered: direct costs, overheads etc. Particular emphasis is given to budgetary control - how can we be sure that we are on course. Again, the traditional accounting approach is married to the new thoughts centred on the Balanced Scorecard - don't just take the temperature of the patient, monitor what the patient is actually doing. (or to adopt a more positive approach, don't just time the athlete in the race, monitor his training, diet, sleep, attitude - these are the performance drivers, look after these and the performance will take care of itself!)

Please use the links below or the menu at the top of the page (hover over our logo) to find out more about our services.

Hard Management Home Page Hard Management Site Map     Right-click on the image opposite and choose Save Target As... to download our leaflet.