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Finance for non-finance managers
Below, we provide an example
of a typical Finance for Non-Finance 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".
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- performance drivers
- many finance for non-finance manager 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 non-finance
manager 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 non-finance 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 Non-Finance
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
- 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, 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
- payback period
- discounted cashflow and IRR
- discounted payback
- risk analysis
- accounting versus economic profits
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.
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