Essential Financial skills A Manager should have

A manager has a huge responsibility in their company. Daily, a manager makes decisions and a conclusion that will benefit the company. Aftermath effect may be positive or negative towards the company. Managers’ choices will affect financial performance, firing and hiring personnel, budget preparation, and capital investment approval, sending an invoice for payment or scheduling operations. Often, most managers lack financial skills. Hence they tend not to understand the financial implications o their personal decisions. As a result of a lack of business skills, poor choices made, resources wasted, and the company’s financial performance suffers greatly. But with the best financial expertise, a manager will run the company smoothly and swiftly. A good manager should have specific skills to run a company. 

#Basic Financial Statements.

A right manger should have good, clear, and familiar with the basic financial statements. It doesn’t matter whether the report prepared for internal or external users. One should have a clear picture of what information in every report presented. A good understanding of the financial statement will provide you the manager with the basic terms and terminologies needed for communication both to your finance personnel and accounting officer. To be precise, when looking at the financial statement, you ask yourself.

  • What information is in the financial statements?
  • Does your company use a different format for financial reporting, both internally and externally?
  • Do I internalize, understand, and ready to use these statements for operational and financial improvement performance for my area of responsibility?

#Cash versus Accrual Accounting

As a manager, you need to know the two accounting methods: Cash and Accrual basis of accounting. These are the basis of accounting that is to apply in business transactions record. Most medium-sized and large successful companies use accrual accounting. It is very crucial for you as the manager to understand what it means and implement it accordingly. When using accrual, you ask yourself questions like: When does an expense get charged against your new working capital? When do you receive credit after a sale? Does a purchase order generate an accounting transaction? 

When you understand the difference between cash and accrual accounting, you will manage the cash flow, vendor’s obligations, spending levels, and the receivables due from your client.

#Budget Preparation

As a manager, you should know how to prepare your company’s budget. Managers should have a reliable quantification of the resources able to meet the company’s objective and action plans for the next fiscal year. A manager should not have a formality to satisfy top management demands, investors, or lenders. A budget should touch each department based on the returns. A budget preparation makes a manager have quality time to ask how resources expenditure in each department. Resources allocated should be more effective and efficient.

Managers should have identification and documentation of the operations that drive their spending levels.

#Variance Analysis

Managers need to know the variance analysis. The analysis is necessary for forecasts and budgets. Significant variances, whether favorable or unfavorable, should be examined. For accounting, managers should be able to have variance relations to what in their department for a whole year. Is this a recurring or onetime variance? Do you need to include this favorable or unfavorable variance in the next fiscal year? As a manager, if you are not in a position to explain these variance questions based on your knowledge, then you should contact the department of finance immediately. 

Financial skills are the essential foundation toolkit a manager should have. A skillful manager should have a clear understanding of the financial implications based on their personal decision. A manager should effectively use their financial information in the improvement of their company performance.

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