Finance professionals are not exempt from the influence of business acumen! Don't snooze on the invaluable tools available to enhance your career, strengthen your credibility, and expand your business and financial expertise. In this video we help you do just that, read the transcript of the video below:
Understanding the Complexity of Finance:
“If you've ever asked finance for more money you usually get two answers and they come in an interesting order. So first you get the answer "no" the next answer comes in the form of a question – an incredulous "why?" Why would you ever want more money? Now maybe that's a little harsh and just like any other department, finance is actually a group of different functions. Usually when we say 'finance' we're talking about accounting. But in reality, there are a bunch of other groups like treasury, cash management, financial planning and analysis, billing, payables, and more. You may even have a finance function integrated in your own department. So for example, if you're in the CPG world, the revenue growth management function can be thought of as a finance function that helps the business with pricing to ensure promos and other trade dollars are invested wisely.
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Business Acumen will Transform Financial Professionals into Strategic Partners:
Regardless of how you think about the finance function, business acumen is key for every financial professional. Especially if they want to be seen as business partners rather than bean counters. You would think that business acumen is an inherent skill that all finance professionals are born with or at least it's beat into them during school. But having been in or around finance departments for nearly 20 years now, I've noticed that even finance professionals have gaps in their business acumen. When professionals first enter the corporate finance department a lot of us are just trying to understand exactly what we're doing. We may know debits and credits but we may never have applied them to an actual business. For example what is a credit to revenue actually mean? We may know how to calculate metrics like EBITDA but how do we use EBITDA to make actual business decisions?
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Empowering Financial Professionals for Strategic Impact:
So, whether you're a finance professional or you work with one, be aware of two big gaps that we have to overcome to be better partners to the business. The first gap is not just having the technical knowledge but being able to apply it to the business. For example, each month we close the books. We look at variances and we issue reports. But do we really understand how our business works? Have we spoken to business owners or department leaders to understand the trends that they're seeing, the challenges that they're facing, or even the external pressures we may not even understand? If revenue goes up, can we point to a specific action we took to grow? Did we change pricing? Did we run a promotion to push volume? Have we pushed certain products that change the mix of our revenue? If we issue reports but we can't have an intelligent conversation with our bosses or the business about movements in those numbers or variances to budget and plan, we will be seen as bean counters and paper pushers. We need to know why the numbers moved and what's driving the business. But all of that is looking into the past. It's important that we understand the context of the business and the levers we pulled to achieve the performance. But as a business partner we need to be more than just good analysts. We need to help the business push into the present and into the future.
Use Business Acumen to Connect with your Strategy:
And that leads us to gap number two. Gap number two is our failure to connect with our strategy at multiple levels. Our own department strategy, the strategy of the businesses we support, and ultimately the overall corporate strategy. But knowing that we want profitable growth through differentiated products and services by being radically customer centric, isn't enough. We need to know why? What forces in the market are we facing? Be it competitive, regulatory, or even sourcing challenges. What are the trends in our industry? Where is our business in the business life cycle? Where is the economy in its latest cycle? Who is our customer? Where are we not going to play? We need to understand all of that context so we can take what we learned by filling gap number one and help the business identify appropriate initiatives, help them measure the behaviors we need to see, help write compelling and strategically aligned business plans for new initiatives. Even create financing opportunities to pay for the new initiatives, anticipate shifts in strategy, metrics, and performance, and on and on and on. If we want to be business partners we have to think like the business — like business owners not just purveyors of P&L's, not just experts on EBITDA.
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Become the Strategic Partner Your Business Needs Using Business Acumen:
So, here's my challenge to you. If you are a finance professional or you want to play one on TV, continue developing your own business acumen to be the partner your business needs. And you can do it by doing two things! Number one – know what forces are driving current and past performance to help business owners get more out of the numbers. And number two - know where the business is going and why so you can be a positive force driving your business to further success.”
Why Business Acumen is Essential for Financial Professionals:
For financial professionals, business acumen is essential for success... not only within your organization but also for your career as a whole. The good news is that you’ve already got a big head start with your understanding of the financial portion. So, you just need to focus on developing a complete understanding of the strategy and skill. With business acumen, you work to understand the WHOLE business, not just the numbers part of it. Then you’ll develop the skills you need to effectively communicate findings and plans with colleagues and clients. Essentially, you’re learning to speak the language of business.
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