Importance of Financial knowledge for effective decision making.

Do not be under the wrong notion that the subject matter pertains and concerns only CFO's, Accountants and Financial executives alone.

It is essential that non-finance managers, business leaders,CEO's, Managing Directors,Sales Managers,Departmental Heads and even supervisory caders are expected to have basic financial knowledge for effective decision making in their organisation at their respective levels.

It is essential to know how to read and understand a balance sheet, cash flow , assets &liabilities,depreciation, P&L ,reserves, surpluses etc.etc.

Many of the executives and employees harbour a mortal fear of accounts and lack in basic financial concepts,and in the process of this ignorance, they even do not know how money comes in, how money is managed and accounted for in business.The most routine financial statements continues to bamboozle them and there is no wonder that businesses fall and fail due to poor Cash management.How can Managers make informed business decision without distinguishing how the finance of the business actually operate?How can the employees perform effectively without understanding the basic financial aspects of the business of the organisation they work ?

Lack of executive level financial awareness of malpractices like pilfering,manipulations, embezzlement etc. can lead for more clued-up elements.

Calculating and assessing the over all financial health of the business is an important part and core aspect of any managerial position, as highlighted by Mr.Karen Berman in his famous book "FINANCIAL INTELLIGENCE". Companies to expect and ensure Managers to use financial data to allocate resources and run their department cost effectively, and with end result of profitability. Many managers are at a loss without knowing to read a balance sheet and to calculate return on investment etc. apart from many other relevant aspects.

In the present scenario, many business being in choppy waters- mangers , executives, business leaders are required to possess sound financial literacy more than ever before. Business complexities, legal regulations , bindings and certain practises have made the financial acumen crucial. Without basic and fundamental number sense and awareness , executives and managers cannot decipher financial statements or arrive at the net present value of the business- and if you can't read a balance sheet and understand its contents, its going to be pretty difficult to craft required business strategies.

Only by understanding the financial aspects of the business, like Income statement,P&L statement,assets and liabilities cash flow, depreciation, costing etc. decision makers can comprehend the business implications of the day to day and with this insight, they will be angle to analyse the statements, grasp the required information and monitor future growth and development on an on going basis- and prepare themselves for plans of actions and bolster effective decision making capabilities.Poor and ineffective corporate decisions are a direct result of lack of awareness of the dire implications on the financial structure of the business. Knowledge of factors like capital turn over,debt ratio, equity ratio,working capital management will enable the business managers to create proper strategies when comes to financial planning, budgeting and forecasting which in turn will assist to increase profitability by achieving business targets effectively and efficiently.

Business Managers need not necessarily become experts in accounts and finance, but are expected to possess with basic finance and accounting principles in order to understand the "bottom line"and therefore it is imperative for mangers of organisations to possess working knowledge of finance in general and should be in a position to to identify the financial skills needed for business development.

In view of the above organisations should arrange and organise work place financial education to develop employee skills in the financial sphere as the employees cannot be afford to be inadequately informed of the money matters. Once the financial health of the organisation is clean and clear and every one knows how to impact the bottom line, it make them efficient and confident at work. It is the bounden duty of the management of the organisation to impart basic financial education and knowledge to it employees without any second thought, and the role of the CFO and his team has to look upon this aspect in all earnestness ,to impart basic financial knowledge to their employees.

Create a proper system in place to indoctrinate new employees on finance while inducting and make them understand the basic importance and value of finance and its relevant application and operations in the organisation.

An executive or Manager is incomplete to an organisation without basic financial knowledge and skill and it is the responsibility of the management to inculcate this knowledge and skill in them while inducting ,with periodical reviews.

J.K