| Raising Financial IQ for Executives to Take Their Career to the Next Level

Posted in Business Finance Lessons at 9:00 AM by Loftis Consulting

Given that you as an executive have progressed nicely in your career, you may not realize that in order to move to the top levels of the organization you must understand the value of the business and how it is performing both operationally and financially.  I have met many executives who know and excel at the specifics of their specialty area within the business but know nothing about the financial aspects of the business.

As a corporate board, you would not put someone in charge who would not know how to grow the value of the business and thus executives become stuck in their specialty area. Having a basic understanding of the numbers is not enough.  For example, focusing on sales only is not enough since one must also understand the cost structure to not only achieve the sales but support the sales.  There are steps you can take now to raise your financial acumen.

  • Talk to your finance team
    • To explain the pain points in the business
    • To review financial statements
    • To review key operating and financial metrics of the company
  • Make sure you understand the language of finance so when financial conversations occur you understand what is going on
  • Understand why certain key metrics are tracked within your business and what influences these metrics

Some general metrics that are usually tracked include:

  • Net margin: This is calculated by that net profit divided by sales. The trend over time is key with this metric. If net margin decreased year over year then the business is being effective in controlling cost, increasing sales, or managing overhead.  If it is vice versa then the business is not being effective and a solution needs to be put into place by the management team.

 

  • Cash flow from operations:This reflects how much cash is being generated by the company’s regular operations for a specified time period. Even with strong sales, a company could run short of cash if most of the sales are coming from credit sales rather than cash sales.

 

There are a multitude of metrics that can be used but you want to understand the ones that are relevant to your business.  If you are a little confused or just need some one-on-one coaching to get a better handle on financial know how, Loftis Consulting can help.  Loftis Consulting can walk you through the ins and outs of financial statements and metrics in a language that you can understand.

Give Loftis Consulting a call today to schedule an appointment at (312) 772-6105.

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