Whether you’re a manager at your organization or an entrepreneur leading the charge for a brand new company, financial skills are crucial to your success both professionally and personally. These skills help you understand how your organization succeeds or where it falls short, enables smoother communication across departments, and ultimately drives major business decisions. On a personal level, you should be knowledgeable in managing your own finances so that you can support your career and poise yourself for financial health far into the future. Here are some financial skills, both professional and personal, that you should consider familiarizing yourself with in order to be an effective leader.
Every leader should have a basic understanding of the ins and outs of the business when it comes to accounting, even if your job doesn’t require you to monitor those numbers yourself. While you can always hire an accounting team to dive into the finer details of these documents, you should still be able to interpret the data and come to sound business decisions based on the information presented. Credits, debits, cash flows, and income statements can help you understand the way your company works and communicate efficiently across departments. Even if accounting skills aren’t listed in your job requirements, having knowledge in this area helps demonstrate leadership and initiative.
Forecasting is a helpful skill to master as a leader, as it is a driving factor of decisions made by your organization. This process uses past data to predict future sales or trends using both primary and secondary resources and gives companies the ability to manage unpredictability as best they can. Similar to accounting, you don’t necessarily need to know how to come up with these figures, but you should be able to interpret them. Quantitative and qualitative data are used each day in organizations; you can bring a lot to the table by taking the initiative to learn more about it.
3) Ratio Analysis
Ratio analysis gives professionals a clear image about the position of the company and allows you to make comparisons in terms of growth and measuring risk. There are many ratios that are used on a case-by-case basis to indicate the strengths and weaknesses of the business; some of these include profitability, liquidity, and debt-to-equity. Profitability represents the monetary profit compared to the company’s expenses, while liquidity determines an organization’s risk of running out of cash. The debt-to-equity ratio similarly measures risk by weighing the debts owed against the degree of ownership. These numbers can be used in your everyday life as well, as homeowners, property owners, etc., so it’s a very useful skill to master.
4) Credit Management
It’s important for your financial future as a hardworking employee in any career (or as an entrepreneur) to be familiar with credit and all that it encompasses. Why? Credit has an impact on almost all major investments you will make in your lifetime. Looking to start a business? You’ll need an appropriate credit score to get a loan to buy a house or a car or even open a credit card. For entrepreneurs, credit scores will come into play when applying for a small-business loan or an equity loan because your credit score represents your trustworthiness as a borrower.
Investing is an extremely valuable skill in the long term, especially when it comes to retirement. Chances are good that your organization has a retirement program of some kind. You can use these programs to dedicate a portion of your paycheck to save for post-retirement life and the company will often match your contribution up to a certain percentage. This allows you to set yourself up for a comfortable life in the future and turn your money into more money (and financial security). Not only that, but you can also use your investing experience to guide your team members, answer any questions, and be a person they look to for advice.
Planning out your personal finances and sticking to that plan demonstrates discipline and self-control that can carry over into your career. However, one study shows that 59% of people are not tracking their spending. Being familiar with setting up a financial plan for yourself can be valuable when it comes time to put together a financial plan for your team, your department, or your company as a whole. Budgeting makes reaching your team’s goals attainable and sets you up for your own individual financial success in the future. Take the time to outline your monthly spending, analyze it, and decide how you can change your finances for the better.
Regardless of whether you’re working to improve your personal finances at home or expand your business acumen in this important area, there’s always an opportunity to develop your skills and pass along knowledge to your peers. Refining your skills both at work and behind the scenes can help you manage your money efficiently as you climb the corporate ladder, so what are you waiting for?
About the Author: This post was submitted by CMOE Guest Author. CMOE guest authors are carefully selected industry experts, researchers, writers, and editors with extensive experience and a deep passion for leadership development, human capital performance, and other specialty areas. Each guest author is uniquely selected for the topic or skills areas they are focused on. All posts are peer-reviewed by CMOE.