To be a good manager, you must constantly improve your knowledge, skills and keep them up to date. To achieve this, you may need to access information from various sources or take trainings with online courses.
One of the most important issues in the management process is the financial statements of your business. With the financial data of your business, you can measure business performance and efficiency, track budgets,data analysis and use this data to motivate and lead your team in the most effective way.
3 FINANCIAL STATEMENTS MOST USED BY MANAGERS
The tables that managers should follow and analyze in the best way are the balance sheet, income and cash flow statement. The balance sheet contains data showing the financial situation of the company in a determined period. It organizes assets, liabilities and equity into lists for specific periods for a clear table.
The income statement is used to provide an overview of the company's income and expenses. Thanks to the annual or quarterly income statements, companies can periodically compare their profit and loss trends. The third table is the cash flow statement. This table shows details of cash inflows and outflows for a specific period. In this way, the cash flow table reserved for different activities within the company gives information about the ability of the company to operate in the long term and short term.
By analyzing these three tables together and regularly, a general perspective about the financial situation of the company can be gained. Tables will be very useful in determining the paths to be followed by the managers in the future. Here are six ways you can leverage the company's financial statements to become an effective manager.
6 WAYS MANAGERS CAN USE FINANCIAL STATEMENTS
1. Pay attention to Measuring Impact
It is very important for the managers to examine the company's income statement and to have a method to measure how the expenditures and efforts made affect the profitability of the company. For this reason, managers should regularly examine the company's income statement and control direct expenses that affect profitability.
There can be many ways to increase the profitability of a company or project. Examples of this include purchasing a piece of software, allocating more advertising budgets, or hiring an expert for a large project. However, it is essential that these expenditures result in the targeted net income. By making these expenditures and subsequent controls, lessons learned from mistakes can be focused on investments that increase profitability.
2. Budget Planning
Financial statements are very important in providing a future perspective when managing and planning budgets, John Wong, Senior Director of Financial Planning and Analysis at HBS Online, states that taking past financial statements as a starting point when planning future budgets can cause errors, as the financial environment is constantly changing.
“Past financial statements can be used to create a reference, and this is important for budgeting but should not be used as a starting point,” John Wong wrote in a previous blog post.
While creating the budget, it is very important to review the financial situation of the company, to analyze past data well and to take a critical look at it.
3.Avoid Unnecessary Costs
Seeing and analyzing expenses line by line in the income and cash flow statements of the company can give very important ideas in which areas it is possible to reduce costs. In these ways, previously subscribed services that cause regular expenses but are not currently used can be canceled or more economical packages can be preferred for team entertainment. Being able to see every expense item by item is very important both to see how these expenditures affect the revenues of the company and to save money and shift the expenditures to the most vital points.
4. Expand your perspective
Considering the general situation of the company is very important when managing a team. Understanding and analyzing the balance sheet, income statement and cash statement, which we explained in the first part, allows you to understand the financial situation of your company and to look at it from a wide perspective so that you can make the right decisions for the future.
5. Alignment Between Sections
Financial statements can be used to manage different departments. When the managers of each department present the data on the basis of the department, you can hold meetings about the company's future goals and budget analysis. This creates a general understanding of the financial condition of the company and can make a difference in the perspective of other managers.
6. Driving Team Motivation
You can motivate your team by using the company's financial statements. Letting your employees know that the projects they make positively affect the income of the company and indirectly the employees' income, allows them to do better and see that what they do is working
Use financial statements to manage a team and determine its future goals for that team. Providing employees with the ability to see the big picture, which is the basis of plans to achieve your goals, and showing them the value of the effort of company employees can have a positive effect on performance.
BECOME A FINANCIAL MANAGER
Using financial statements is the best way to make correct and strategic decisions for the future and to manage your team in the best way. If you do not have the necessary infrastructure to analyze financial statements, you can get help from people who are experts in this field. By gaining knowledge and experience in finance, you can use your resources in the most efficient way and become an effective manager.