Home > The Monday Musings Column > the importance of understanding money

the importance of understanding money

I wrote in one of my books about probably the best piece of business advice that I ever had came not in a work context, but from the father of a young lady who I was about to take out on a date.

He told me that the three most important things in business were cash, cash and more cash and he was right, for it doesn’t matter a jot about what else you do, but you do have to understand where your business gets its money from, where it goes and how much of it will be available at any time.

My relationship with the young lady was short lived, but the advice her father gave me stuck and helped me a lot because finding out how the money worked advanced my career more than once, and in both private and public sectors.

We tend to focus on our job first and our department second, but most of us are only a cost to the business and so is what we do. We may well try to save our business money, but if you don’t understand the way that the money works it is hard to make the right decision about what is the best price to be paying. Finance may hold the purse strings, but knowing how to use funds in the best way is something that works best if there is a strong operational input to the decision process.

This is why I encourage people to get to understand the financial processes that their organisation works with so that they can use the system to best advantage, but also to get behind the process so find out why it works that way. Making a pal or two amongst your Finance colleagues so that you have people you can get advice from is a good investment as well.

Every management role includes some budgetary element even if it is only monitoring and so that can be your entry point. Monitoring spend is a part of cash flow management and an inadequate cash flow kills more businesses than any other cause, so find out how your budget monitoring fits into the organisation’s cash flow management and general financial forecasting. It will give you an insight into how important these things are, why accuracy on your part is required and start to develop your financial understanding.

I’m not suggesting that we all become accountants here, just that getting to grips with how money flows and how it is managed will make you better at what you do and improve the contribution that you make to your employer. That alone will help your career, but think about how much impact it would have when you go for a promotion and tell your interviewer how what you do contributes to the bottom line, asset value or income generation, and managers do all of those things. Being able to understand just how you do it is the connection that you need to make and the information is all there; it’s just that very few organisations seem to want to ensure that everyone who needs it gets it.

The choice is yours, but I can’t recommend getting to know how money works highly enough. It worked well for me and whilst that knowledge may not what have been what I had in mind when I was in pursuit of the young lady at the start of this musing the words of her father turned out to be worth their weight in, well shall we just say cash.

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