Why Every Manager Should Know a Little Finance 📈

Financial training for managers isn’t about turning them into accountants but equipping them with the basics to make confident, strategic decisions that benefit both their teams and the company.

Imagine this. You’re a logistics manager in a team meeting, and the discussion turns to spending cuts, budgets, or finding creative ways to save money. All eyes shift to the managers to steer the conversation. But you never had formal financial training and start to feel uncomfortable. It’s not surprising that such situations usually lead to feeling a little uneasy or even intimidated. Yet, understanding financial talk is a crucial skill that could make your role so much easier and more effective. 

Whether it’s understanding budgets or spotting opportunities for growth, having basic financial skills can be a game-changer for managers. I don’t mean they need to become full-blown accountants and prepare financial statements. But companies should give them the tools to make smarter, more confident decisions.

Today, I want to share why I believe financial skills are essential for all management positions – and how a bit of financial knowledge can make work life a lot smoother.

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Every Decision Has a Financial Impact

When you’re leading a team, nearly every choice has a financial consequence, whether it’s obvious or not. Think about it: even a simple decision to order new software for the team or approve some overtime hours will impact the company’s bottom line. And the bigger the project or decision, the more important it becomes to understand how those financial implications play out.

Actually, buying an intangible asset (software) can be treated as CAPEX and only hit the balance sheet in the current period while hitting the bottom line only through amortization in the future periods… yep, I know accounting…

Here’s another example. Imagine a manager needs to choose between an expensive live training for the team or a more affordable online course. Without basic financial knowledge, they might only see one option as “too expensive.” But if they understand the value of Return on Investment (ROI), they can evaluate whether spending a little more now could bring additional long-term benefits larger than the initial cost.

So, learning to see beyond the initial numbers to what they actually represent (gains, savings, potential risks) gives managers the insight to make better choices that benefit their teams and the company.

How Financial Training Sharpens Strategic Thinking

We all know strategic thinking is about seeing the big picture. For managers, that means looking beyond day-to-day activities. Knowing some financial basics helps managers connect their goals to the company’s financial health.

For example, if a team’s project budget is tight, a financially trained manager won’t just focus on cutting costs here and there. Instead, they’ll think about how each expense connects to the end goal, keeping value in mind rather than just savings.

By providing basic finance training to the managers within a company, we essentially give them tools to align their team’s performance with the company’s bigger goals. When managers understand cash flow or profit margins, they can make decisions that help the company stay profitable while also working towards growth. This could mean adjusting project timelines to reduce costs, prioritizing tasks with the best return, or simply knowing when to hold back on expenses for the greater good.

Avoiding Costly Mistakes

Mistakes happen. But some mistakes, especially those involving money, can have a big impact on a company (we’ve all seen the Big Short). Misjudging a budget, overspending, or simply misunderstanding the company’s financial limitations are common pitfalls that could be avoided if managers had some basic financial training.

Imagine you have to propose a new project budget. Without an understanding of overhead costs, you might underestimate expenses, leading to overspending later. Or maybe you need to justify new equipment purchases but don’t know how to calculate the long-term cost savings of such purchases. You might miss out on pushing for something that could ultimately save the company money.

Some basic financial skills are essential to non-finance managers as they help them ask the right questions, catch potential red flags, and make sure they’re not approving budgets or projects that don’t make sense for the team’s goals or the company’s financial health.

Better Budgeting, Less Stress

Budgeting tends to be one of those “least favorite” tasks for many managers, and it’s no wonder why. Numbers, limits, and cost control aren’t everyone’s favorite topics. After all, not everyone can appreciate a beautifully structured actuals to budget variance analysis… just me? Okay...

But seriously, a little financial know-how can actually make budgeting far less intimidating and much more manageable.

Imagine if managers had a better sense of what their budget numbers really mean. Knowing just a few basics like how to balance a budget and track spending can make a huge difference. Suddenly, budgeting becomes less about restricting the team and more about setting realistic, strategic spending limits.

If we were to teach managers how to budget effectively, they’ll be able to plan ahead, knowing where every dollar goes and having the confidence that the team is working within its means. It’s a win-win for both managers and their teams, as well as the entire organization.

Financial Knowledge Boosts Team Morale and Performance 

When managers understand the financial “why” behind decisions, they’re more likely to inspire and motivate their teams. It’s much easier to lead a team when you can explain how their work connects to the company’s financial goals, like increasing revenue or cutting unnecessary costs. A manager who understands basic finance can translate the bigger picture in ways that make sense to the team, bringing meaning and purpose to everyday tasks.

Imagine a scenario where you must encourage your team to cut back on costs, like limiting overtime or finding cheaper alternatives to supplies. With basic financial knowledge, you could explain how these cuts tie into the larger plan to save the company money, allowing for future investments that could benefit the team directly, like a team-building retreat or better equipment. This approach is much more effective than simply enforcing cutbacks without any context.

Managers with basic financial knowledge can connect the team’s day-to-day work with the broader company goals, which boosts morale, encourages smart spending, and ultimately drives performance.

If you’re a manager (or maybe training new managers), starting with financial basics is easier than you might think. Learning to read a balance sheet, understanding basic financial statements, or attending a few workshops can go a long way in building financial confidence and ultimately improving your performance.

For companies, offering even short, simple finance training sessions can make a huge difference. Non-finance managers don’t have to know it all, but starting with concepts like understanding cash flow, budgeting, ROI, and overhead costs is like adding another tool to their management toolkit.

At the end of the day, when every manager has a basic understanding of finance, they’re more prepared, more confident, and better equipped to make decisions that keep both their team and the company’s bottom line strong.

So, if you run a company, think about offering/mandating Finance 101 courses to managers. Or even better, there are specialized ‘finance for non-finance people’ courses. And if you work in management, perhaps it’s time you asked for such a training.

Thanks for reading and sharing with friends and colleagues. It’s the main way I grow my audience and can reach more people that might find value in what I have to say.

See you next week!

Best,
Dobromir 🍃