Finance for non financial managers course is not always understood by those who need it the most. Failure to understand the dynamics of costing principles has cost many organisations loss of income due to poor pricing decisions in their tenders and sales proposals to customers. It is amazing the value that a single training course in this subject can bring to the bottom line result.
In an attempt to understand how financial statements are put together, managers must first understand the impact of their decision on their organisation's financial statement. To do so they must first understand how expenditure are classified in financial statements and have a good understanding of how to interpret financial statements. Non Financial Managers must be aware that the impact of any financial transaction will result in what is known as expenditure or income at the very least and in some cases may result in assets, liabilities and capital. All of this may seem alien to the manager at first instant when they attend a typical finance for non financial managers course. However, the concepts of financial jargons soon become clearer by the end of the course.
Managers need to know that expenditure occurs when their organisation buys products from suppliers for the purpose of carrying out business activities and as such must be particularly selective about their choice of suppliers so that they don't end up buying the wrong products that add no value to the business and cause a loss for the business. These expenditure, can result in the business having in its possession a physical item such as a computer, a car or an equipment which are classified in a special way in financial statements. In contrast, some expenditure may not lead to physical possession of an item but will confer benefits to the organisation using the services of the supplier which draws on their expertise. Such expenditure include the use of telecommunication services to make sales and marketing phone calls or the use of electricity and gas supply for heating and lighting consumption. Non financial managers should know that these types of expenditure are classed as services and will be listed as expenses in the accounting year they were consumed.
What is even more interesting is the fact that expenditure that results in the acquisition of physical products and are used by the business for use for more than 12 months have special accounting treatments known as depreciation, a concept most non financial manager find confusing. Such types of expenditure are classed as 'Fixed Asset' because they can be sold to realise income up to the point of their saleable value being zero. As a manager in charge of financial resources, you must be aware that when expenditure is made, money leaves your business and unless the resources obtained are efficiently utilise to create wealth your business will have a declining cash reserves going forward. Aside this scenario, non financial managers find it hard to understand the concept of accruals. They do not realise that as soon as their business consumes services of suppliers they have incurred expenses which must be accounted for irrespective of whether the suppliers have been paid. So typically, they will fool themselves holding back on the payment of an invoice as though to reduce the spend shown in their accounts in a particular month, only to find the accountant have included the spend on their accounts. When this happens friction will occur between the finance department and the non finance managers. This is precisely why finance for non financial manager's course can help build a stronger relationship between the non financial managers and their finance colleagues and help ensure the two profession work in harmony for the greater good of the organisation. You as a manager should know that just because you have not paid for services or products does not mean expenditure has not arisen. When a third party supplies goods and services to your organisation and you differ payment to a later date you need to recognise the financial effect are twofold. First, there is the expenses of say a car or television and then, there is the monies owed to the suppliers shown as creditors in the balance sheet of the organisation.
In the world of finance, you will find that expenditure can be classed as direct expenditure or indirect expenditure. Similarly some expenditure are classed as fixed and others as variable. Non Finance Managers need to know what this means for effective management of financial resources and.Direct expenditure otherwise known as direct cost is nothing more than the expenditure that is directly related to the production of goods and services sold by the organisation. So for instance, if you are selling books to the open market, then direct costs or expenditure will be all the expenses that you have to spend to produce the books. Indirect expenditure or indirect costs as it is known is all expenditure that is spent over and above direct expenditure and they must be indirectly linked to the production of your goods and services. This is so important for pricing decision and failure to accounts for direct expenditure properly when preparing proposals for prospective customers will result in an overcharge or undercharge.
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