Finance for Non Financial Managers: 3 Common Myths

Myth # 1: You need to be good at maths

People often say to me when speaking about Finance that they need to be good at maths.  Nothing could be further from the truth.  Provided you understand simple arithmetic, things like addition, subtraction, averages, percentages and multiplication you have the base knowledge interpret financial information. 

Myth # 2: Finance is complicated

Actually it is very simple.  The vast majority of managers get a budget statement that will tell them:

Whether they are on target?

Whether they are behind target?

Whether they are doing better than target?

The key thing is to compare the budget (expected position) with the actual position and take action accordingly.

Myth # 3: Finance is for specialists

The recording of financial information, the creation of the systems for planning and management of finances is led by specialists.

Financial management is the responsibility of every manager. 

So what other myths have you come across when it comes to Finance?

About the Author Duncan Brodie

Since 2006 I’ve worked with in excess of 8,000 accountants and professionals in workshops, seminars and one to one helping them land their next jobs and become better leaders, presenters and business partners. Before that I spent 25 years in accountancy climbing the career ladder from Payments Clerk to FD. I’m a CIMA Fellow, Certified Professional Coach and Team Coach Facilitator.

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Mike Newman says 13 July 2009

Could not agree more! Accountants tend to trade on these myths, Finance for Non Finance Managers can also be fun, engaging and interactive – in fact if its enduring learning you are after then these are a must!!

andromeda says 24 July 2009

The biggest myth of all is that finance is an exact language.

I am a developer for Income/Outcome board game business simulation which is used for development business acumen and finance literacy. Specifically we use the the game to create the context for applying the financial planning and analysis tools we are presenting. One of the key lessons we offer is that you should always ask ‘What do you mean by that?’:

I have seen the word Revenues as the top line of the Income Statement – i.e. the sales revenues. I have also seen it used at the bottom of the Income Statement – i.e. the profit revenues.
Margin has two possible meanings… sometimes it means the raw result, sometimes it means the raw result as a percentage of sales.
One of my favorite confusions is costs vs expenses… many people use the terms interchangeably and use other descriptors to separate the kinds of cost or expense (e.g. direct vs indirect, fixed vs variable). But I am now finding companies who use the term ‘cost’ for a line item that occurs above the Gross Profit line, and the term ‘expense’ for a line item that occurs below the Gross Profit line. In at least one case, these are called ‘direct cost’ and ‘direct expense’; so while they sound like the same thing, they are very different in nature.

Regarding the budget, you also need to look at the line-by-line variance… sometimes you get to the ‘right result’ but by a different path than you projected.

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