“In reality, financial statements are simply a reflection of what non-financial managers are already doing and thinking about. The difference is that in a financial statement, activities and decisions are being measured by a dollar sign rather than other metrics non-financial managers commonly use such as market share, combines sold or acres sprayed.”
It’s no secret that the food and agribusiness industry is a fast-paced world of tight margins and dynamic marketplaces where CFO positions are of significant strategic importance. It’s also no secret that the world of numbers and finance can be daunting for non-financial managers who don’t get their hands on the statements every month. The need for non-financial managers to understand financials is rapidly becoming a crucial and sought-after trait. While speaking the same lingo as your CFO or understanding financial forecasting seem to be ideas that are easier said than done, there are serious benefits to revealing the story behind the numbers.
If you pay attention and listen closely enough, your financial statements and ratios will eventually begin to tell key pieces of information about your organization. When placing these pieces together, they build a story that tells how successful your operating decisions were in all areas from a financial standpoint. These stories can serve as a road map to guide us in where our company should go next and how to increase the effectiveness of our decision making.
Not only is it important to reveal the story behind the numbers, but it’s critical to understand what factors are helping to compose this story. Typically, inside of an organization it is a shared goal to create customer value and aid customers in reaching their definition of success. We’re constantly searching for actions we can take internally to deliver value and brand promises to them. Financial statements simply allow us to put a dollar sign in front of the activities and efforts we take to overcome this challenge.
Regardless of your area of work, whether it’s developing new seed traits, advertising in the farm press, building relationships with farmer customers or getting the most out of your team, it’s important to understand how your individual decisions tie into your organization’s financial story. The extent to which you are able to specifically map your individual decisions to financial statements will increase your potential for impact in your company.
Accountants tend to think about financials from a cost-cutting side; they know the cost of everything, and the value of nothing. Good CFOs partner with the other areas of a firm to think about creating value for the customer. The more clearly one understands financials, the more clearly they can make a case to focus on value creation for customers rather than the next cost that needs to be cut. Sometimes, you have to spend money to make money. Each specific area should be able to transform their value-creating activities into a conversation about why they are essential to the finances.
Once you have a grasp on the role your decisions play in the story, try working with accounting to move the degree to which financial statements accurately reflect what you’re trying to do. Standardized financial statements aren’t always useful for decision making at first glance, but by partnering with accounting, you have the ability to turn those statements into something of value.
While these area-specific financial conversations are necessary, it’s not uncommon for non-financial managers to be somewhat uncomfortable with them. Using the correct terminology and understanding what statements are telling us before speaking with a CFO or an accountant in an organization doesn’t have to be a daunting task. In reality, financial statements are simply a reflection of what non-financial managers are already doing and thinking about. The difference is that in a financial statement, activities and decisions are being measured by a dollar sign rather than other metrics non-financial managers commonly use such as market share, combines sold or acres sprayed.
The story that evolves from our financial statements and ratios may not be one we choose to read before going to sleep at night, but it’s one everyone should absorb and learn from. Key insights from these statements such as net income or return on equity are a single measure you can compare across years to monitor performance and see how your story aligns across companies, competitors and even industries. Our society operates in an era of greater levels of detail to data, and financial data is an extremely relevant piece we can use for decision making.
So, what story do your numbers tell?
Beyond the Blog
Learn more from Dr. Michael Gunderson at the Agribusiness Finance for Non-Financial Managers workshop on June 17-21, 2019. For the first time ever, this professional development workshop is broken down into two parts to fit your specific financial goals.
Part 1: Financial Analysis of Operating Decisions | June 17-19, 2019
Learn to speak your CFO’s language and how to communicate your area-specific financial goals to other parts of your organization.
Part 2: Investment Analysis for Future Success | June 19-21, 2019
Discover the world of financial forecasting and how to transform marketing analysis to deliver the most value to your customers.
For questions or more information, contact Key Account Manager Emily Hoeing at hoeinge@purdue.edu or 765-496-3099. Be sure to check out our other upcoming programs and follow us on social media!
