In this post, we will understand how financial skills are essential in scheduling business operations, recruiting professionals, making investments, maintaining the right spending plan, etc.
So, without any further ado, let us get started right away-
Introduction to the Financial Skills
We all know that money is an essential aspect of life.
We all believe that money cannot buy us happiness. But there is equal truth in the fact that money can give you the power to eradicate many woes of life. Money is also synonymous with the term finance.
Financial matters are matters related to money.
These matters need complete concern and awareness while dealing with them. It is called financial literacy. A person can make financial analysis and carry out money management based on this analysis report.
Money management is a way to invest all your income or cash inflow wisely and enhance the returns gained from it. It will boost the revenue that comes from the interest from these investments.
Need for Financial Skills
Finances mean the matters of money which are crucial in all walks of life.
These days, numerous investment plans are springing up from several financial organizations and agencies. One needs to understand which investment policy is the best of them and suitable for your needs.
There is a vital role in business management in both the personal and professional sectors.
In the personal sector, one needs to manage the money based on the family’s total income, the expenses done by the family and the financial security required.
In the professional sector, this business management is done concerning the projects going on and beginning shortly, the returns expected by the investors, the deadlines to maximize the profit and the cash inflow and outflow of the company.
To fulfill all these needs, there is a provision called the ‘financial manager’.
This designation is for the person managing all the finances of the company.
He/she needs to have a specific set of skills which can be called financial skills. This section encompasses the vital responsibilities of a financial manager.
Let us now have a look upon 10 of the most important financial skills-
Top 10 Financial Skills
There are financial skills which are required by a company to stay in business. The top 10 of them are explained below.
1. Formal accounting skills
Accounting is the skill used to record the financial transactions of a company in a defined format.
There are two basic types of accounting, namely, accrual accounting and cash accounting. Most medium-sized and large-sized companies practice accrual accounting. It is used in various aspects and decision-making points in a business.
A financial manager is responsible for all of these activities. Hence, accounting is one of the necessary qualifying skills for financial management.
2. Preparing basic financial statements
Financial statements are a reflection of the accounting status of a company.
All the entries of the transactions have taken place. The financial manager should understand the details and the correct usage of a financial statement. A financial statement is presented to the external users for understanding the fiscal policies and position of the company.
That is why they should be prepared in a way that can be comprehended by the user. All of the nitty-gritty related to it should be known to the financial manager.
3. Strategic initiatives and financial evaluation
A business manager should know the exact worth and value of the investments made by the company. Various strategies can be devised based on these evaluations.
Every project has two fundamental aspects of performance called the operational performance and financial performance. A financial manager should understand these concepts and also terms like ROI (Return on Investment), NPV (Present Net Value) and IRR (Internal Rate of Return).
Financial strategies should have initiatives to enhance profit and investment returns.
4. The skill of preparing a budget
Budget can be defined as the estimate of the income and expenses of a company or an individual which is prevalent over some time.
There are various types of budgets like annual, monthly or budgets specific to certain tasks about the needs of the project. The skill of preparing the budget encapsulates the ways of using finances more wisely and managing departmental expenditure.
It aims at enhancing the profits and returns from a fiscal year by drafting various strategies, action plans, and objectives for the budget.
5. Communication skills
Communication is undoubtedly a crucial part of managing all the aspects of a business.
There needs to be smooth communication among the employees and all the stakeholders of the company even concerning the financial management details. The financial manager needs to establish a connection with the help of written and verbal media.
It puts a trustworthy front for the clients as well as the employees. If there is transparency maintained in this relation, it is beneficial for the company at large.
6. Interpersonal skills
This is the time to gel with all the employees and take their suggestions concerning financial matters. The typical employees have more exposure to the requirements of the clients and the real-time problems occurring on a project.
Hence, they can give better suggestions on developing the financial management plans of the company.
There should be a free-flowing discussion among the team members without any hesitation to provide recommendations for improvement.
7. Analytical thinking skills
The analysis is the act of studying some entity in detail and concluding some results based on the study and test cases.
In financial management, knowledge of analytical studies is a must. There are various facets of analytical thinking like logic, thoughtfulness, accurate strategizing and prompt response mechanism.
The system of finance which is laced with smartness and intelligence of the financial manager derived from analysis of the past situation and the current scenarios has a high possibility of correctness.
8. Leadership skills
A leader is the one who captains the ship of the team and governs all the tasks carried out by the organization.
The leader of a team instrumental in carrying out the tasks related to finances is called a financial manager. A financial manager should know how a plan or a strategy would work and what would be its effects on the market and the company’s financial status.
He/she should also possess the capabilities of decision-making, interpersonal skills and the sense of positivity.
He/she should be one step ahead of the team members concerning creativity, motivation, and delegation. The feedback given by the team members should be taken in good stride by the leader.
9. Use of new technology
In today’s world, technology is dominant everywhere. It has become part and parcel of our living. Even in the domain of finances, there is the emergence of technology.
New IT software and other technologies are coming up, which can provide analytical support and financial modeling. In addition to this, there are several mobile applications, SAP accounting software and other technical aids that offer better financial management.
Also, a company can get software or an app designed exclusively for itself based on its specific requirements. It proves the need for technical skills in financial management.
10. Problem-solving skills
There is no department in a business where there is no risk of problems being encountered. The financial matters are the most sensitive of all.
Sometimes, they are dependent on the market conditions; sometimes, they depend on the financial status of the company while sometimes on other aspects like recession and other global economic phenomena.
For the same reasons, an essential financial skill is that of problem-solving. The ability to mitigate risks and solve problems, a business manager needs a plan already devised.
The system which is supposed to carry out the project should, in an unfortunate case of any problem, be in place and ready for action.
Ways to Improve Financial Skills
It is crucial to have the necessary skills required for financial management.
One can learn these skills through various online courses dedicated to their enhancement. Also, as they say, practice makes a man perfect.
So, one should work under an established financial management expert to gain the first-hand experience of the actual implementation of these skills. Security and assurance are of the utmost importance in financial matters. If you master the skill of providing that, you can ace the position of a financial manager.
If you are working in a company, you should mark active participation in the meetings conducted for financial strategizing. This way, you can showcase your skills and make their best use.
There are many ways to ensure your growth as a financial manager. All you need is the right set of skills and the nerve to understand finances.
Several financial skills need to be developed by a financial manager.
If you aspire to work in the finance department, you need to imbibe the set of expertise mentioned above. With mastery in these skills, finance is an exciting arena of business studies.
What according to you, are the most important financial skills to thrive in today’s world? Feel free to share your views with us in the comments below.