Episode Transcript
The finance department measures your department’s finances, and you will be judged on their measurements. The key to working effectively with finance people is to understand their world. After all, your department’s financial health is a key component of good management.
Your finance person can help you with a number of tasks, including
• Building your initial annual budget
• Describing what expenses other departments charged to your department
• Calculating your quarterly forecasts
• Helping you analyze your budget vs. actual monthly and quarterly reports
Additionally, they can also generally give you very valuable advice on the best ways to manage your costs. I don’t mean by telling you to stay in cheaper hotels (even though they do that too) you can figure that one out on your own. I mean that a good understanding of how your company allocates revenues and expenses can greatly assist you in meeting your budget goals. For example, say that you are buying lunch for ten customers that are coming to your office to discuss future software product changes. You may find that if you classify the lunch as a customer meeting, it may automatically be charged to the Marketing Department rather than to your Product Development department. Of course, the cost to the organization is the same, but it saves your budget dollars for lunch on another day. I don’t condone doing anything inappropriate, but understanding how these intricacies work within your organization, will not only help you spend your money wisely, but help stop other parts of the organization from spending your department’s money wisely. Let’s change roles, if you were the Manager of Marketing, wouldn’t you like to know that the Product Development Group was charging lunches to your department?
As a manager, it is important for you to understand
• How your budget in constructed
• The effect that your budget will have on your ability to travel, train your team, hire staff, purchase goods, hire consultants, etc.
• How to read budget vs. actual reports
• The effect that meeting (or missing) your budget has on your annual performance review, raise, and bonus
The finance department can also play an invaluable role during times of growing or declining budgets. In good times when budgets are increasing, they can help you define, justify, and calculate the funding needed for new projects and new hires. In times of declining budgets, they can help you decide the best ways to cut your budget with the least effect on your department’s processes and people.
In summary, don’t underestimate the value of a strong relationship with the finance department, particularly if you do not have a financial background. As a manager, very few things can get you in more trouble then out of control spending. It could cost you your raise, your bonus, your promotion, or even your job.
The primary advice and takeaways are to know that:
• Your department’s financial health is a key component of good management
• The finance group can help you keep your department’s expenses on track
• The finance group can also help assure that your budget is designed in a way that will allow you meet your department’s goals.
