Practical Finance
Essentials of Finance tell us the overall business value of financial reporting tools such as the balance sheet, income statement, cash flow statement and ratio analysis, but from a practical standpoint, how do such tools help you manage your specific department, campus or division?
Budgeting at my school has always been top-down. I am not privy to any budgetary constraints or availability even though I am a department head in charge of purchasing for my department as well as for several other business needs. Its usually a shot in the dark if anything is going to be approved with litte explanation.
Access to school's balance sheet and cashflow statement would definitely assist me in determining the lifecycle of certain equipment and aid me in building a case for internal re-investment.
I think these tools would help management make better decisions regarding their departments. While all managers need to attempt to control costs in their departments, with our without these statement, it would help if they were aware of what is going on in the company.
Hi Alicia! Thanks for your reply!
To your point, these financial tools do provide information such as asset value, debt and equity structure, cash liquidity, return-on-investment, etc. This is company-wide and, in some cases, by department as well. Such tools help a functional manager not only control costs, but aid in decision-making on things such as budgeting, asset allocation, lease vs. buy, and debt vs. equity financing.
Perhaps most importantly from the department standpoint is cost control and short -term liquidity. If an organization's current ratio is such that it cannot pay its short-term obligations, that is an immediate red flag.
Thanks again for your observations, hope you are enjoying the course.
Jay Hollowell
ML141 Facilitator
These tools are valuable at the departmental and campus level. Each department and campus equals a piece of the entire business unit. If all of the departments and campuses within the organization were able to manage their budgets, profits and expenses and understand how it fits in to the whole the company would benefit immensely. I believe some aspects of the for-profit understand their financial impact but others don't. It seems to me that the academics department really does not have a grasp on their financial impact other than their attrition numbers.
If your school is publicly traded this information is readily available. If you are strictly private and not for-profit however it may make things a little more complex.
Todd,
I would agree that most Academics departments do not have a grasp on their finanical impact on the institution, based on my previous experience; however I beleive this is the fault of their Campus leader. I think this comes down to training and ensuring that the budgets are shared and explained to them so that they see the big picture. I have worked in institutions where the budgets are held so tight to the cuff that only the Campus leader had access to this information and now that I am in this position and you need the buy-in from your department leaders to be successful in all areas, I feel that it is important that they understand how their performance affects the budget and how they are able to make a difference in this area.
It does ultimately affect them when they want to purchase new equipment or hire additional personnel, so why not take the time to train them. They also have desires to move up in the organization and building their skill sets will help ensure that they are able to move up and keep them loyal to you and the company.
Hi Janet and Todd,
Thanks so much for your comments; ideally the budget is everyone's business and our academic staffs are the closest to the revenue source - out students! It is imperative to train our school employees on how all positions and departments affect budgetary outcomes. One particular area comes to mind - our instructors are the link to our students: the classrooms and labs that they manage, the skills that they teach, the outcomes they assess and the professional relationships they develop with students all affect student retention - and student retention is a business measure!
Jay Hollowell
ML141 Facilitator
In my campus, i need to review the budget and compare with the actual cost and expenses, now I have more tools to prepare reports and take decisions
It is empowering as a manager to be involved in the budgeting process. As simple as managing the receptionist, knowing the incoming lead calls vary from high dollar tv ads to the minimum expense of a newspaper ad gives you a motivation tool for the staff to make sure every phone call is answered because you can put a tangible value on each caller. It also shows you the influence of a single purchase or a single missed sales opportunity can cause to help in your decision making processes.
Hi Caren!
This is a very valid point and one that I do not see often. Being involved firsthand in the budgeting process not only affects one's approach to strategy and control, but also helps to see what activities contribute most to the bottom line. A good budgeting process can truly integrate planning and operations together!
Jay Hollowell
ML141 Facilitator
The cash flow statment is a very important part of our business planning and future growth of our school.
I did not realize how every aspect of the nursing school I work for affects our finances. This course definetely has opened my eyes and showed me how to become more involved in helping our school achieve and exceed their financial goals in the future.
These tools definetly detail the life of the organization and its activity. I am able to budget and manage projects and report them effectively for both accouting and human resource departments, it also facilitates reporting and budget analysis.
Understanding financial statements and having access to them is essential to the success of your campus. Financial statements can be used as a roadmap on your campus journey to profitability and growth. Using the numbers as navigation aids can steer you in the right direction and help you avoid costly mistakes.
it helps you to realize that units is very esential in terms of investment. However,top management don't usually share GL but only budget at the departamental level.
ed
I definitely agree this module helped me understand and be able to apply it to daily work and most of allwork along all departments and be able to reach my goals understanding quaterly budget reports for the campus.
We review our finacial reports on a monthly basis and our budgets each quarter. Without these reports we would have no idea if we should expand at our school or downsize. It is everyones responsibility to look for ways to increase revenue and reduce costs.
Having access to such information allows department heads and campus directors the opportunity to make a director and informed impact on our campus or department.
Basic understanding helps us compare our current performance with past performance. Doing a prior year comparison of financial statements and providing feedback to your team as to where you stand comparatively speaking provides competitive drive.
