Financial Intelligence - It's Not Just for the CFO

Here at Setpoint, we often tout our open-book-finance style of management. To us, open-book-finance means that key financial data is shared with each employee on a weekly basis. Sharing this information with employees isn’t a revolutionary idea per se but training employees to understand the information is. In order for Setpoint employees to maximize our contribution to the company, it is important that we understand how our jobs impact income, cash flow, expenses, losses, etc. So how do Setpoint employees learn to be financially intelligent?

Joe KnightOur CFO, Joe Knight, owns a separate business called the Business Literacy Institute. He travels the globe training Fortune 500 companies and their employees on the art of finance and accounting. Recently he took time to provide training to all project and department managers at Setpoint. The training consisted of 4 sessions. The first 3 sessions were dedicated to the 3 financial statements – the income statement, statement of cash flows and the balance sheet. The final session focused on principles of time value of money and return on investment. While finance is an important (and riveting) subject in its own right, what did the training do to make Setpoint better?

First, it helped everyone understand that their decisions affect our bottom line. But it went deeper than that. It helped everyone understand that their decisions and contributions affect cash flow, receivables, payables, inventory, COGS, expenses, etc. For example, if the sales department doesn’t require sufficient down payments on new projects, we choke our cash flow and we may have to finance the project until we finish the job. If our procurement group doesn’t stage their orders correctly, our payables may outrun our receivables. If a project manager doesn’t manage his project efficiently we may make less per hour than we bid. Any of these examples can (and sometimes do) happen at Setpoint and they hinder our ability to run efficiently. The key for our employees is to understand that they are equipped with the knowledge that their actions impact the company.

The important take-away from this blog post is not the idea that you should only hire accountants or finance majors to work for your company. The important take-away is that every employee needs to understand how their job directly impacts the financial statements.

So what if your CFO doesn’t have a side business training Fortune 500 companies in matters of finance and accounting? That’s OK. Have someone in your organization, who understands your financials, train your people. Get your employees to understand your numbers and you will have a more financially intelligent company.