Basics of Economics and Finance. The minimum amount of knowledge required by the owners and managers of companies

Basics of Economics and Finance. The minimum amount of knowledge required by the owners and managers of companies

Despite the fact that it is now virtually ended the era of “space” profits when transactions could earn even tens or hundreds of percent, the majority of businessmen are still they do not consider it necessary to understand at least the basics of economics and finance. In this case, the reasons for this attitude to this discipline may be different. 

For someone from business owners and company executives, everything related to finance, economics and accounting seems very boring and not worthy of attention.

Some business owners are quite satisfied with the financial result that their company brings to them. More precisely, not a financial result (many in general do not even know what it is), but the amount of money that they can withdraw from the company. Although, in fact, the result could be much more, but they are satisfied with what is already there, and they have no particular desire to improve something. 

There are owners and managers who believe that they do not need to be guided in financial and economic issues, because they have a person (or a whole service) who is entrusted with this task. 

Surely there are other reasons why, until now, many owners and managers do not descend to such “low matters” as the company’s economics and finances.

Actually, if you think about it, this attitude is, to put it mildly, illogical. Whatever they say or write about various theories of company management, any business should be a money-making machine. Moreover, this machine must be effective. 

In order to achieve this, it is necessary to understand how it works, how it should be maintained and repaired, in the event of a breakdown and, naturally, it is necessary to understand how it needs to be managed. That is, you must have at least some minimum amount of knowledge.

Otherwise, the machine can be brought to such a state that it can no longer be repaired. Or it may fail due to improper operation, and its recovery may require very high costs. All this can be avoided if you have certain knowledge and be able to put it into practice. 

There is another analogy. It is impossible to achieve success in mathematics, not knowing certain basics. There is a minimum, without which it is impossible to move forward. Oh, at least the multiplication table you need to know. 

The articles posted in this section, so to speak, contain the description of the very financial-economic “multiplication table”, without which it is impossible to effectively manage the company and achieve its goals.

So, a company can use in its practice a large number of the most modern management tools (which, in fact, for more than a dozen years), be very correct in terms of marketing, quality system, approaches to the selection and management of personnel, etc. 

But if all this “correct” company does not know how to make money, then there will be little sense from all these tools. There are many examples of how, it would seem, successful companies were falling apart due to the elementary financial and economic illiteracy of its owners and managers. 

For some reason, it is believed that to control the main business processes (sales, production, supply, etc.) they need to be well understood, and in economics and finance it is not at all necessary.

Yes, you can hire professionals in the field of economics and finance, delegate certain powers to them, but you also need to be able to manage them. In addition, you must be sure that they are professionals. And how can this be done if you understand very little about this topic? 

In addition, they can use their professionalism in the wrong direction. After all, corporate theft can be dealt with not only by employees who perform basic business processes. This can be part of the company’s financial and economic unit. More information about corporate theft and how to deal with it can be found in the book “The system of ownership control of business . 

Even if we assume that there is no hint of corporate theft in a company, then without certain knowledge in the field of economics and finance it is impossible to effectively manage a company. 

Still, one of the main criteria for the effectiveness of the company is precisely the financial and economic indicators. Therefore, it is necessary to know all the main indicators, what they mean, how they are formed, how they can be used in practice, etc. 

It should be noted that the crises that arise more and more often, contribute to the fact that many business owners and company executives finally began to think about the financial and economic efficiency of the organization.

We can say that crises have a beneficial effect on many of our companies in terms of their development prospects. More information about this can be found in the book “Crisis – afedron or magic pendel. Anti-crisis technology to improve the efficiency of the company . ” 

It turns out that the temporary deterioration of the condition contributes to the fact that our enterprises are finally starting to think about improving the efficiency of their work, however, this does not happen to everyone. 

Yes, of course, there are entrepreneurs who manage and now find very interesting business ideas that bring a very large financial result. Therefore, they allow themselves not to delve into financial and economic issues.

But after all, everything can change, and not in ten years, but literally in six months, if not earlier. The modern world is very dynamic, so you need to have time to adapt to all its changes. 

This means that you need to be able to build long-term development strategies for the company, as well as implement mechanisms that allow them to be implemented (for more details, see the book Strategic Management and Effective Business Development ). Again, to assess the financial feasibility of a strategy, you need to understand at least the basics of economics and finance.

In fact, to ensure the manageability of the company, it is necessary to introduce a full-fledged budgeting and management accounting system. It will be very difficult, if not impossible, without the active participation of the owner and manager of the company. 

In order to understand budgeting (much detail about budgeting is written in the 100% Practical Budgeting series of books ) and management accounting (you can learn about the management accounting system by reading the book Setting and Automating Management Accounting ) again need to know financially -economic “multiplication table”.

IT CAN BE INTERESTING

The nearest seminar on the basics of economics and finance will be held April 18-19, 2019.So, in the articles posted in this section of the site, it is the fundamentals of economics and finance that owners and managers of all companies who want to work effectively and successfully develop should be aware of. 

anatoly simons

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