Opinion and Analysis
Prioritise financial literacy in firms
Posted Tuesday, January 1 2013 at 17:32
- Financial literacy needs to become part of a company’s culture. To become a better business manager, one must have the basic financial intelligence and discipline to make practical management decisions.
The New Year is here with us and with it a world of opportunities. Perhaps, just like last year, we have yet again set out to make and pursue a list of New Year resolutions.
Some maybe achievable but some may just be impractical thus quite hard to achieve. Whichever way the wind blows, I am encouraged to share a few tips in the New Year largely centred on nurturing financial literacy. Most of us live with illusions that being a technical specialist in any aspect of management is adequate to handle and succeed in any business.
Nothing could be further from the truth. Time and again, it has been proved that one must have some basic knowledge on finance besides one’s specialty, art, trade or even profession.
However and perhaps due to various academic and cultural factors, we are increasingly turning out to be a nation of financially illiterate academic giants. Quite a paradox one may argue but essentially true.
The only light at the end of the tunnel appears to be the role currently being played by financial institutions such as Barclays Bank of Kenya and Equity Group. These two institutions have running initiatives that seek to raise financial literacy standards’.
In my view, financial literacy needs to become part of a company’s culture. To become a better business manager, one must have the basic financial intelligence and discipline to make practical management decisions. Understanding the financial side of the business will make your life more meaningful.
A healthy business offers valuable goods and services to its customers. It provides its employees with stable jobs, pay raises and opportunities for advancement while providing a healthy return to the shareholders. Overall, a healthy business helps an economy grow, keeps our communities strong and improves standard of living.
For a country aspiring to attain Vision 2030, financial illiteracy becomes a key challenge that needs to be addressed. Entrepreneurs’ cannot thrive in business with a low appreciation of financial dynamics. Such entrepreneur cannot even afford to sufficiently embrace and exploit to their advantage the numerous financial tools and resources at their disposal such as loans and related banking products.
Managers equipped with financial intelligence can take better decisions and easily manage their resources wisely and astutely; effectively raising their business profits and cash flows.
Financial information interpretation is the nervous system of any business. For practical reasons people should understand something about the finances of the company, like investors who monitor performance of their investments in order to create a true culture of financial transparency and intelligence.
One need not be a Chartered Financial Analyst or even Accountant, but if the financials are out there and the key concepts repeatedly explained, each employee in the place will be more trusting and more loyal to make the company strong.
The company’s revenue growth, profit growth and margin improvements over the previous year, inventory turns, free cash flow are the critical factors which are monitored like periodical executive health check ups. Staffers who do not appreciate the path to a companies profit turn are simply a liability as they’re more likely to ignore the tell tale signs of a revenue leak; yet profit is the sovereign criterion of the company.
Similarly, a manager will be judged on the profitability of his enterprise.
In an environment punctuated by frequent fluctuations in currency exchange rates, bank interests, duties and taxes, inflation that greatly impacts business profitability, one must be prudent enough to act proactively.
With the prevailing economic circumstances, one must actively seek to innovate and ensure value for money for the customers. In the retail sector where I belong, such innovation comes on the shade of introducing private labels such as the Nakumatt Blue Label, which we are unveiling this year.