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For starters, understanding the components of an accounting
cycle, meaning the steps involved in collecting and recording an or-ganization’s
financial transactions, is an important basic.
“You have to find out how what you do fits into the financial
statements,” said Dimnik. “For that, you need an understanding of
the complete financial cycle.”
Core financial statements should all make sense, as well. Being
able to read income statements and understand what goes into
revenue and expenditures is an important building block, says
Shepherd, as is the ability to read balance sheets and understand
assets and liabilities.
Everyone should understand how to calculate an after tax net
present value – or discounted cash flow – too. In English, this is
the long-term strategic worth of an investment, based on project-ed
future cash flow.
“For most medium and large business, discounted cash flow is
the major decision-making tool,” said Dimnik.
Cost allocation should be another fundamental area of study.
“People should understand how cost allocations are calculated be-cause
that will impact nearly any decision at the table,” said Causton.
For example, numbers on a page might initially point to cutting a
particular cost centre to improve profits. “If you understand how the
numbers found their way onto that report, you have a better sense of
whether it’s really a good idea to go ahead with the cut.”
These and other basic building blocks can help an HR pro
measure impact in accounting terms and develop more influen-tial
business cases, even when the subject matter appears difficult
to quantify. For example, it might seem nearly impossible, at first,
“IMAGINE HOW MUCH
BETTER IT WOULD
BE TO WORK IN AN
ORGANIZATION WHERE
FINANCIAL INFORMATION
MAKES SENSE TO YOU.”
– TONY DIMNIK, PROFESSOR, QUEEN’S SCHOOL
OF BUSINESS EXECUTIVE EDUCATION,
AND PRESIDENT, VEDNOST INC.
to quantify how a new training program will positively impact
business. But if you take a look at the documented excess costs
of poorly managed projects in the past, and how the new pro-gram
will help avoid those, a stronger business case will start to
take shape.
GIVE INVESTORS MORE CONFIDENCE
An HR pro with a good handle on finances can impact investor
relations, too.
“A savvy investor is looking towards not only earnings capabil-ity
in the short term but protection of capital in the long term,”
said Shepherd. A lot of that protection of capital is about the or-ganization’s
ability to attract, retain and develop its talent pool to
maintain or grow those earnings.
A business with effective, strategic HR initiatives in place is only
compelling to investors if those plans can be articulated in the lan-guage
of finance.
“To give investors confidence, an organization’s HR people
have to be able to communicate how what they do and the systems
they have contribute to value,” said Dimnik.
CONTINUING EDUCATION FOR ADVANCEMENT
Learning a new skill set never hurt anyone’s career trajectory.
“In terms of personal promotability, being a person who knows
accounting and finance means you’re a person who can learn oth-er
things and take your knowledge into other areas,” said Dimnik. “I
can’t see how anybody could get promoted to the top position in the
organization if they didn’t have a basic understanding of finances.”
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HRPATODAY.CA ❚ MAY/JUNE 2014 ❚ 23