How To Master Financial Management – Learn Finance In A Fun Yet Informative Way

After completing the MBA course in Australia, I proudly put MBA next to my name. I already had B.E. (Civil), and now with the MBA certificate, I thought this is all I need to run a successful business.

Unfortunately, it was not the case.

Please note: I do not have anything against MBA or the University where I graduated. In fact, I teach the subject of finance in the same university and also in other business schools to Executive-MBA students.

Looking back, after failing in six start-up ventures one thing I did was ask for help. Fortunately, that is when I met my first business mentor who analysed what I had done and said, ‘Chinmay, do yourself a favour. Educate yourself on the subject of finance because finance is the root of how a business makes money and the language of business is NUMBERS’.

I took his advice seriously, but neither did I have the time nor money to go back to college to learn about finance and accounting. Instead, I went around picking the brain of the best of the best accountants, CAs, CMAs, CPAs, CFOs and financial gurus.

Little did I know that I was understanding the subject of finance from an engineer’s perspective. An engineer’s mindset is a problem-solving mindset, however, a typical commerce/accounting student’s mindset (this is not a generic statement, so we can agree to disagree) is a compliance mindset. Yes, making sure a business is compliant is important but what I noticed is that the business owners and key decision-makers are more interested to know much money their business/company is making and how to further grow it.

Let us understand this better using a sports analogy.

I am sure you will agree with me that to play any sport we need to know two things:

• The rules of the game. (in a business, it is called compliance)
• Knowing how to play the game will help us win. In other words, knowing how to make decisions enhances our chances to win the game. (in a business, knowing how to make effective & efficient decisions helps in positively impacting the bottom line i.e profit, and this is what finance is all about)

If I may, I would like to ask you a question.

When you are playing any sport say football or cricket or tennis, how will you go about making a decision whether to play defensively or aggressively or so on?

I am sure you would say, based on the scoreboard and situation of the game.

In other words, the decision you will be making will be based on numbers on the scoreboard and also based on time i.e again numbers.

Almost every decision we make in our life is directly or indirectly related to numbers.

Chinmay Ananda

If we just look at the decisions we make on a daily basis,

1. What time should I start from home to the office?
2. What time should I go to my client’s place?
3. How is the weather today?
4. Who won the elections?
5. How much is my monthly expense?
6. What is the petrol price? And so on.

I know most of us to know the importance of numbers. But what used to surprise me back in 2012-14 was when I saw people in business making decisions based on assumptions, gut feel and some rule of thumb.

This made me curious to analyse hundreds of failed businesses along with insolvency practitioners and liquidators. During this research, I started seeing a pattern that most of these failed and struggling businesses had done. I then discovered the five common finance mistakes made in a business.

When I interacted with a few of them, I could see they were passionate about their business, some had a strong technical background, others had years of work experience in a particular profession, and quite a few of them were very smart. But what I could not understand is why did they making decisions based on assumptions or gut feel or some rule of thumb.

Later I understood, that it is not that they do not want to look at numbers or they do not understand the importance of numbers (finance). In fact, they all have tried to learn financial management by reading some book or watching videos on the internet but unfortunately, they got more confused and they had given up.

Also, when they asked their accountant or some person in their finance department for that specific number – what do you think they were given?

A big Excel file and/or a fancy financial report.

This is DATA!

Data is like crude oil. It has to be filtered and it has to be processed.

Data filtered (categorized/segregated) becomes information.

This information processed (analysed) becomes relevant information.

The critical thing is to effectively communicate (preferably through stories) this relevant information in simple layman’s terms to team members (stakeholders) so that everyone will be on the same page to contribute toward the decisions that need to be made that can either make or break a company.

Remember, none of us is as smart as all of us.

Usually, when I share this most people ask me this question with a concerned look on their faces – “Chinmay, do you think I can understand finance because I hate numbers or I was bad at maths in school or I am a very creative person?”

My answer to all these questions is a simple and loud YES!

You might be a bit sceptical, so, let me put you at ease.

All you have to know when it comes to mastering financial management is to make sure you are on top of four financial transactions at any given point in time. The only four types of financial transactions that can happen in any business are,

1. Money comes-in
2. Money goes out
3. Money supposed to come-in
4. Money is supposed to go out.

Nothing in any business or organization can happen outside these four financial transactions. My expertise is to educate people to get on top of these four financial transactions so that they make informed profitable business decisions based on facts and not mere assumptions!

Remember, finance is a common-sense subject but unfortunately, common sense is not very common.

Related: Understanding Finance Management For Entrepreneurs, Individuals As Well As Start-ups

Finally, I will leave you with these questions,

1. Have you seen any sportsperson playing the game without knowing the score?
2. Have you seen any sportsperson saying they do not want to look at the scoreboard because they do not like numbers or they are not good at maths?
3. Have you seen any sports person whilst playing the game asking the referee or their coach how they should be playing the game?
4. Have you seen any sportsperson celebrating thinking they had won but after many days or weeks or after a year they realised they have actually lost?
5. Have you seen any sportsperson playing very hard and being very busy without knowing if they are winning or losing?

Wanna play?

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