Are you spending more than you are making? This is the absolute basic of budgeting for any start-up or non-finance manager in Dubai. Can you honestly say you understand where all the money coming in is being spent? And do you know which areas need less money and which areas require a boost?
At the heart of all businesses is the need to earn enough money to cover all the overheads and make some profit. Without a clear plan to ensure this happens, a business will obviously flounder. But assessing how this happens, and where to make changes to increase profitability, requires some knowledge of financial terms and how to implement them.
Here are some staples of a Finance Director’s daily routine. Understanding not only what they mean, but also how you can use them, will help a manager create a healthier department.
Cash flow Analysis: Shows where (and more importantly when) the money is coming into the company and how it is being spent out of the company.
Gross Margin: If it costs you 12 dirhams to make a product and you sell it for 25 dirhams, the gross margin is 13 dirhams.
Balance Sheet: This is a snapshot of your company’s, or your department’s financial situation. It shows the assets and liabilities on a specific date and can be used to show the worth of the company and to analyse its management.
Break Even Point: This is where your total income equals your total expenditure.
Income Statements: An important report analysing a company’s revenue and expenditure. This is also known as the profit and loss statement.
Return On Capital: Is the measure of how a company uses its resources to generate profit.
Key Performance Indicators: These help companies keep track on the success (or failure) of defined goals and targets.
Working capital: Is the money available to a company to pay the day to day bills.
It is the job of a department manager to do more than just know what these terms mean. A thorough understanding of how to read a cash flow analysis alongside the income statement, will allow you to plan better. You will see where the money is working hardest and where it is disappearing into a black hole of inactivity.
So instead of winging it every month, you’ll be able to place a strategy behind your department’s work, and ultimately increase profitability.
Without proper budgets behind purchasing and marketing decisions, a department can quickly descend into chaotic spending patterns that not only make it a drag on the company as a whole, but also puts a question mark against whether you are capable of running it properly.
If you are struggling to keep a tight rein on your business or department budget, it’s time to think about a financial course in Dubai aimed specifically at non-financial managers. The Institute of Sales and Marketing has a highly knowledgeable team of experts that are here to help you. On our Finance Management for Non-Financial Managers course, you will gain confidence in your abilities to effectively oversee budgets and understand basic financial principles.