How to Read Financial Statements Without a Finance Degree
Allyson Small
Corporate Trainer | I help Non-Financial Leaders & Managers Understand Finance | E.D.G.E. Method | Company Secretary | Financial Manager | Advisory Board Member | Over 30 years in Business
Hi there! ??
For many managers, financial statements can be overwhelming, especially without a formal finance background. But here's the good news: you don’t need a finance degree to read and understand them!
Here are a few practical key tips for getting comfortable with financial documents:
?? Start with the Basics: Familiarise yourself with the three key financial statements: the Income Statement (more commonly known as the Profit and Loss), Balance Sheet, and Cash Flow Statement. Each serves a unique purpose and tells a part of the story about your organisation’s financial health.
?? Focus on Key Metrics: Focus on essential figures like revenue, expenses, profit margins, cash flow, and balance sheet items like assets and liabilities. Together, these numbers provide insights into both performance and the financial strength of your team or department and where improvements can be made.
?? Understand the Structure: Financial statements are organised in a specific way. For instance, the Income Statement lists revenues and expenses, while the Balance Sheet shows assets, liabilities, and equity. Knowing this structure helps you quickly find what you need.
?? Use Comparisons: Don’t just look at one period; compare current results with past performance, budgeted figures and industry averages. This helps you spot trends and identify areas where your team is excelling or struggling.
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??Ask Questions: If something doesn’t make sense, don’t hesitate to reach out to your finance team. They can help clarify concepts and ensure you have a solid understanding of the numbers.
?? Practice Regularly: Like any skill, the more you practice reading financial statements, the more comfortable you’ll become. Make it a habit to review these documents regularly to build your confidence.
Being financially literate helps you make informed decisions that benefit your department and the business as a whole.
If you'd like to explore how financial literacy can boost your team's performance, I’d love to discuss how tailored financial literacy training can make a real difference in your organization. Book a quick call with me to learn more about how we can enhance your team’s financial confidence and decision-making.
Cheers to mastering the numbers!
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