Professor James’ Story of Unleashing Transformation: How Leaders Can Leverage Financial Acumen to Supercharge Success

It was an absolute pleasure to have spoken with James Leong C FOO Professor-Author, Financial Trainer and Keynote Speaker as he shared his invaluable insights about how Leaders can leverage #financialacumen to supercharge #success

So we asked Professor James …

What is Financial Storytelling?

“Financial statements might look a bit intimidating, but think of them as stories about a business.”

I am a financial educator. I help to demystify financial statements and help people to level up their financial acumen. Through my experience in teaching, I come across a lot of various intelligent people, #entrepreneurs, #managers, and they find numbers a struggle, because when they look at financial statements; very important that they have it in their business, but somehow it just doesn't speak to them. There's a lot of jargon, involving lots of numbers. So I decided that a better way to help, to reach out to them, to make it more relatable, is to really let them reframe the entire experience that they have with financial statements. I tell them that financial statements might look a bit intimidating, but think of them as stories about a business towing numbers. So, as with any book that's written in words, you can understand the vocabulary, the alphabet. You could understand wonderful stories like Harry Potter. Same thing with financial statements. You make friends with the jargon and the numbers. They will tell you wonderful stories behind the business. Whether it's a good story or just a good story part, you get to make #betterdecisions because you now understand those stories.

Why Is Financial Acumen Important And How Does It Drive Business Success?

“Think of financial statements as your GPS. They help you to guide you in terms of making money decisions”

I you think about financial statements, there are really three basic financial statements. The first one is always called the balance sheet. So the balance sheet story revolves around three characters.

1. They are your #assets.

Assets is something that you own of value, liabilities or the money that you owe. The difference between these two will be what's called your net worth or your equity. So if your assets are 100 and your liabilities are 80, then your net worth is only 20. So the residual is what's called net worth or equity.

And why is this important? Because what it tells us here is that the balance sheet tells you a story of the #strength and #weakness of a #business. How resilient is your business financially? So, for example, a person who is strong and is unlikely to fall sick easily. Business which is financially strong is unlikely to go bankrupt easily. Generally, companies that went bankrupt tend to borrow too much money; they have too many liabilities. Like, think about, if your assets are 100 and your liabilities are 80, then your net worth is only 20, as compared to if your assets are 100 but your liabilities are only 20, then your net worth or your equity is 80. So you're a lot stronger. You're able to withstand unforeseen circumstances like COVID for example.

You have better chances of survival because you are more resilient. So that's the first story that the balance sheet tells you. And if you have financial acumen, then you could make decisions around understanding how resilient your business is. Are you able to pay off your liabilities or are you chalking up too many liabilities? So you need to kind of manage the way you are scaling or growing your business and just making sure that your obligations could be fulfilled before taking on more. So that's one way, knowing the balance sheet story could help you manage your business better, give you better control, which is very important.?

2. The second financial statement, is what's called an #incomestatement.

Generally called a #profit and #loss statement. Now, this story revolves around three characters as well, which is typically your #sales or your #revenue, your direct cost, and also your expenses like your overheads for instance. So an analogy you could think about is, for example, if you drink coffee or tea, you may think of it as you brew a cup of coffee, right? Or you brew a jug of coffee and let's say the coffee is a dollar, which is your revenue, think of it that way. But you can’t drink all the coffee that you brew because part of it, you have to pour into a cup called cost of goods which is what you have to pay your suppliers for producing, giving you the coffee beans and the milk.

Whatever remains there, you can't drink it all by yourself yet because you have to pour into another cup called expenses. This is where you have to pay your employees, you have to pay your utilities, and your rent. And whatever that's left, hopefully there's something left, it goes on to a final cup. It's like a small tiny espresso cup and that’s your #profit. So knowing that can help you visualize and understand where your money is going. I may charge a dollar, but maybe only $0.10 goes into the final cup and that's my profit. So to extend that, I could run my business more efficiently, bring down my cost, bring down my expenses so that these two other cups are smaller, and my final cup will be a lot more, right? There's a lot more that will go in my profit cup. Again, think of financial statements as your GPS. They help you to guide you in terms of making money decisions. Are you happy with your current level of profit or #profitability? If not, what could you do about it? This is all in the numbers. Numbers tell us a #story.?

3. The third story is what's called a cash flow statement.

The cash flow statement tells you about how #healthy your bank account is, which is very important. We all have bank accounts and we want to make sure it's healthy. What do you mean by healthy? Bank account question, fundamental question here. Do you have more cash inflow compared to cash outflow? So if you always have more outflow than inflow, then you're running on a #deficit. You constantly have to borrow just to keep your business going. Same thing with an individual as well. So you want to make sure that you have more inflow than outflow. And the cash flow statement gives you visibility. It also tells you where your cash is coming from or where it's going to. So the sources of your cash is very important because you could have lots of inflow, but the inflow could be temporary happiness because you borrowed that money and next month you go to repay with interest.

Cash flow statement tells you exactly where it's coming from, where it's going to give you lots of control. So it's a great GPS, definitely to have on your financial dashboard as you run your business. So for example, if you're running a business, the same thing happens. Meaning to say that sometimes you want your team to look good, as in I got a big team, I'm growing my team. But that's probably an emotional reaction or decision that you have to say: “Hey, I'm growing my team, but maybe I’m growing my team too fast and not bringing revenue to cover your expenses”. The more you grow your team or the more you grow your business, you end up having a smaller cup at the end. Which is a profit cup, which is not full, and that is worse.”

What Actionable Strategies Can Leaders Implement To Foster A Culture Of Financial Consciousness?

“Take care of the people. And once you take care of the people, people start to care.”

That's true, because what we're talking about here is about #ownership. I think ideally, you want your team, your staff, your employees to behave like owners, because owners take responsibility.

1. #Care about your people.

Owners care about the business. And again, it's important, that the business owners or the leaders, first of all, care about the team. So if you care about the team, they care about you and they care about your business. I think it works both ways. So the people really come before money in many, many instances. So take care of the people. And once you take care of the people, people start to care.

2. Make it #personal to your people

Then I think it's important to start promoting what's called #financialawareness and responsibility among employees. Many times people do not know what they do not know because they are hired not for financial skills and knowledge. They are hired for operational expertise, marketing expertise. It's important to train them up for that role because every decision everyone makes in the organization has both a business impact and a financial impact. You can't say, I want to spend more money on marketing without thinking about dollars and cents. I can't think about expanding my team without thinking about dollars and cents and what revenue it will bring. So everything that you make in terms of business decisions has financial #consequences. Knowing or having financial acumen; being able to operate your financial GPS, helps you to make those decisions a lot better, and to promote financial awareness. I think we got to start to make it relatable.

How to make things relatable? Make it #personable, make it #fun, make it personal to the employees, like starting with financial literacy education. Meaning to say that get people interested first of all, to know about numbers and that they are not intimidating. It's not something alien, and is something that affects all of us. Run workshops for them, tell them the value of budgeting.

Tell them the importance of looking at numbers and tell them things that they might be interested in, such as how do I #invest my money? Then bring them into the company financials and say hey, same thing if you are owner this is how your decisions are affecting the business financials, and start to make it relatable to them. People get exposed to this on an incremental basis slowly but they will build an interest in all things numbers. I think that's the first part to get people interested, make it relatable.?

3. Be #transparent

Leaders need to be transparent, meaning to say, you tell your team these are my goals. Question here is that do you share with them the financial metrics? Are we on track with their goals? So if you do that and you update them in progress then people could see the line of sight once they know the financial acumen and they understand the financial GPS and say well hang on when I'm doing this, this is how it impacts the bottom line and how do I steer it to get there faster? Or if it's deviating, how do I turn it back? So people now take an active interest because they learn something and they can apply that and they can see direct line of sight contribution, not like just do my thing and be in a very silo based environment. They actually get to see the overall thing so that they can help contribute and chip in.

When talking about #transparency, storytelling I think is very powerful because what do you mean by storytelling? It's about sharing lessons and being transparent about some financial lessons learned. Sometimes we make mistakes, we get emotional, we spend money that we shouldn't have. That could be important lessons to teach our children, for example. So I have a client, they put this in as part of the training. It's in the annual report because when the company was doing well, it was a 100 year old company and at some point midway in the journey they did very well. They spent a huge amount of money on acquisition; a business that they realized they shouldn't have gone in. But it made them look good at that time. Took them many years to unravel the financial mistake and having learned that, they restored themselves. They make sure that all leaders go through training and saying please remember like 30 years ago we made this terrible mistake, make sure you are now stewards of money. You manage the finances, you manage #budgets. Don't make the same mistake again. It's not about looking good, it's about making #wisechoices. Financial storytelling has a way of just connecting people with what's true, what's happened, and just connecting them in an emotional sense so they feel about their decisions. I think that's another way they can help right??

4. Open #Communication

And of course, bringing in open communication is very important. Promoting #opendialogue creates safe spaces for people to really talk about financial challenges, cost savings, revenue generation, cash flow improvement. So make it part of the culture to communicate this in a safe and open environment.

How Can Collaboration Between Finance And Business Teams Be Effectively Encouraged To Maximize The Benefits Of Financial Acumen?

“I think it's really about elevating the conversation to a higher level so everyone could see the bigger picture”

What I've come across from my experience is that the business teams are generally non finance people. The finance teams may come from different perspectives and different priorities because finance could see the numbers, but they may not appreciate the entire business, the customers, the challenges. The business teams appreciate all that at the ground level. They are the boots on the ground, but they may not see the numbers at the level that will integrate everything, other than perhaps their own silo, their own department.

The first thing is for them to understand the #value that each other brings to the table, to be able to see differently across the whole organization. And that comes from financial acumen; where communication comes in for them to appreciate each other's point of view. They have a common language and finance is a common language to help them to communicate and see each other's point of view. Having regular communication, for example, through cross functional meetings or even having skills exchange, business people can share with finance people saying; Hey, this is kind of how we do business in India, for example, right? This is how we do business in Indonesia, for example. So it could be very different from where finance teams could be operating from. They may be based in headquarters, but they may not appreciate the local culture nuances and differences. So having that will help to open up their mind at the same time finance guys would find it really useful if they share with the business people saying; Hey, let me tell you what financial reporting; that is FRS that we have to oblige by and what our auditors are looking out for. And you now know where the pressure points or where the challenges are. And that's the reason why we ask all these questions from you. So they could see both perspectives and they work together rather than working against each other because they always think that you're against me, you're kind of stopping me from growing and you're not complying with the numbers. I think it's really about elevating the conversation to a higher level so everyone could see the bigger picture. Otherwise they're just seeing different pieces of jigsaws. But really they forget the whole picture.

What Are The Key Approaches To Monitoring Progress In Financial Acumen Development And Maintaining Motivation For Transformation?

“Make it as part of the culture so that people don't learn and just forget, but they learn something they could use forever within the organization”

What we are talking about here is leveraging financial acumen as a strategy. I do a lot of training for my clients and we do what we call finance or non financial managers workshops. They're really useful, very powerful, quick crash courses so people don't have to go through like three years of study accounting and in two days they can have a good grasp of what? financial statements are and how to use a GPS. But I believe that more could be done in terms of #leveraging as a #strategy. Meaning they make it very deliberate, make it as part of the #culture and so that people don't learn and just forget, but they learn something they could use forever within the organization.

1. Create a #roadmap.

One way to do it is to create what's called a #roadmap, a professional development journey roadmap that you have. If you're an individual contributor, what kind of skill sets do you need in terms of financial acumen? If you are a team leader, what do you need? And if you're a department head, what else do you need? Collectively you can start to upscale people along the continuum of scales so that people will know; okay, this is how I can contribute more and more within the level of responsibility I'm taking on. And you could celebrate success, milestones, give them badges, recognition and additional career advancement opportunities when they attain certain levels, get them involved in bigger projects, for example, because now they have the financial know-how to handle that. The financial roadmap and this is where HR can really come and put this all together. They have great expertise in this.?

2. Invest in #learningresources and provide #mentorship

The second way they could leverage on that as a matter of developing a financial acumen as a strategy, is to invest in learning resources, provide #mentorship so you could have senior people, the finance people, more experienced, mentoring the business people, to tell them, hang on, come and study with me for the next three months to understand what I do. I'll share the thinking with you, the business process, the financial thinking behind those decisions so people can see the other side.

It's not a black box, it's not finances top down and telling me stuff about what they do. Peer learning, knowledge sharing platform, both ways will be very important. So when people feel supported and encouraged to learn about numbers and finance, they don't feel like they're asking silly questions. Then they are likely to feel #motivated and #energized. So I can ask questions until I learn something and I say hey, the next time I know how to apply and start to contribute.?

3. Engage them in real world projects.

Some of my clients actually do financial improvement projects with the Brinks in collaboration of finance people or non finance people. For example, how do I increase gross margin? And this becomes a three month, six months, nine months project where different business teams or different departments work together. Just to focus on one thing; let's improve our gross margin for the next nine months and then we celebrate success. We acknowledge each other's contribution so it brings in collaboration. At the same time, it's not just theoretical knowledge that they have learned in the course, but these people get to apply it in the real world. In their own business context as well. So I think those are the ways in which companies can leverage them. And again, we bring an external coach or mentor to do that, kind of like guiding and is very much like action learning. So they know how they could make this in a very conscious and deliberate attempt to inculcate financial acumen in everything that they do.

More about Professor James Leong?

C Foo James is a force to be reckoned with in the world of finance education. As an adjunct professor with National University of Singapore and founder of Financial Storytelling, he has dedicated his life to helping non-financial people understand the power of financial statements in a simple, easy and fun way. With years of experience as a former regional finance head of a US Fortune 500 company, James is an expert in his field.

About SpeakIn

SpeakIn is Asia’s largest digital learning platform for executive learning. SpeakIn brings together the best of thought leadership, ideas, and discussions. In this inaugural podcast by SpeakIn, we bring the best of thought leaders and their leadership to the region.

This brings us to the end of our conversation. It was an absolute pleasure to hear from Prof. James and the wonderful words of wisdom from him.

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