Understanding Business Financial Acumen

At the 2018 Workers’ Compensation Institute conference in Orlando, FL, the Alliance of Women in Workers’ Compensation presented a half-day session focused on helping people gain a greater understanding of business financial acumen.

The session featured a panel discussion with leaders in the workers’ compensation industry. The panel was:

• Veronica Cressman – SVP, ESIS
• Artemis Emslie – AGM Holdings, Inc
• Delphia Frisch, COO, Genex Services LLC
• Brooke Evans, Founder, CFO Alliance (moderator)

Financial acumen is the language of business. Learning this can be like learning a foreign language and it takes time to master. The goal of the session is to give people high level insights into the language of business finance.

Terminology:

P&L – Profit and loss statement. The key components are revenue and costs and the statement provides details on all aspects of the business.

Gross profit – Measure of how healthy your business is. Profit less expenses

Fixed and variable expenses – Fixed expenses are not dependent on volume while variable expenses fluctuate based on volume of business.

EBITA – Earnings Before Interest Tases and Amortization. This is a way to compare different businesses even if they are not in the same industry.

Return on investment – Shareholders care about the return they are receiving on the funds invested.

Panelist Discussion:

• Don’t be afraid to ask questions. As you climb the business ladder you will find yourself responsible for more aspects of the company’s financials. There is a learning curve. Don’t be embarrassed to ask as most people have to learn these things on the job.
• Find a mentor to help you navigate corporate policy.
• Learn to identify trends, both positive and negative, and respond to those trends quickly.
• Financial management is mostly about making good decisions.
• You don’t have to be a math wiz to do a good job with business and understand the important issues to focus on. It all starts with a strategy, a budget to implement that strategy, and sales goals.
• Every P&L has the answers to your questions and the solutions to your problems. They may not be easy to find or execute on, but the numbers always tell the story.
• Take the time to learn more about the jobs of the people you are managing. Talk to those people and understand their challenges, frustrations, and keys to success.
• Ask “why” all the time. Don’t make assumptions. Find the reasons things happen, both good and bad.
• Put your swagger on. Don’t be a victim of not being active in financials.
• Financial management is really embracing the empowerment of making good decisions.
• It’s important to learn how the pieces fit together into the big picture of your business.
• Many think mergers and acquisitions are all about the financials, but it’s really about growth and job opportunities.
• The terminology is tricky and companies and even individuals in the same company may be viewing the terminology differently. It is important to make sure everyone is on the same page.
• It is important to have a very transparent environment with your company financials and your employees. They need to understand your budget, sales goals, and their role in these things. Everyone in the company impacts profitability.
• Being transparent with your employees helps them embrace your goals.
• Working with investors including private equity adds some new challenges. Their focus is on growth.
• Private equity is interested in workers’ compensation because they see opportunity here.
• Everyone has some level of financial acumen and an opportunity to learn more.
• Always stay curious and keep asking why.
• Just because something is not broken does not mean that things cannot be improved on.
• Just asking how a business makes money leads you down a path to better understanding that business and their goals.
• Shareholder value is driven by growth in both the top line and bottom line. You need to have a plan looking out five years and develop a strategy to achieve those goals.
• It is important to keep track of the financials of your competitors. If they are publicly traded, listen in to their quarterly investor calls.