Ten Accounting Instruments Every Professional Should Know
In today’s results-driven world, the demand for increased productivity and bottom-line results is greater than ever before. And that means employees are expected to take responsibility for monitoring and quantifying their contribution to the organization, regardless of their background, experience, or skill set.
But chances are most employees have a limited knowledge of financial basics, even if they sailed through Accounting 101 at some point in time. The fact is everyone can benefit from a working familiarity and understanding of the most commonly used financial instruments, including:
- Balance Sheet
- Income Statement
- Statement of Cash Flows
- Break-even Analysis
- Liquidity Ratios
- Profitability Ratios
- Leverage Ratios
- Efficiency Ratios
So what are the primary benefits of analyzing financial information? Employees who know how to read, examine, and interpret these accounting tools have the necessary skills to improve revenue, shave expenses, and increase their value to the organization. In addition, they’re well-equipped to control operations, determine the soundness of business partners, and assess how the organization appears to investors and creditors.
- Enables employees to set and achieve goals.
- Measures performance (or lack thereof) in black and white terms.
- Provides insight when results are inconsistent or unsuccessful.
Determine the Soundness of Business Partners
- Builds the close relationships necessary for just-in-time delivery and customer service.
- Avoids potential trouble spots with vendors, suppliers, and clients.
Assess How the Organization Appears to Investors and Creditors
- Enables employees to anticipate how others perceive and evaluate the organization.
- Prepares employees to address potential concerns.
- Provides an understanding of accrual income (revenue) vs. cash flow and notes to financial statements.
Whether you’re working with people who are tuning up a rusty skill set or seeing a balance sheet for the first time, integrating basic accounting into your training curriculum will empower employees to take ownership of their performance, translate outcomes into financial terms, and communicate more effectively with management about the results they’ve achieved—and those they plan to deliver.