If you don’t work in a finance role, perhaps you’ve fallen into the trap of assuming that finance isn’t of much concern to you. If so, you’re not alone—the number of Americans who score above 60 percent on a basic financial literacy test has been steadily dropping since 2009.
The Bureau of Labor Statistics expects the demand for finance skills to rise 16 percent by 2028, indicating that financial literacy’s demand is increasing as its supply is decreasing. Now is the time to gain a competitive edge and become financially literate.
Financial literacy can help you succeed in any area of business, and elevate your decision-making, negotiation, and leadership skills.
Before delving into some of the ways financial literacy can help you succeed in business, let’s start with the basics.
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What Is Financial Literacy?
Financial literacy is the understanding of financial terminology, statements, and concepts, and knowing how to use this information to make a financial impact.
The first step is to read up on the language and documents your company uses to talk about and track finances. To start, check out a few of Harvard Business School Online’s finance resources:
- Financial Terminology: 20 Financial Terms to Know
- 6 Basic Finance Skills All Managers Should Have
- How to Read and Understand a Balance Sheet
- How to Read and Understand a Cash Flow Statement
- GAAP vs. IFRS: What Are the Key Differences & Which Should You Use?
- Financial Statement Analysis: The Basics for Non-Accountants
Once you have a handle on the basics of finance, you can leverage your knowledge to make an impact. Here are five ways financial literacy can help you succeed in business.
5 Ways Financial Literacy Can Help You in Business
1. Understand the Impact of Your Actions
Once you understand your company’s financial statements, you can track specific items that impact your organization’s bottom line. When applied to your daily responsibilities, insights into your company’s financial accounting can be a motivating factor for you and your team. Knowing the impact your actions have on the broader organization’s financial health can help you keep the big picture in mind.
2. Make More Informed Decisions
If you’re a manager, financial literacy can allow you to approach problems with a new toolkit. When faced with a difficult business decision, you can confidently consider the financial implications before weighing your options and making the best choice for your team and organization. Financial literacy can enable you to become a well-rounded leader who considers multiple facets of any issues that arise.
"Whatever business decision that you're going to be making, you want to understand all facets of it," says Harvard Business School Professor V.G. Narayanan, who teaches the online course Financial Accounting. "So there are going to be human resource angles to it. There are going to be marketing angles to it. There are operational angles to it. But there's also: 'What is the impact on the financial statements of this particular decision that you're going to make?'"
Watch the video below featuring Professor Narayanan to learn more about the benefits of understanding finance in a non-finance role:
3. Advocate for Your Team’s Budget
When your team is in need of money for a project or product, your understanding of finance can help you build a strong case. For instance, if your team is requesting funding for project management software, you could calculate the anticipated return on investment based on how much more efficiently the software could enable your team to work. Proving the impact on your company’s bottom line will make your case more compelling.
Related: 6 Budgeting Tips for Managers
4. Hone Your Negotiation Skills
Financial literacy can help you thrive at the negotiation table. Whether you’re negotiating salary, benefits, or the scope of a project, having an understanding of the bigger financial picture can serve you well. If the matter of negotiation will impact the financial well-being of the organization, understanding how to talk about the financial implications of your desired outcome could sway the conversation in your favor.
5. Become Financially Efficient
Understanding how each of your team’s expenses plays into the liabilities on your organization’s balance sheet can allow you to assess how to be more financially efficient. Maybe there’s a service your team previously subscribed to and no longer uses, or perhaps you can find a free version of a tool your team has been paying for. When you’re aware of how each expense factors into the balance sheet, it can be easier to identify ways to be more cost-effective.
Building Your Financial Literacy
If you’d like to build your financial literacy, you need to weigh multiple factors to determine which method of learning about finance is right for you. These factors include your preferred learning style, budget, schedule, and transportation options. Once you’ve selected a method, it’s important to dedicate time in your routine to your financial education, as well as make connections with other professionals.
Advancing Your Career With Financial Literacy
No matter your role, being financially literate can help you succeed in business. At a time when the demand for financial literacy is high and expected to climb, learning about finance can enable you to make better decisions, negotiate more effectively, and positively impact your organization. Whether you choose to read up on finance, network with other professionals, or take an online course, your financial literacy is in your hands.
Are you looking to develop or hone your financial literacy? Explore our six-week Leading with Finance course, eight-week Financial Accounting course, or other online finance and accounting courses, to develop your toolkit for making and understanding financial decisions.
