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Financial intelligence

What do those numbers mean and what are we going to do about them? Financial intelligence is executives’ and employees’ ability to understand and execute on accounting principles in order to make better business decisions. Executives and employees who are not formally educated in finance or accounting still need to have enough of an understanding of finance so that when they’re presented with accounting information, they can discern the best course of action to take.

The benefit of financial intelligence, as established by Peter Drucker in his book, “The Practice of Management”, can be surmised as, if everyone understand what the numbers mean as well as the overall goals of the organization, then they’ll act in a way that will improve financial standing.

From theory to real world application, B2BCFO summarizes financial intelligence’s four main attributes:

  • The Foundation: Do you know basic business measurements? These include: income statement, balance sheet, cash flow statement, and an understanding of the difference between cash and profit and why the balance sheet is actually balanced… or if it’s not.
  • The Art: One part art, one part science, financial intelligence implies that you know when assumptions have been applied and how those assumptions can lead to different conclusions.
  • Analysis: You can analyze the numbers to dig deeper into their meaning with the ability to calculate profitability, leverage and liquidity.
  • The Big Picture: What do these numbers mean when placed in the context of the economy, competitors, regulations and changing customer needs?

Modern financial intelligence tools are making sense of accounting data much easier. Automation has improved many finance team’s ability to do things like use double-entry accounting logic, translate currencies and gauge their impact, management, legal and regulatory roll-ups, and establish time dependent hierarchies. 

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