Have you ever been surprised by a seemingly thriving, profitable multinational construction or engineering business suddenly going bankrupt? It happens too frequently: a company is publicly busy and profitable, but privately going bust. The root cause? A lack of financial acumen, when a business is managed by those who are experts in their technical field but who aren’t well-grounded in financial management.
Bring it back to the numbers
Engineers are generally good with numbers – it goes with the territory. But when those numbers are part of balance sheets, profit-and-loss statements and cash flow analysis, it’s quite common to put those in the ‘someone else’s job’ or ‘too hard’ baskets.
However, engineers are also increasingly expected to be finance-savvy – comfortable talking the language of money, able to understand the business’s financial priorities and able to pinpoint how decisions will affect financial outcomes. Financial acumen shows up in three ways: the questions you ask, the actions you take and the advice you give.
Whether you’re an engineer in a large multinational corporation or a smaller consultancy business, understanding and applying the basics of financial acumen can build your credibility in the company and your confidence in the boardroom or project meeting. It can even help you to gain company buy-in on your next big idea.
Understand the basics
With basic financial acumen, you’ll gain the competence to:
- Use the correct language
Have you ever wanted to throw a financial phrase into the conversation but weren’t too sure the context was right? If you can talk the language of money, you’ll improve your confidence in interactions with financial experts, be able to make sense of reports, and avoid obvious mistakes.
- See the bigger picture
Once you have the fundamentals of financial acumen under your belt, you’ll be able to understand how all the moving parts of a business work together – not just those in your department or area of influence, but the broader drivers and financial variables, using a more strategic perspective. You can ask the right questions, which leads to deeper understanding and better negotiations, reporting or presentations.
- Predict financial consequences
Sometimes a dollar saved turns to ten dollars lost through incorrect decision-making. A great example of this is the maintenance paradigm – deciding on planned proactive maintenance versus running equipment to failure or only ever performing reactive maintenance. There’s no correct answer for every situation, but understanding the effects on a business’s revenue, cash flow, and profit can significantly influence your decisions.
- Justify the cost of initiatives
Without some level of financial acumen, it’s often challenging to communicate effectively with finance decision-makers about your initiatives or ideas. But if you can explain how your plan will affect or improve financial as well as non-financial results, you’ll be on your way to better outcomes.
- Build your career prospects
Lack of financial acumen will hold you back, career-wise. Demonstrating an understanding of financial fundamentals will aid in any managerial position. If you’re comfortable with financial talk and financial concepts, you’ll be more confident and effective personally and professionally.
Apply financial knowledge from a strong foundation
Engineering Education Australia is offering workshops that will build the foundation of practical, formula-led financial acumen for any level of engineer or manager. The facilitator, Geoff Rip, applies his 25 years’ experience to a hands-on course that can be transferred immediately into your everyday work life.
As Geoff explains, “the world needs T-shaped engineers – those who combine their deep expertise in engineering with practical knowledge across a range of disciplines. Financial acumen is a vital part of this mix.”
The workshops are geared towards engineers, built on case studies that illustrate concepts based on real-world situations. And because engineers work best with models and formulas, all the fundamentals are captured in easily recalled graphics and equations.