Myth # 1: You need to be a mathematics genius
It’s a common misconception that you need to be a mathematics genius to be in corporate finance. Provided you understand simple arithmetic, addition, subtraction, division, multiplication, averages, rations and percentages you have the essential components to interpret financial information. More important is comfort with numbers and the ability to understand the concept of reasonableness of numbers in relation to one another.
Myth # 2: Finance is inherently complex
Corporate finance is largely about budgets and allocations, defining an ‘allowance’ in the form of a budget and then tracking consumption of that budget and forecasting what ‘may’ happen in relation to the budget.
Finance managers help budget owners to understand
- Whether they are on target with their numbers targets?
- Whether they’re behind target with their numbers targets?
- Whether they’re exceeding expectations i.e. doing better than targeted numbers?
The key thing is the comparisons – expected position with the actual position of revenue, expenses etc and taking appropriate action to either get closer to the numbers or adjust the budget.
Myth # 3: Finance is only for specialists
The recording of financial information is typically the realm of bookkeepers and accountants. The creation of the systems for planning and management of finances is often led by specialists or finance professionals with a knack for building systems.
Ultimately, financial management is the responsibility of every manager who owns a budget.
What other myths or misconceptions can you think of?
