Financial thinking is characterized by a certain emphasis on financial results – Financial & Insurance News

Financial thinking is characterized by a certain emphasis on financial results

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With the increasing refinement of social division of labor, financial work is increasingly “fragmented”, is dismembered into N positions: cashier, treasurer, expenses, accounts receivable and payable, general ledger, costs, statements, taxation, financial analysis, audit, and so on and so forth, all belong to the scope of financial work. Once in a large home appliance companies have personal experience, the Finance Department under the post as many as hundreds, a single accounting section, a dozen people, busy all day, do not know where to end. Know what this accounting section is doing? Say it without fear of laughing out loud, invoicing! Of course, that was the era of manual invoicing, labor-intensive.
Since there are so many positions, it is difficult to imagine that they will have the same or similar thinking.
Financial people still have some commonalities, such as the concept of cost, cash flow and tax risk awareness, the belief that “there must be borrowing, borrowing and lending must be equal”, and follow the “assets = liabilities + equity” law of conservation of energy. Financial thinking may be a kind of thinking or habit that business managers need in their daily work, but not all, just like using a computer or driving a car, if it is limited to the use level, it is destined to be just an operator or a driver.
The following article will try to interpret financial thinking from seven dimensions, hoping to learn from it and provoke thinking.
First, financial thinking: results-oriented thinking

The business perspective is about the process, but our financial perspective is about the results, so no matter what business variables there are, in the end, we hope to be reflected in certain financial variables. The financial variables, see the box on the right, are increased revenue, increased profits, and increased cash flow. Asset quality is improved and liabilities are controlled.
In human resource management, there is actually a very famous tool called the balanced scorecard tool, which I believe all major companies and human resource management managers have heard of.
What is the function of this tool? To make the specific business variables correspond to our financial variables and put the strategy into practice. The highest level of this balanced scorecard is the financial variables. The next level in the financial variables is the customer variables. That is, in order to pursue good financial performance, we have to serve our customers and understand the market. Then in the next dimension of this market is the issue of our business processes, specific business processes to support our customers and support our products, and the last dimension is the dimension of learning and development. Each of these dimensions will have some indicators for each dimension.
The role of this tool is to decompose our strategic objectives into specific business indicators, so that the business indicators can be successfully aligned with our strategic and financial objectives.
Let’s take an example. I went to a restaurant and asked for a bowl of rice, which was too large to finish, and it was a lot in the same kind of restaurant. At this time I told the waiter that I could reduce the amount of rice by half and charge half less, but the waiter said that the restaurant rules do not allow it, so I chose not to have that bowl of rice.
From this example, we can see that if a company’s business variables are excellent, if they cannot be successfully converted into financial variables, then such business optimization may not be sustainable. Just like the example I just gave, the amount of rice is very large, but from the customer’s point of view, he does not need such an amount, so the company does not receive money, such as this is called no performance. The first characteristic of financial thinking is that it must emphasize the results of finance. We call it result-oriented thinking.