6 Ways to Upgrade Your Financial Knowledge as CEO

It takes a lot of time, work and skills to run a business. A successful long-term CEO, must never stop learning and adapting. An important piece of this equation is your financial knowledge. Being  financial savvy, you will gain competitive advantages that steer your company to sustainable profitability and growth. 

In a study conducted by the Harvard Business Review, U.S. managers ranging from C-level executives to supervisors scored an average of just 38% on a basic financial-literacy exam. Many study participants didn’t know the difference between an income statement and balance sheet, while a whopping 70% couldn’t pick the correct definition of “free cash flow,” which is a key performance indicator.

In business, where knowledge is power, upping your financial knowledge increases your  competitiveness. As CEO, expanding your financial knowledge will help you: 

• Discuss important performance metrics with managers
• Understand how cash flow is affecting operations
• Critically think through problems to stay on track
• Know where to tighten expenses to improve profitability 
• Set an example that trickles down to the rest of the organization

By enhancing your already robust skillset with an increase of financial knowledge, you’ll be able to make more informed decisions about your organization and discuss high-level concepts with investors, stakeholders, employees and partners. 

Here are six ways to improve your financial education and leadership as CEO:

Consume on-topic books and podcasts

Books and podcasts are incredible ways to get high-level, verified information from trusted sources in condensed formats. Carve out some time from your busy schedule and kick back with a book for a few minutes of personal growth. When you’re on-the-go, play a podcast or audiobook. Listening while making breakfast, exercising or driving to work. 

As a CEO looking to up your financial knowledge, seek out books on finance and accounting softwares, such as Quickbooks, to increase your understanding of the technologies available to your team. Dive into broader concepts, such as business investing, M&A strategy or fundraising.

Here are some books we recommend:

• Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean by Karen Berman and Joe Knight 
• Accounting QuickStart Guide by Josh Bauerle 
• HBR’s 10 Must Reads for CEOs

Not a reader? Click here for a list of the top financial podcasts. 

Track your personal expenses

One of the best ways to improve your financial knowledge as CEO is to become more aware of your personal spending habits. By tracking personal expenses, you’ll gain an awareness of how you’re using and reinvesting your income, which will increase your financial fluency. Ask yourself these questions: 

• How much money do I make?
• What percentage am I spending versus reinvesting? 
• How can I tweak this to obtain major personal goals? 

It might be helpful to download an app such as Mint.com that enables you to easily track personal income and spending. With this evolving data at your fingerprints, you’ll start to identify meaningful trends and occurrences. 

Learn how to reinvest in your business

Experts recommend that companies reinvest at least 30% of profits back in their businesses. To increase your financial knowledge as CEO, learn about the delicate balance of reinvesting vs. sustaining profitability.

In order to avoid a financial plateau, we recommend that CEOs reinvest back in the business in alignment with broader strategic goals so that you’ll be able to keep evolving and unlocking longevity. 

A Fractional CFO, a financial expert you can hire on an as-needed basis, can help you make high-level decisions about where and how to reinvest in your business. In addition, analyzing the financials yourself will allow you to stay informed and empower you in the decision-making process.

Take courses and workshops

Employee training has been proven to increase engagement. As CEO, you also can benefit from ongoing training by taking courses and workshops.

Some of these courses may be refreshers or build upon previously learned skills, while others may take you on new pathways of education altogether. By signing up for a few in-person or remote workshops led by experts in finance, you’ll be able to fast-track your financial knowledge.

Get involved with your CFO’s decisions

As CEO, you might rely on financial experts to help you make operational decisions.  However, it’s important to stay involved in and challenge their strategies and decisions. 

Trying asking:

• Why are you recommending this strategy?
• How can we improve cash flow and stay profitable?
• What hard decisions must we make to achieve our desired growth?
• Why do this and not that?

This will power your financial knowledge and make you more in-tune with the health of your organization and the trajectory of your business’s growth. 

Evaluate the numbers of your business

Look through and analyze balance sheets, income statements, budgets and cash flow reports to get a handle on the way money is moving into, through, and out of the company. While common line items like income, cash and revenue are important, take time to evaluate the metrics that are unique to your industry. 

Let the A Team turbocharge your financial knowledge 

The A Team employs a dynamic team of financial professionals, ranging from accountants to CFOs, who work directly with CEOs. Let our team of professionals hired on an as-needed basis empower your decisions. We’ll help you improve your financial knowledge while steering your company toward longevity and success.