At times finance can seem a bit daunting. Even the experts get it wrong – you may for example , remember a small “VAT issue” in the run up to the London Olympics attracting some unwelcome media attention at the time when VAT on building costs caused a large unforeseen jump in the cost of putting on the show.
It’s often the case that people will inherit some finance responsibility by virtue of being good at their “day-job”, but the worry is how often do they really get a proper briefing on how the spreadsheet works, what the report actually tells you, what the jargon actually means; or indeed how “the game” is played in the organisation in question? How often is the “handover” done by someone who may not have understood the spreadsheet/process/rule in the first place?
If it’s our own money a 20% VAT charge would make a big difference – especially when the quote we were given turns out to be the net amount and the actual charge is higher. However based on some recent research we have conducted it may be surprising how few people are actually comfortable with the financial maths that will drive the financial impact of everyday transactions in a work environment.
Perhaps of greater concern was the fact that a significant proportion of people tackling our financial literacy survey got the maths wrong, but were 100% confident they were right.
When people are making decisions every day that have a financial (and reputational) impact, understanding where confidence can be mis-placed can be key as organisations seek to target their learning and development activity in the areas that will have the greatest impact.
VAT (and percentages!) is just one area of common confusion, understanding when something will hit the accounts (accruals) is another, as are the differences between cash and profit, or how we should deal with uncertainty in financial information. In each case – not knowing the answer isn’t the biggest risk; not knowing the answer but thinking you do presents a potentially much bigger issue.
Hopefully you can forgive my “doom and gloom” mind-set (accountants have a reputation of being slightly prudent party poopers you may recall), but this insight into the blend of technical competence and confidence also offers more positive opportunities. Based on our survey results many organisations will also have valuable pockets of “untapped potential” – team members who are actually technically strong, but that don’t realise that’s the case. This lack of awareness can mean they are less likely to be heard, or that they aren’t given the responsibility and opportunity they warrant.
Our Financial Literacy Diagnostic allows you to assess and report on the levels of financial literacy in your organisation. The tool presents a series of workplace scenarios (tailored to the organisation) and a series of questions that flow from it, and poses the respondents two key questions: do you know the answer? How confident are you?
Learn more about Kaplan Diagnostics