More with experience than with books, small and business leaders manage their finances day by day. What knowledge they must acquire to make a difference. How they learn today on the subject.
More with experience than with books, small and business leaders manage their finances day by day. What knowledge they must acquire to make a difference. How they learn today on the subject. Experts give their opinion.
Do SME owners have financial knowledge? Are they involved in the subject? How do they learn? With the incentive of these questions is that Multitaskers interviewed two finance experts to tell how today, the leaders of small and medium enterprises carry their finances on a daily basis.
With the experience full of skin and books full of cobwebs (due to their low use), entrepreneurs manage the reality of their accounting. This seems to coincide with Dr. Jorge Luis Rodríguez, Postgraduate Secretary at UADE Business School; and Nicolas Litvinoff, Director of Estudinero.net, an online training company in finance and other subjects.
“It is a model where training is based on the experience acquired on a day-to-day basis, often to trial and error,” Rodriguez begins, who also maintains that it is common, especially in family businesses, “than the new generations come in search of formal knowledge having already passed some years of previous experience ”.
In the event that the owner or owners of an SME see that their strength is the part of the production, but that they have a weak leg in what is the management of finance or accounting, many times they seek to hire a young man professional or a person with more experience who comes from other SMEs to delegate that responsibility to him, ”he explains.
After giving their first impression, the experts answer four key questions that every SME owner should know in order not to succumb to their finances.
Why is it important to have financial education?
Financial education is pending in Argentine Education. Those who graduate from middle school do not have financial knowledge.
Understanding finances is understanding the mother tongue of business and making decisions.
Knowing about finance allows you to optimize costs due to the need for financing and optimize benefits in the presence of surpluses. But above all things, knowing about finance allows you to anticipate problems and use options and tools that the common SMEs need in their usual operations.
What are the main financial issues that SME owners should know very well?
The basic tools such as financial calculation and accounting techniques allow us to understand the relationship between risk and profitability, be able to define optimal structures related to the cost of capital, be able to evaluate new investment projects and have a basic knowledge of the main instruments financial to be able to manage an investment portfolio. Without this knowledge, the responsible thing is to resort to those who do possess them to be advised on specific issues, either temporarily: a consultant, or the figure of the CFO in the company.
Within the theme of what they should know would be issues of the economy rather than finance. It has to do with inflation, inflation projections (another fundamental variable), interest rate, dollar and also the relationship with the bank. Because SMEs work a lot with banks in terms of financing, as to what it would be to turn over, checkbook, credit line, interest rate. Also knowing financial calculations is very important. Real effective rate, annual nominal rate, total financial cost, all those types of financial variables are those that have to handle very very well. That is why there always has to be someone who has a strong knowledge of what the accounting part is but also the part of what financial mathematics would be.
What advice would you give when learning?
(JLR): Clearly understand what is the role that is sought to be developed in the company in order to articulate the formal knowledge to be acquired with the application to the reality and the job. Many times the entrepreneur is concerned with optimizing its production or distribution chain, neglecting a vital aspect in the life of the organization such as collections and payments. The debt must be a planned action and not a solution to an emergency.
(NL): At the level of new knowledge it occurs to me that there are refresher courses that are given in the cameras of SMEs, you can also use private universities, which constantly have within their business model. Not only the part of university careers but some business school or whatever training for SMEs and companies, business training. You can resort to private universities that have a good menu in terms of offering refresher courses or that are usually very much in the day to day of what happens in the economy, in companies and the relationship between them.
And also clearly what is the self-taught training is also very useful. Today there are many online courses on the internet, distance courses that can be done in very good quality, not only in Argentina but also abroad, which have many advantages in terms of the cost of mobility and all the advantages that brings e-learning.
What is the best way to learn about money?
(JLR): The day-to-day experience and constant observation of market variables. In addition, when learning an entrepreneur must stand in all the roles that will have to manage. Sometimes you will need to take funds, and sometimes you will need to place them. There are a large number of programs that focus on corporate finance and others on capital markets. All are necessary because the financial function is essential in an organization.
The issue of money is not something that is learned fairly or in primary, secondary and sometimes even in college. On a global level in almost all countries, one learns at a self-taught level with a base of what one learns at home. Because there is no matter of personal finance, that is to learn from money. It is not on any of the steps of education. The reason for this is very complex, but basically, it has to do with the establishment and the ruling class that people do not know much about personal finances to be able to sell them financial products and to be able to exploit the financial ignorance to the fullest. We are talking about that today the banks are the ones with greater global power at the global level and greater lobbying power in politicians and in what would be political leadership at the global level.
So this financial ignorance means that there is no quality education at different levels (first, secondary, university). So first you have to look for training from where you can.