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Ten Accounting Tools Every Professional Should Know

Posted by HRDQ on 02/19/2018 to Return on Investment (ROI)
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Important accounting tools that lead to more effective work

In today’s results-driven world, the demand for increased productivity and bottom-line results is greater than ever before. And that means employees are expected to take responsibility for monitoring and quantifying their contribution to the organization, regardless of their background, experience, or skill set. There are ten accounting tools that every professional should know about, which will help keep their day-to-day tasks more productive and further deliver on ROI.
 

Chances are most employees have a limited knowledge of financial basics, even if they sailed through Accounting 101 at some point in time. The fact is everyone can benefit from a working familiarity and understanding of the most commonly used financial instruments. Some of the most common one include:

    1. Budget - An estimated income spend and limit for a time period
    2. Balance Sheet - A summary of the financial balances of an organization
    3. Income Statement - A statement of the company's financial performance over a given timeframe
    4. Statement of Cash Flows - Shows how changes in balance sheet accounts and income affect cash broken down into activities
    5. EBITDA - A company's earnings before interest, taxes, depreciation, and amortization
    6. Break-even Analysis - An analysis that determines the point at which revenue received equals the costs
    7. Liquidity Ratios - Metrics used to determine the ability to pay off current debt obligations without other capital
    8. Profitability Ratios - Metrics used to assess a company's ability to generate earnings relative to its associated expenses
    9. Leverage Ratios - Metrics that measure how much capital comes in the form of debt
    10. Efficiency Ratios - Metrics that show how well a company uses its assets and liabilities internally
So what are the primary benefits of analyzing financial information? Employees who know how to read, examine, and interpret these accounting tools have the necessary skills to improve revenue, shave expenses, and increase their value to the organization. In addition, they’re well-equipped to control operations, determine the soundness of business partners, and assess how the organization appears to investors and creditors. Below are some ways that accounting instruments work:
 
Control Operations
    • Enables employees to set and achieve goals.
    • Measures performance (or lack thereof) in black and white terms.
    • Provides insight when results are inconsistent or unsuccessful.
Determine the Soundness of Business Partners
    • Builds the close relationships necessary for just-in-time delivery and customer service.
    • Avoids potential trouble spots with vendors, suppliers, and clients.
Assess How the Organization Appears to Investors and Creditors
    • Enables employees to anticipate how others perceive and evaluate the organization.
    • Prepares employees to address potential concerns.
    • Provides an understanding of accrual income (revenue) vs. cash flow and notes to financial statements.
Whether you’re working with people who are tuning up a rusty skill set or seeing a balance sheet for the first time, integrating basic accounting into your training curriculum will empower employees to take ownership of their performance, translate outcomes into financial terms, and communicate more effectively with management about the results they’ve achieved—and those they plan to deliver.
 
Improving ROI
 
Every business is focused on ROI. If its employees are also focused on the bottom line, it will only help with the organization's success. There is a specific ROI Methodology, which illustrates how ROI is conducted and utilized within organizations, and savvy employees can utilize a framework for evaluating the results of specific programs and projects. ROI can be calculated in any situation; it is just a matter of knowing how to do so.
 
To learn more about delivering on ROI, check out HRDQ's " The Bottomline on ROI." This workshop was created by the founders of the ROI Institute, Dr. Jack Phillips and Dr. Patti Phillips. It simplifies the process of connecting HR, learning, and performance improvement programs and projects to measurable outcomes in a clear, precise, and logical way. The workshop's guiding principles, real-world case studies, skill-development exercises, and implementation strategies help both novice and seasoned training professionals to evaluate and report results with confidence. Learn more here: https://www.hrdqstore.com/bottomline-on-roi.