This is the first of a short series of articles on the significance of accounting and finance for marketers working in the financial and technology industry. This article outlines why marketers should take the trouble to study accounting and finance, and explains the similarities and differences between the two disciplines. They can be studied separately or together.
Today, more than ever following the COVID outbreak, it is vital for marketers to upskill their accounting and financial knowledge. This will help them to collaborate with their finance colleagues and talk in their language to truly help drive their organisation’s financial and business performance.
Why bother with it?
Accounting and finance both play a fundamental role in the management of all organisations. Anyone who wants to build a managerial career needs to have a firm understanding of financial matters. Whether the organisation is a private sector organisation of any size, a not-for-profit organisation, or a public sector organisation, money is its lifeblood, a precious resource that needs to be obtained, allocated and controlled in a way that enables the achievement of strategic objectives.
Not only that, but we also need to report on that use, which in turn requires recording systems to collect and analyse data. To win further money, we need to report on our successful use of the resource in the past, and to forecast the increase in wealth we are going to create in the future. By controlling money, you control the direction of the organisation and its success. This is especially true of the marketing function, which is still viewed as a ‘colouring-in’ department rather than as a key function determining the company’s bottom line and driving the company’s growth.
Compliance and integrity
As well as creating value, accounting and finance also play a role in keeping the organisation in compliance with the law, and managers out of gaol. The disciplines play a large part in ensuring that the organisation pays its proper share of taxes, complies with health and safety regulations, ensures equality and diversity and obeys employment legislation, amongst many other things. The rigour and veracity of financial and accounting information can make or break any organisation that comes under the scrutiny of statutory or regulatory authorities. The recent scandal involving Wirecard, the German payments processor, is a good example.
Performance, planning and control
Tools used in accounting and finance allow an organisation to review its financial performance. Analysing, evaluating, and reviewing their financial records means that marketing managers can understand and learn from the past. Being able to understand how well they used the resources under their control means that they can make informed decisions.
Accounting and finance tools, budgeting, in particular, can also allow marketers to plan and control for the future, and so can bring significant benefits to the company’s prospects. Unfortunately, in some organisations, the marketing department is viewed as a cost rather than an investment, and sadly is often the first to suffer cutbacks. Understanding the relationship between revenues and costs means that marketers can construct a road map to show the destination and the anticipated route to get there.
Why do marketers need accounting and Finance?
At a basic level, marketers need a thorough introduction to the financial aspects of their organisation. They need to be able to understand their company’s financial statements, whether these are for external or internal purposes. As explained above, they also need to be able to understand the effect of money on business operations because of both the quantitative effect and the effect that it has on decision making. At this level, the understanding has to be quite basic and is not too technical.
At the same time, it is also important to emphasise that most of the language in business comes from accounting and economics. As a manager or potential manager, understanding this language means that you have a lingua franca that you can use with colleagues and finance specialists. This aids communication and understanding.
So far, we have spoken of accounting and finance as if they were one term or discipline and perhaps, we should take some time out to provide some definitions about what we mean.
What is accounting and finance?
Most people understand the term to be something concerning the general monetary management of an organisation. In real life, they may even be used interchangeably. However, these terms carry two different meanings. They are distinct disciplines with a lot in common, and it is important to understand the difference between them because they do focus on different aspects of an organisation’s performance.
Accounting deals with the day-to-day flow of money in and out of the organisation. It is about detail, recording and reporting past financial transactions. Accounting involves a lot of time and effort to accurately record what has already happened, and to ensure that the company complies with all laws and standards.
Finance is a much broader term, and is about the management of assets and liabilities, and planning for future growth. It is a high-level overview of the business’s strategy. Finance is more forward-looking than accounting, and so deals in a longer time frame.
The two disciplines are linked because they are closely related, and they support each other.
To summarise then, accounting and finance are two key disciplines for any organisation. A grasp of the disciplines means marketing managers are in a better position to make rational decisions, by improving their value for money through improvements in management efficiency, effectiveness and economy. An understanding of these disciplines will also improve the marketing manager’s knowledge and skillset, allowing them to make increasingly important contributions to the future development of their organisation.
In my next blog, I’ll share with you some thoughts about the symbiotic relationship between accounting and marketing. Check out the article here.
About the Author – Shaun Bowman
Shaun has over four decades of experience working in finance and accounting based roles. He started his career in the accounting sector and after that worked in the finance and accounting positions for many reputable businesses such as Virgin Media, Baldwin Technology, Hunting Gate Group, Willmott Dixon Group to name a few.
Following that, Shaun moved into the public sector to participate in more strategic work through commissioning infrastructure and services in children’s services, public health and adult services, making a positive impact for county councils and London boroughs.
The know-how that Shaun has gained from working for a range of organisations, from small businesses to international corporations, across the private, public, and not-for-profit sectors has been utilised as a Management Lecturer at several UK HE institutions.
Currently, Shaun is working as an Associate Lecturer with the Open University Business School, and he has over twenty-five years of involvement in the Higher Education sector in the UK and internationally with universities and private institutions.
Melding academic knowledge and pragmatic business experience, Shaun has a multidisciplinary view of business. With an expanding portfolio of publications, Shaun’s research interests are in organisational learning and strategy, especially in small businesses.