Sector Growth: To Develop Financial Thinking And Knowledge In The Business Sector.

The financial department is a department, but all the departments and staff of the company are doing financial management.

Business people do not need to be financial experts, but they need to understand basic financial thinking and knowledge.

The problem now is that many business people think that finance is a very professional and difficult thing to understand, a department of the financial department, and our financial staff are complacent with professionals.

We should pass on our financial thinking and knowledge to people with very simple and popular language, and we must not be proud of our difficult and awkward professional terms.

We need to know how the business people can understand. Let's take an example: 8 million of the sales department sold the goods at 10 million, how much did we earn?

Most people think that they earn 2 million and make performance deductions according to 2 million, but financial thinking, first consider the probability of recovery. Secondly, consider the time and cost of recovery. When we explain to salesmen, we should not take the concepts of current value and monetary time value as a whole.

It's OK. Business people who are present value, compound interest or time value of money may not understand or need to understand, but when you talk about interest, you will understand that interest should be considered in sales.

If every department and everyone in an enterprise understands basic financial thinking and knowledge, financial management is difficult to do well.

Therefore, the financial sector should be a corporate financial thinking and knowledge trainer and disseminator, which requires us to continuously improve our communication skills.

The financial sector needs to establish a dynamic and developing competitive theory and apply it in practice.

The biggest problem of the finance department is that accounting knowledge is more than enough, while the concept of dynamic and development is insufficient.

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The classical theory seems to be too simple and too pale.

They have not made much contribution, but they have become obstacles to progress and understanding.

These theories are not based on dynamic equilibrium, but regard competition and decision as static equilibrium phenomena in static economy.

The classical theory is based on the abstract cost behavior mode, and these cost behavior patterns hardly appear in real life.

The assumptions made by these theories to the competitive behavior of enterprises can not be observed in reality, nor are they helpful to the prediction of competitive behavior.

We should realize that accounting theory is not appropriate to interpret economic behavior, because accounting theory is established for other purposes.

Starting from reality, we believe that in dynamic competition, we should not base on accounting theory, but rather based on cash flow -- "cash flow is the key to all."

Generally, the financial department thinks that product pricing can make up for the product cost - this is a static concept, which is equal to selling future short-term profits - Dynamic consideration. If we cut down the price and increase the production capacity first, we can buy market share and lower the relative cost, so that in the beginning, it seems that the price below the cost will be enough to make up the reduced cost in the future and reduce the potential competitors' interest in the industry, thus stabilizing our competitive position.

For financial policy, the classical theory holds that debt raising will increase the financial risk of enterprises, and the overall risk of enterprises will increase. However, if an enterprise actively uses debt to support pre emptive price reduction and production capacity expansion, thereby helping enterprises to gain market share, it will ultimately reduce the total risk of enterprises.

For example, for direct labor costs, financial departments are accustomed to using fixed labor cost or standard labor cost to measure, but in reality, labor costs will change with learning curve or experience curve.

The cost of experience curve is a visible phenomenon, but rarely in classical financial and accounting theories.

Generally speaking, the rising price of the industry is good news for enterprises. However, the short-term price increase will speed up the introduction of new production capacity. If the total market demand remains unchanged, the long-term profits of the industry will be reduced, which will be a bad thing for the long-term development of enterprises.

The essence of strategy lies in controlling the opponent's willingness to invest capital in order to expand production capacity.

In investment decisions, we are used to calculate net present value and internal rate of return with historical data and trends and price and cost information under current competitive situation.

In fact, investment decision is a market share decision - we need to consider the reaction of competitors.

With the expansion of production capacity of all competitors in the industry, prices will generally decline.

Therefore, whether the competitive signal pmitted by investment decisions will affect the market share of the industry is a problem that we need to consider dynamically in the investment decision.

In addition, traditional financial and accounting theories pay much attention to profits.

Book profit is only a signal, and it will not be misleading if it represents the competitive position that the enterprise may eventually win.

Cash is the only valuable thing, but only when enterprises do not have to invest in defending their competitive position.

To truly reflect its value (free cash flow).

A good CFO should be a business planner, controller and trainer of an enterprise. He must possess technical expertise, communication skills and strategic vision.

There is still a long way to go for the financial departments of most enterprises to have real financial departments and achieve real financial and business integration.

A young and promising artillery officer began to inspect and drill at the beginning of his troops. He found the same situation in several troops: in a unit training, a soldier always stood still under the cannon of the cannon.

The officer was puzzled and asked why. The answer was: the drill regulations require this.

After reviewing the military documents repeatedly, the officers finally found that artillery training regulations were still following the rules of the non mechanized era for a long time.

The soldier's task under the barrel is to hold the reins of the horse. In that era, the artillery was pported to the front by horse and cart, so as to adjust the distance deviation caused by the recoil force and reduce the time needed to re aim the target after the artillery was fired.

Now the artillery automation and mechanization degree is very high, no longer need such a role, but the drill regulations have not been adjusted in time, so there is "no horse soldiers".

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