I don't get finance people

[NaanPeshwari]

I have to work with finance people and I really don't understand them.

We have budgets that have to be managed and god help me I hate it. They have different ways of doing things. I'm not dyslexic but there my be some kind of discalculia as if you talk to me about numbers I don't get it. Numbers aren't a language to me, they are, I don't know shapes on a page. So I can work with them if they are written down. But finance people talk too fast in these meetings. I've asked them to slow down but they do it again. What do I do?

Think of it the other way round. You’ve paid them so they owe you the service. They owe you something that has £X value, so that must be an asset of yours, and a liability of theirs.

Think of it as services that have been “banked” for the future. As you use those services up over the coming months, the asset (“banked” services) will be reduced.

Exactly this over the prepayment being an asset. You’ve paid in advance for something and you have an iou for the supplier to provide it

My job is mainly making the money so just end numbers to me.

Sometimes get involved in managing specific projects. I'm not finance or delivery.

Can't get people to do three month forecasts cos not officially required. So underspend but everyone had said it was fine.

Maybe I need to be saying X hasn't happened, what does it mean for the budget. Seems like obvious that finance should be doing that.

Our own finances run on cash in and cash out, giving our bank balance.

The whole of accountancy is basically the opposite.

We are trying to match our income against expenditure in the month the event happened regardless of when we paid the bill.

If you pay a 12k insurance bill in January you would actually use prepayments to "spread" the cost evenly over 12 months.

If you had had some repairs done that month but the contractor hasn't sent his invoice in, you would use accruals to "imagine" you had received it anyway.

Basically you are trying to level everything out, on the basis that the real life cash in the bank will catch up at some point

YOU WIN THE THREAD! I need to learn how to make these!!

Creating waterfall charts used to be the sign of someone who had mastered Excel charts. But then microsoft introduced this button.

Lay the data out in a list. insert chart, then the one with a circle out it in the pic.

The only other thing you need to do is change the columns with are the pillars to the bridge by right clicking on the and selecting "set as total".

If you underspend on a budget item, and you have evidence / it's clear it won't happen again, then you just assign that expected spend elsewhere.

Budgets are not fixed for years on end. Monthly or quarterly you would look at your budget, compare actual against estimated and then see if you need to adjust. If you don't have enough, then you need to trim your spend - no pay rises, no temps if someone is away,

Do you get provided with the actual spend against your budget items in real time? You should have been given a template to use by finance.

Then you give it back, they populate with actuals, which gives you the difference in actual spend vs budget.

Always ask for the actual line items which make up the actuals. This way you will see if all spend is yours and finance haven't misallocted, ie coded sometjing to your deot in error, screwed up pre payments / accruals and you can immediately flex - change - your budget to reallocate.

Anyone who can't explain an actual number- real spend- is trying to cover up their own fuck up. Do not assume finance are always right.

Nothing annoys me more than waffle. And babbling on about prepayments and accruals- this doesn't affect your budget, because you would have 100 a month in for rent for example in your budget. You know rent is 1200 a year.

Then actuals would show 100 a month. In the background accounts would journal, pay, whatever, but it's always going to be 100 a month. If it's not, then either you got duff info about rent cost or the bill has gone up and no one told you so you could fuss over your budget and blame finance.

But my budget is fixed for 12 months at a time. If I walk in on project being cancelled on the 3rd Jan I am stuck with it for the rest of the year. There isn’t a way to rejig it that year.

Is that common? Or is it just another lovely thing our finance team does?

Same.

I do t understand it when they talk about P+L, profit and loss?

surely there’s either a profit or a loss? Not both?

Spending is bad if it's over spend, i.e. you're spending more than you've been allocated. Underspending is often bad because then your next year allocation could be reduced based on current year spend being lower. Basically change your thinking. It's not about spending being good or bad, but about doing something different to what was expected being bad.
How you build out expectations is using assumptions, basically your best educated and supported guess. I know this seems like asking the impossible but the business has to be able to plan for the future. You don't exist in a vacuum - how does the business make sure it can cover the costs of your team, how can it make sure it can fund that essential project. How can it know as early as possible that things aren't going to plan and can change course.
Let's say something happens economically and sales fall. The company needs to have a very accurate picture of its current spend and what's coming down the line so it knows how to change course.

That's a crap finance team. They're not doing forecasts then? Usually the budget is the amount set at the start of the year and a good company will do forecasts which are updating for changes throughout the year, usually every quarter.

There are two main financial statements one us called the Profit and Loss (or Income Statement), the other the Balance Sheet. The P&L measures the income and expenditure for the current year and determines whether the company has made a profit or a loss. It's the performance over one year. The Balance Sheet is like a snapshot of the company's entire financial position at the end of the year, how much it owes and is owed and how much equity is in the company. So like if it was a family the P&L would show mortgage payments for the year, but the balance sheet would show the value of the house and the total mortgage still owed. That's a super simplification, but that's the idea.

No, this is not common. Your company needs to be agile which is why budgets flex. Unless you work in the public sector?

Do you have an assigned budget manager from finance? Ie their job is to forecast, analyse, support your dept in being successful?

To give the bigger picture of accountancy, it's not just to match income or spend against the right period for no reason, it's to ensure comparability between sets of financial statements and that anyone who reads them can understand what the numbers mean. So as a company I can't decide to sell my product by selling 3 years in advance at a big discount and make it look like I'm a company that makes loads of money, versus my competitor who charges monthly. Equally then, the company who decides not to pay their bills, doesn't look like a company who is able to manage their spend better than and company who pays their bills on time.
You don't account for money based on what is spent and when, you allocate it to the period it was used (spend) or delivered (income) so the playing field is equal.
If you are a non finance person you probably think about your budget based on money in and money out, rather than what has been used and when. A good finance person will be able to bridge this gap for you and help you understand.

This is actually making a lot more sense. I spend a lot of time making sure I’m as accurate as I can be but things change. Good to know that it’s not good to be fixed for such a long time but I do understand the how can we plan if you never spend what you say (that could be spent elsewhere) or I spend way more than I said I would. That money is having to be moved from another pot as I’ve got it wrong.

In potential defence of the finance team - if this is public sector or something like FE (in Scotland anyway) this would be pretty standard and says more about the way the sector is run rather than the finance team.

2 years in FE was more than enough to send me running back to industry, despite the pension and holidays 😂

I've always been private sector so nothing I say applies to public sector! I know in Ireland we're only part way through the process of moving from cash accounting to accrual accounting in the public sector.

I have discalculia I reckon 😄😄

Can barely count

Also, when i have to add up the number of months or years since an event, i just cant do it 🙈🙈

thank you @BloomingGardens

Thank you so much - my new job is obsessed with them - and I was putting them off..

I suppose Profit or Loss account would have been a better name - but bookkeeping was invented in the middle ages, so a bit late to change it now.

I did work in education for a few years - honestly, I wish I had just coded up the cash book - I think everyone would have been happier, and it would have been less work.

Thank you, you’ve just saved me a lot of time as I wanted to present data like this on Monday but couldn’t work out how as I’m entry level in excel

OP the key thing I would start with thinking about is budgets are not cash flow based.

You are understandably thinking about money in and out as you would in your personal finances, but budgeting in corporates is much more nuanced than that.