Leading advisor to senior Finance and FP&A leaders on how to succeed with business partnering
They say Accounting is the language of business. But have you ever tried explaining accounting to a non-accountant? It’s far from easy, I can tell you! We need to simplify our explanation significantly. And even better if we can visualize it! Here’s a simple attempt to do that… REVENUE A field of green ready to be harvested. This is the maximum potential income your company can have. ADJUSTED EBITDA Your harvest cleaned and sorted on a pan ready to be fried. This is the expected income you show to management, the board, and investors. EBITDA What’s left on the pan once you’ve fried the harvest. This is what actually left after you’ve paid operating expenses and salaries. NET INCOME What you can actually eat from the pan. This is what’s left after accounting has finished processing the numbers and what can be used to pay dividends. So you explain to non-accountants that this is the potential cash flow they can expect. --------------- Accounting is neither sexy nor rosy. Some would say it takes the fun out of business. The least we can is try to be humorous when we explain it 😉. How do you explain finance and accounting to non-finance and accounting people? #finance #accountingandaccountants #careers #storytelling --------------- 🧑💼 I'm a partner at Business Partnering Institute 🆘 Need immediate help in your finance team, call us! 🤝 We help increase the influence of your finance team 🗣️ Send me a message to join our Slack community 🔔 To see more of my content ring the bell on my profile 📻 Find our #FinanceMaster podcast on your podcast channel
Yes ... all important and . . . A big hole in this information and analysis is in in people - the intellectual and competitive intelligence that the people contribute to the business. i.e. a senior software engineer with 10 years of experience leading a team of 8 people - how do you calculate that as an asset in your accounting world? I think its calculated as a cost?
Anders - I use daily household events to explain accounting 101… Blood 🩸 as cashflow. Top line 👆as revenue… etc… Capex as 🪣 of water.. In that way, they understand right away… Budget as 🧫as pool of funds to my daughter. Equity as cash of deposit 💵 etc… It’s actually quite fun. These analogies were used with my accounting students. I gather if they understand then non finance trained stakeholders will.
Revenue is Vanity. Profit is Sanity. Cash is King - Alan Miltz
As a technologist who has had to bridge into the world of accounting, I can honestly say it’s a like learning another language, lots to learn!
Anders Liu-Lindberg can you please share the right formula of Adjusted EBIDTA ?
Anil Mehra
1y
What is left is a little too less!!!
John H.
1y
What if net income is negative, what’d you be eating then🤣
Love this, Anders! As a finance professional, I couldn't agree more that accounting is the language of business. But let's face it, explaining accounting and finance to non-accountants can be a real challenge! That's why I love this simple analogy: revenue is like a field of green ready to be harvested, while adjusted EBITDA is like the harvest cleaned and sorted on a pan ready to be fried. And EBITDA is what's left on the pan once you've paid operating expenses and salaries. Finally, net income is what you can actually eat from the pan! 🍳🌱💰 But let's not forget finance, which is all about making sure we have the money to plant, fertilize, and water that field in the first place. Think of finance as the seed capital, the bank loans, and the investors who make it all possible. 💸💰🌱 At the end of the day, both accounting and finance are crucial to the success of any business. So the next time you're trying to explain these concepts to your non-finance colleagues, try using this analogy and see if it helps! 🤓👨💼👩💼 #accounting #finance #businesslanguage #analogy #simplifiedexplanation #simplicity #storytelling #communication #financialanalyst #linkedinfinance
Tech Investment Analysis and Value Realization Manager, A.P. Moller - Maersk
1yAs an engineer now working in the cross field between tech and finance, I used to be on the other side of the table. Luckily I am in an environment pro learning with many wonderful colleagues who make me wiser every day. Revenue is sexy, DOC and SGA less so. Exponential growth is sexy, sustainable business model and continuous improvement less so. But real innovator and technologist needs to be financial savvy. For when the time gets tough, it is the camels not unicorns that carry us through. https://www.entrepreneur.com/growing-a-business/forget-unicorns-startups-should-be-camels/347659