FINANCE IN BUSINESS

I’ve usually have asked people how they view figures by giving them a small riddle:

“How many sides has a coin?” They automatically give the answer of two without any thoughts of their own….(you can always tell someone who has learnt by rote). Its the wrong answer but they won’t never admit that. The answer is “Three”.  Its the Ridge of a coin when it stands on its side. There is also a fourth dimension its when the coin is placed in the palm of your hand.”

Its important to have the ability to read numbers to turn it into useful information rather than just raw data. My views of finance which is still developing is the following:

There are those maths people who like the theory of solving complex equations.

There are maths people who like the practical applications of finance in everyday situations.

There are those who like to play the numbers game for the thrill of it.

To quote Jakow Trachtenberg, the founder of the Mathematical Institute of Zurich, Switzerland who was “…of the opinion that everyone comes into the world with phenomenal calculations and possibilities [also] once one has mastered the rules, lighting calculations is as easy as reading a story….” (1)

However the mathematical abilities of any person is one of many or put another way many of one, although some people are more able than others to calculate in their heads whilst others can’t. Math’s ability can be applied in different ways in any business environment it shouldn’t matter if a person would rather use a calculator that’s why it was invented and it free’s the brain to do other things and narrows the error-rate of calculations.

Also of the similar viewpoint was Michael Drosnan “…for you this whole vision is nothing but words sealed in a book [also] we experience it like we experience a hologram, it looks different when we look at it from a new angle…”(2)

Most companies hire those who have mathematical abilities in specialist areas which is one end of the spectrum which business requires. Companies don’t seem to employ those who know the current exchange rate and how it effects the business and their lives.

Wouldn’t it be better for an organisation to have all members of staff who understood or have a wider concept of business finance knowing how to read any financial report placed in front of them, follow the stock exchanges and the basic understanding of the corporate tax system. These are practical skills which any business employee should be gathering.

Now to business finance…most interesting subject when one ignores the paper numbers but its the application of figures that’s intriguing because every answer seems to ask another subtle question that’s never completely answered where finance is concerned.

Monetary wise yes you can construct a ‘sample’ model of long term goals, but if it becomes to rigid there is no room for maneuver. Sometimes its better to forecast in smaller parts so the effect if there is change is less damaging than that of long term.

If the CEO’s and managers were able to say they knew what the future holds of the company than why would the CEO come out with statements that may not have any bearing 5 or 10 years from now more less 500 years from now, and makes no sense to others apart from him (CEOs must have had such mystical experiences!) It would make only sense to the current CEO and not the ones of the future.

In strategic monetary planning I think companies would be looking at 2-3 years for a realistic result that they can measure. Business does not need to function all the time on a hit and miss tactics as so many of them do, its destructive.

Its the power of money and information combined, that’s the beauty of knowledge management but also why and how it generates wealth and assets for staff and for the company because:

“If you cannot be a good accountant ~ you will grope your way forward like a blind man and may meet great losses” Pacioli

I agree with Baruch Lev analytical points in an article New Math for a New Economy that accounting has not change at all in 500 years and is functioning back to the 1400s in a 21st century business environment and my view is business finance has become disconnected with its prime purpose of assisting the businessman, for who understands the economy of business better than they do….accounts seems to be made for accountants or economists but not the Chairman/CEO. Can this be?

For example: “…the approach adopted by the WSJ (Wall Street Journal) runs counter to the Business culture of the FT newspaper (Financial Times).

It [WSJ is] full of thumb-sucking articles exploring the interaction between economics and politics. InBritain, we concentrate on the relationship between business and finance.

Personally, I find that more sexy than politics. Let’s face it, price-sensitive news and analysis is a must-read. The political stuff is tedious….” (3)

Also the Nasdaq chief, John Hilley gave an interview with the by-line “has set his sights onEurope~ and what he wants he gets” regarding his strategy of entering the European markets from an extract(4).  I think the Nasdaq as it is fairly new with technology stocks had better concentrate on getting that market solid like the blue chip markets before considering entering fresh monetary green’s.

For every mother with a newborn baby knows if its stool is slushy and slightly green (cash in hand or credit cards) means they need to worry and the alarm bells start to ring especially if the expansion of green becomes too much, if brown/yellow (bonds and gold) then its okay.

Would it be possible therefore for Annual Reports to Shareholders to be improved upon that actual have something that the average shareholder/employees could look at which made its pages relevant and they could question and receive constructive answers at AGM’s (Annual General Meetings) instead of a PR exercise.

I recall The Prisoner television series in the sixties springing to mind:

“….I’m not a number, I’m a free man…”

REFERENCE SOURCES:

(1) The Trachtenberg Speed System of Basic Mathematics translated by Ann Culter and Rudolph McShane, published by Souvenir Press, London.

(2) The Bible Code written by Michael Drosnan, published by Weidenfeld & Nicolson,London.

(3)  The Guardian Newspaper on Monday 17th January 2000, article “Oi! Mind your own business”, Media section page 7.

(4) Sunday Business Newspaper, 6th February 2000 Business Life Section on page 25.