::: IFMA HK Chapter :::

March, 2005

As always the responsibility for seeking out learning opportunities and taking them on board lies in the hands of the facility manager themselves.

The Problems

When facility managers fail to grasp the financial nettle they leave themselves open to all kinds of problems. Many of the stories that I hear of people battling with unsupportive finance departments, failing to get business cases approved or struggling with inadequate budget provision are a direct result of a deficiency in this vital competency area.

	Facility Manager A submits budget requests far in excess of need in order to hedge against future cost cutting initiatives. This reduces funds available for vital investments elsewhere in the organisation.
	Finance Director A would have no problem justifying a capital replacement programme for older plant in exchange for a lower annual maintenance cost but the facility manager has never suggested this.
	Facility Manager B always finds themselves under budget half way through the year and overspent by the end. A poorly planned budget and a lack of commitment monitoring are to blame.
	Finance Director B has a constant battle to ensure sufficient cash is available at month end, the facility manager could solve this by renegotiating payment terms with service contractors.
	Facility Manager C makes no effort to ensure the accuracy of monthly financial reports. This leads to important decisions being taken within the finance department based on inaccurate data.
	Finance Director C has a store of useful information about the performance and risks faced by companies in the FM supply chain. This would greatly enhance the facility managers position at the negotiating table if shared.

A Plan

A personal development plan for financial literacy in facilities management should cover the following five key areas:

Financial terms - The ability to read a Profit & Loss Account, a Balance Sheet and a Cash Flow Statement. An understanding of key measures like the Current Ratio, the Quick Ratio, Interest Cover, Collection Periods, Debtor days, Gross and Net Margins and ROCE or Return on Capital Employed.

For a facility manager this is the area that can be most daunting. The technical jargon used by accountants to describe and manage corporate finance presents a formidable barrier to the initiated. However without becoming an expert the facility manager who learns a little of the basic concepts soon finds the language to be less confusing. As Cato the Elder said "Grasp the subject and the words will follow"

Financial Accounting - Essentially the record keeping system that all organisations employ to satisfy statutory requirements and to ensure that funds are properly managed, assets carefully stewarded and management information produced.

The maintenance of consistent records of facilities expenditure is a vital process that supports the finance departments corporate reporting obligations. However the same process provides the valuable information on trends, opportunities and issues that the facility manager needs to inform effective decision making and to justify future actions.

Management Accounting - The methods used to help forecast future performance through reference to past performance. This is the critical