You work in IT, not the finance department, right? The answer to this question might not be as clear cut as you might think. For you see, all of those IT projects that you and your team are going to be working on have to be funded somehow, and that money comes from one place – the finance department. This means that even though you don’t work in finance, you are still going to have to able to add to your IT manager skills the ability to understand financial concepts and speak the language.
What Financial Skills An IT Manager Needs To Have
Let’s face it: none of us ever went to business school and that means that there are a lot of courses on finance that we’ve never had as a part of our IT manager training. We’ll never get a job running a bank. That being said, however, we still need to have some basic knowledge of financial concepts. Here’s the list of what you need to know about money in order to be a successful IT manager:
Tracking and Management: I’d hope that this one pretty much goes without saying. The money that your company gives to you and your team is given for a very specific reason. You are the one that is going to have to be able to tell the people who gave it to you where it has gone and what it has been used for.
Preparing a Business Plan: I don’t care if your IT team has just had the best idea in the world, you are still going to have to go ask for money in order to implement it. The business world has created a formalized way to go about doing this: you create a business plan. When presented this way, your proposal can be compared to other proposals by the rest of the company.
Preparing an Investment Initiative: If you think that the company should buy another company (or at least invest in another company), then you are going to have to clearly tell the rest of the company why you think that this is a good idea. Creating an investment initiative requires you to clearly lay out why you think that this is a good long term plan for spending the company’s money.
Cash-Flow Analysis: Cash is the lifeblood of every company. This means that how much is available and where it’s going is a critical question that needs to be answered. Having the ability to create a cash-flow analysis for your IT projects will allow you to have meaningful discussions with the finance team about your current status.
Breakeven Analysis: The only way that your IT project is going to get funding is if the company believes that they are going to either make money on it, or at the very least not lose any money by funding it. Your ability to create a breakeven analysis that shows that your IT project will end up making more money for the company that it will spend on the project will be the key to getting your IT team the funding that they are going to need.
Quantitative Analysis: Since you are the person who is closest to the IT problems that your IT team will be solving, the company is going to need your guidance. This means that you are going to be the one that they turn to in order to get the quantitative analysis of both the problem and the solution that you propose for solving it. Make sure that you express your findings in terms that they’ll be able to understand.
What All Of This Means For You
If you talk to an IT manager, they’ll probably brag about just how deep their technical knowledge goes or how good they are at IT team building. However, it turns out that in order to be a successful IT manager, you also have to have a significant amount of financial knowledge.
The two types of financial activities that an IT manager needs to be good at include the process of asking for IT project funding (business plans, breakeven analysis, and investment initiatives) and keeping track of the money that you’ve been given (tracking, cash-flow, and quantitative analysis).
This may all seem like it is the equivalent to going out and getting an MBA in finance. However, the good news is that it is all understandable if you take the time to study what is being asked of you. I guess an even better way of saying this is that in the end, it all makes good cents…!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Management Skills™
Question For You: Do you think that it is fair to ask IT managers to create business cases to support their requests for IT funding?
P.S.: Free subscriptions to The Accidental IT Leader Newsletter are now available. Learn what you need to know to do the job. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
Sure, your job is fine for today. However, what about tomorrow? Where do you want to go to next? What IT manager training do you need? Perhaps more importantly, what is it going to take in order for you to get promoted?