Organizations are managed by managers at all levels across different functions and operating processes. Financial resources are then allocated and these managers make the decisions on how they are deployed for the most effective outcome at work. Managers operate with their team members, colleagues and subordinates. While they may not be accountants, all of them have some form of accountability over budgets and how the allocated resources are used.
At the end of it, each manager will have to explain the use of such resources and the achievements coming out of their use. Therefore, we need to recognize that all spending decisions are in the hands of the leader manager, and not the accountant or the finance manager. The finance manager and CEO may approve the budget but the effective use and achieving the ROI is with the manager.
At the leadership level, the manager is assisted by the subordinates and colleagues who consume most of these resources through budget allocation, equipment and manpower. An understanding of the return on investment and the issues of financial control and efficiency are essential as an effective leader of the team that manages limited financial resources.
A leader is looked upon with high esteem and is placed with confidence and trust of his or her capabilities by the top management. The confidence and trust encompass the capability to make good financial judgement as well. Hence a working knowledge of finance for leadership roles is as necessary as any other executive skills.