I’ve been thinking recently about my transition from musician to chief financial officer. What a strange course of events! An artist changes course, makes a choice of major in business school, throw in some time and experience, and here we have a CFO! I still remember sitting with my fellow arts administration peers in a room with our program director and telling him how frustrated we were with our accounting course. What on earth were these debits and credits, and why did the professor keep using the word “clearly” when things were so mysterious?
But I compare that to two instances where something that could have been complicated was made simple. One was in my undergraduate days when I was in counterpoint class. It was typically a difficult course, yet the professor taught it with such clarity, and it wasn’t difficult at all. The second instance is when a doctor explained a friend’s son’s congenital heart defect by saying “It’s a plumbing issue, and the doctors are rerouting the blood flow.” I didn’t hear anything about aortas, ventricles, or anything else in medical terminology.
This brings me to finance, accounting, the shift in my career, and especially as it applies to you. Money doesn’t need to be complicated! I think that the finance and accounting industry has lost its way when it comes to explaining things. Yet:
- We all know that outflows have to be less than inflows, or that inflows need to be greater than outflows.
- We all know that higher prices lead to greater income.
- We all know that our bank balance at the beginning of the day, plus deposits, minus checks cleared / debit cards will give us our ending balance.
- We all know that 2 + 2 will always equal 4. And 2,000,000 + 2,000,000 will always equal 4,000,000. It’s simply a matter of adding zeroes.
So my friend, forget debits, credits, gross profit, net revenue, and all that terminology for the moment. Yes, you will eventually want to understand these terms in order to be a financially savvy CEO. But if we get back to the basics of financial management, or looking at things intuitively, and understanding the core principles…well, I think the rest is a matter of taking learning more over time, just like I did. Remember, if I could make the transition from artist to CFO, you’ll be able to get this stuff too!