Owners do not start their businesses hoping to spend a lot of time on accounting and finance but rather to do what they do best. All owners, however, need to have a high enough level of financial intelligence to know they are making the best possible decisions for their business. In addition, the more financial intelligence their employees have, the better the decisions of the organization will be as a whole.
Financial intelligence, although it is a recently defined term, has its roots back in 1954 when the management guru, Peter Drucker wrote in his groundbreaking book, The Practice of Management, "[The worker] should know how his work relates to the work of the whole. He should know what he contributes to the enterprise...if he lacks information, he will lack both incentive and means to improve his performance." "It is in the best interest of the organization that the worker has the information". One piece of this information that Drucker was talking about is financial information. But it is not enough that the employee has the information, but that the employee knows what it means and what to do with it.
Proponents of financial intelligence in organizations believe that if all employees understood financial information and how it is measured, then they will make decisions and take actions based upon this financial understanding, to the benefit of the organization. If everyone knows the mission and goals of the organization and knows how the decisions they make help achieve these goals, the organization will be far better off.
Financial intelligence relates to the knowledge and skills of accounting and financial principals. It is not just theoretical knowledge, however, but requires practical real world application and experience. Overall financial intelligence requires understanding four key attributes:
Owners, managers and employees in general, who understand these principals and the effect of their decisions on the organization, will provide a competitive advantage to their employer.