The 10 essential things contract managers should know about corporate finance and why.
1. Cash flow management: Contract managers should have a solid understanding of cash flow management, which includes budgeting, forecasting, and managing expenses.
2. Financial statement analysis: It’s essential to understand financial statements such as balance sheets, income statements, and cash flow statements, which can provide valuable insights into a company’s financial health.
3. Cost of capital: Knowing the cost of capital and how it affects the company’s ability to raise funds and make investment decisions is essential.
4. Capital budgeting: Understanding capital budgeting, which involves evaluating potential investments and deciding which projects to pursue, can help contract managers make sound financial decisions.
5. Risk management: Contract managers should understand how to identify, evaluate, and mitigate financial risks to protect the company’s assets.
6. Compliance: Knowledge of financial regulations and compliance requirements is critical to ensure a company’s financial practices meet legal and ethical standards.
7. Financial modeling: Financial modeling involves creating mathematical representations of a company’s financial situation and can help contract managers make informed decisions.
8. Cost accounting: Cost accounting involves tracking and analyzing costs associated with a company’s products and services and can help contract managers make informed pricing decisions.
9. Working capital management: Managing working capital, which includes cash, inventory, and accounts receivable, is essential to maintaining a healthy cash flow.
10. Corporate finance strategy: Understanding corporate finance strategy, which involves raising capital, making investment decisions, and managing risk, can help contract managers develop effective financial plans for the company’s future.
Knowing these essential principles can help contract managers make informed decisions, support financial goals, and improve overall financial performance.
Having a more than rudimentary insight in finance is something I personally believe professionals in the field of contractmanagement should understand well.
So, after you have studied for your CATS CM® exam, you know what to do next.
Arjen van Berkum
Arjen van Berkum is a columnist, keynote speaker and motivator, with an eye for business ecosystems, innovation and disruption. In addition to his work as technology and contract management evangelist, he is a visiting lecturer at Delft University of Technology (TU Delft).
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