H. George Shoffner - The McGraw-Hill 36-Hour Course: Finance for Non-Financial Managers 3 E (McGraw-Hill 36-Hour Courses)

The McGraw-Hill 36-Hour Course: Finance for Nonfinancial Managers

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Third Edition

H. George Shoffner
Susan Shelly
Robert A. Cooke

Copyright 2011 by Rupert Scofield. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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My friend, Ralph, went to college and majored in history (and extracurricular activities). With sheepskin in hand, he applied for many chairman-of-the-board positions and wound up in a slot selling high-end printers. The social amenities learned in college helped, and the eventual responsibilities of one-and-a-half children ensured that he became a heavy hitter in the sales representative roster. He became a field supervisor/trainer; and eventually, when the third child was within two months of arriving, he was appointed Southeast Regional Sales Manager.

The euphoria of the private office, first-class travel, secretary, and impending large bonuses was short-lived. Ralph moved into the high-powered job on September 1st. On October 1st there arrived the memo from the national sales manager: Regional sales budgets for next year are due by October 31.

Ralph had heard of budgets, but he wondered, How do you make a budget? Partying 101 and the related advanced courses did not include anything about budgeting. He looked at last years budget. Where do the numbers come from? What do they mean? He was desperate. With embarrassment he went to the corporate controller and asked for help. Judy, a young staff accountant just out of college, was assigned to help him. From her, Ralph heard words such as capitalized, prepaid, deferred, depreciation, and others. Definitions? Judy was a technician. She knew what the terms meant, but brief explanations of them were not her forte. Accounting majors do not receive much exposure to the communications, journalism, or English departments.

At the executive budget meetings, each executive was to discuss the impact of other departments on his own budget. Ralph muddled through, but it was plain to everyone that he was not only deficient in understanding the budgeting proceeds, he was terrified by it.

Yes, a budget for the southeast region was produced. Was it meaningful? Was it a useful management tool? In despair, Judy and Ralph had taken last years budget and added 10 percent. But Ralphs predecessor had already won approval for one additional salesperson in the region. High-speed color machines were to be added to the line in January. There would be laser kick off displays and meetings in Charlotte, Atlanta, and Miami, but Ralphs budget made no provision for that added expense nor for the additional sales that would be generated.

By April, the national sales manager, the vice president of sales and marketing, the president, and the board of directors all knew that Ralphs budget was useless. Ralph, the chief executive officer (CEO) told him, finance is the language of business. You would be well advised to learn it.

For self-preservation, Ralph enrolled in Accounting 101 at a junior college. His summer evenings and weekends were filled with learning about debit, credits, journals, ledgers, and all the details that qualify one to keep booksa skill that Ralph did not need. What he did need was knowledge of how to use what an accountant puts togetherfinancial statements, operating reports, and budget of a complex operation such as a manufacturer and distributor of office equipment. That information, Ralph found, did not come until the second semester of the second year of accounting.