Why does a manager need financial thinking? And, in general, what should a manager know about finances?
Nataliya Tadeeva: So, why does a manager need financial thinking? In the context of our program "Finance School for Non-Financial Managers," we aim to convey the idea that any managerial decision directly or indirectly affects the financial result. This impact can be positive, negative, or neutral – each option is possible. To assess the necessity, timeliness, and urgency of a decision, to understand whether the company can afford it, and to see its long-term perspective, there is one universal language – numbers and finance. This is a language that all managers must understand; a language through which employees and heads of different functions freely communicate. It serves as an accepted basis for the economic justification of project approvals and investment decisions. Therefore, I believe that financial thinking is an elementary, "hygienic" issue that should be in the portfolio of every conscious manager.

Could you orient us on what basic financial questions a manager should know without delving too deeply? After all, this area is extraordinarily vast.
Nataliya Tadeeva: First of all, it's important to understand the area of responsibility for each manager. If we look from the perspective of a manager leading a certain function in the company, the minimum necessary for work is an understanding of the boundary of their financial responsibility.

That is: what do I influence, and what do I not? How will my decisions affect the final financial outcome? I might not see specific numbers at the moment, but I must understand the vector: how will they affect the result – positively or negatively? I must know how this financial result is formed specifically in my company and understand how to plan the impact of my decisions on this indicator. This relates to budgeting and forecasting. These are basic things.

To summarize: how does knowledge about finance impact decision-making? It's clear that it concerns financial outcomes, but perhaps there is something more?
There is a saying: sometimes the most important thing is simply to stop making wrong decisions. Financial thinking becomes the filter that helps to sift them out. For example, it indicates which steps do not align with your strategy or could critically undermine the liquidity of the business right now.

Sometimes, a project may be promising, but the state of liquidity does not allow for its immediate implementation. In such cases, financial logic helps build a sequence: what steps to take first to prepare the resource base for the future. This saves you from lost investments and provides a clear understanding of where you create value and where you are simply spending money. This strategic vision is the essence of financial thinking.

What key financial metrics exist for managers and why are they important for understanding the effectiveness of a department or the business as a whole?
Metrics are primarily about the system for measuring performance (KPIs), and they divide into qualitative and quantitative. While qualitative indicators are almost impossible to digitize with high precision, quantitative ones form the foundation that every manager must know: the total expenses for a function, the cost per person-hour, the maintenance costs of a department, as well as burnout rate and break-even point. These elements of financial analysis, such as the cost structure or margin, pertain to both individual functions and the business as a whole.

However, I would advise against oversimplifying this topic. For example, if we are going into the analysis of business processes or the cost per person-hour, there are numerous nuances and factors that do not allow for everything to be digitized correctly. There is no universal "checklist." I view financial analysis as a holistic area of activity, not just a set of individual numbers. You understand, you cannot grasp the real state of affairs by looking at one metric – for me, that does not work.

If you were to choose something for a quick overview, you could mention the popular burnout rate or profitability, but that’s just the tip of the iceberg. Financial logic is always a complex of actions.

If we look at finance not through the prism of individual metrics, what should we focus on?
Nataliya Tadeeva: I prefer a holistic analysis of reporting. In the program "Finance School for Non-Financial Managers," we will primarily discuss what constitutes reporting, how its elements are interconnected, and learn to form expectations regarding changes in each report. For me, financial thinking is the ability to see the picture as a whole, rather than just tracking trending metrics that, on their own, say very little.

For example, if I see a significant volume of assets in the company, I immediately turn to the cash flow statement to analyze liquidity and investment activities. It’s important for me to understand how these assets were formed: were they financed through loans or from internal funds? If the company purchases assets with its own money, I check how much operational activity generates, how the profit and loss statement is structured, and what the cost composition is.

This is where the essence of financial thinking lies: viewing the business "from the top down," analyzing not one report, but three main forms simultaneously. Understanding their interconnection allows you to see where hidden risks or opportunities lie within the company.

Budgeting and Projects

How should a manager correctly approach project budgeting to ensure it is realistic?
N.T: When we are in the position of someone preparing a budget, our main task is to gather as much information as possible about potential benefits and threats, as well as to determine the likelihood of each situation occurring.

Often, we are enamored with our idea and believe that everything will work out 100%. In this state, we want to quickly estimate, set a high margin, and “let's go.” But the main task of the manager is to stop and verify their hypotheses through the most independent sources available. These could be market research, consultations with people in the industry, data from colleagues in other functions, or even AI analysis.

We need to bring the numbers as close to reality as possible. Sometimes an idea seems great until we start calculating. Only during the calculations do we notice which current expenses we overlooked, what the actual cash flow will be, and what the true probability of revenues is. Confronting external and internal factors can quickly reveal that the positive scenario isn’t guaranteed. Therefore, the main rule is to gather information from all available sources, except for one’s own head and intuition, and use that as the basis for the financial model.

What should one do if you are the receiving party? What should you look for in the budget that is presented to you for approval?
Nataliya Tadeeva: When in the position of someone receiving the budget (often this is the role of the financial director), I always suggest checking two main things.

First — does this project align with our long-term strategy? Every company has a goal that is broken down into short-term milestones. For example, we want to become market leaders, and in the next three years, we plan to enter the top five. If a project is presented to me, I ask: what will it give us in achieving that goal? Or maybe we currently have liquidity problems, and we need this project just for quick cash turnover?

The second is checking the hypotheses for realism. If the budget is submitted for three years, then under our conditions we can only estimate the first 12 months with 85% likelihood (I wouldn’t give more). Predictions for the second and third year are usually very unlikely. If you see stable growth, for example, +10% annually – you have to ask where this figure came from and how it’s justified.

I recommend identifying critical drivers – factors that directly influence success. Instead of demanding complete scenario analysis (pessimistic, realistic, and optimistic scenarios), it’s important to find the "point of failure." Ask the question: under what scenario will the project not happen at all?

For example, if we are ordering equipment to expand production, but it’s being shipped from China. If it doesn’t arrive, there will be no project, and we won’t enter new markets. This is an external risk that needs tracking. Or an internal factor: the market research on which the entire calculation is based may be flawed. Then you need to go to marketing and ask for alternative evidence of the forecast.

So, the job of the person receiving the budget is to verify the adequacy of the hypotheses and identify critical points that could derail the project. Everything else — sensitivity of indicators or minor deviations — can be worked on if the foundation isn’t based on "thin air" or because "Elon Musk did it this way."

What typical budgeting mistakes exist? You’ve already mentioned insufficient information gathering, lack of hypothesis verification, and ignoring whether the project aligns with the overall strategy. Is there anything else important?
Answer: Misalignment with strategy — this truly is the most important. I often encounter situations where a project is presented simply because it’s "cool" in itself, without analyzing how it affects our company.

Interestingly, there can be a reverse situation: a project may be unprofitable, but it aligns extremely well with our strategy. For example, if our goal is to enter the top three market players. To achieve this result, we might consciously take risks: lower profits, engage in price dumping, and incur losses to gain market share and become leaders.

In such a case, we need to clearly calculate: will this lead to a cash shortfall? How much will our net profit decrease? Will this be accepted by the board? Are other managers willing to trim their budgets for the sake of a common larger goal? If the strategy is clear to everyone and the consequences are quantified — there are no questions; it’s a conscious managerial choice.

What is unit economics and how deeply should a manager dive into this subject?
N.T: Unit economics is a part of financial thinking that allows assessing the effectiveness of the smallest scalable unit of your business. For example, in a taxi service, such a unit could be a specific transaction, one customer, or one driver — and for each of these cases, the calculations will be completely different. We choose this "unit" — whether it’s the profitability of one bottle of drink or one brand in the portfolio — and analyze its profitability using specific indicators and approaches.

This topic traditionally raises the most interest among marketers, as their motivation often hinges on product margin or the success of launching a new product in the market. Aspects such as tracking customer loyalty or Software as a Service (SaaS) models are entirely based on unit economics. However, for managers in other areas — logistics, administration, production, or IT — it’s a useful but overly specific toolset.

Forecasting and Liquidity: How to Spot a "Storm" in Time

How should one correctly account for business finances at the start, and what should a founder know to avoid "burning out" during the launch phase?
N.T: Startup finances are a special topic, and I have a few solid recommendations. First: never plan for longer than 12 months at the start. This is your maximum planning horizon. Secondly, it’s crucial to determine your fixed costs extremely carefully — those that you incur regardless of whether you have sales or are still in the development or negotiation stage. Even if you are a solo entrepreneur, you have a “hygienic” minimum: living expenses, subscriptions, software, marketing. If you are developing an MVP (minimum viable product), your task is to make it as quickly as possible, as during this time you earn nothing, only “burning” money for process maintenance.

The third tip is to keep accurate records from day one. It isn’t necessary to immediately separate managerial and accounting records at a complex level, but it’s important to get used to operating within the legal framework. Taxes are also your fixed costs that need to be quantified, and as soon as there is at least minimal income, you must immediately start analyzing the effectiveness of each expense: how it contributes to your profit and revenue.

The most common and fatal mistake I observe in startups after receiving grants or investments from accelerators is misallocation of resources. As soon as funds come in, people rent luxurious offices, buy expensive cars, or hire top consultants. None of these expenses bring you closer to income.

I had a case where a team, having only a viable prototype created from make-shift resources, attracted $6 million in investments and managed to exhaust all that resource within a year. Four people, three of whom were developers, instead of coding the product, started “improving their living situation”: prestigious office, expensive cars, hiring a highly-paid financial director... As a result, within 12 months, the capital ran out, and the prototype did not turn into a market product. They simply didn’t have time to reach the market because they had nothing to show, and the budget for marketing was completely spent.

This is a classic mistake: it’s important to realize how every action you take and every penny spent works towards creating income. The question of record-keeping in the early stages can always be solved with outsourcing — that’s not a problem. The main focus should be on the product and liquidity.

What should be closely monitored to predict a financial crisis within the company or the unprofitability of its projects in time?
N.T: When it comes to company stability and crisis prevention, I would highlight two critical aspects. The first is operational reporting. Data should come in as quickly as possible, not a month after the reporting period ends. They may not be 100% accurate or complete, but they must reflect the current trend and the scale of events.

The second aspect is liquidity forecasting, which is an absolute must-have. It involves scenario analysis, forecasting, and budgeting cash flows. Here, I often see two extreme mistakes. Companies that always have money usually do not engage in liquidity forecasting at all. Those already in a crisis focus solely on cash.

Focusing only on cash flow is also a trap. When a manager only looks at account balances, they stop seeing the real margins in the profit and loss statement (P&L) or unit economics indicators. As a result, the company knows there’s no money, but does not understand the main issue: what exactly is causing them to lose it. To predict a crisis, one must maintain a balance between having resources today and understanding overall business model profitability.

We’re talking about the importance of quickly obtaining data, but where should it come from and how complete should it be to inform decisions?
N.T: Data that arrives quickly may not always be 100% complete, but it must be relevant. For a manager, relevance is much more important than absolute completeness.

An experienced manager already has certain expectations of the results even before receiving the report. Quick data is only needed to confirm or adjust these expectations within one or two days. It’s normal if a report is 95% ready and will be subject to further closing or updates. The main thing is that these numbers should already reflect a trend compared to the previous month/plan and show the scale. For example, if we are used to seeing expenses in millions and the report shows 1.8 million, we understand the scale and expect that after finalizing the numbers, it won’t jump to ten, but will at most reach two million. That is understanding reality.

In addition to operational data, I highly recommend constantly conducting a comparative "plan-fact" analysis and regularly updating forecasts. Not all companies have matured to this point, but it is critical. For example, you approved a budget for 12 months. If in January and February you did not meet the plan, then by March, it’s time to recalibrate the entire budget for the rest of the year based on the actual pace. One shouldn’t reassure themselves with phrases like, “It’s okay, we’ll catch up and exceed from April.” It’s important to maintain a realistic picture.

We continuously update forecasts not to punish anyone. Similarly, we cannot immediately hit the target in new projects with 95% accuracy. We compare facts with plans to understand where hypotheses failed to work and adjust the budget in time. This allows one to see whether the project is still leading us toward the goal or has already become unprofitable.

Unfortunately, there are cases where people work based on “moral-willpower” to the very end, afraid to recalculate the budget. Our task is to constantly "bring ourselves back to earth" and not let the numbers lie.

About the "Finance School for Non-Financial Managers" Program by kmbs

Are modern BI systems and dashboards sufficient for effectively managing a company’s finances, and how can a manager avoid getting lost?
Answer: Typically, companies use a standard set: BI platforms, dashboards built on operational data, operational and financial reporting. However, I personally do not particularly like the term "metrics" — in my understanding, they often depict a one-sided or distorted picture. What does it matter if you see the account balance daily? If you only look at one number and see nothing else, that money will run out one day.

That’s why, in our program "Finance School for Non-Financial Managers," we teach people to see interconnections. Finance is not a set of dry indicators, but a chain of processes. We begin from the top — from strategy.

Every manager must understand the strategic goal that is then broken down into specific quantified indicators. I always ask: what’s your priority by the end of the year – a million in the account or market share? These are two completely different financial goals. You can capture market share while being in the red, break even, or make a profit. In each of these three cases, we need different financial indicators.

When the board or owners say, "We must become top-3, but not at all costs," it signals to management what to focus on:

Which products should be the most profitable?

Where can we find the best supply conditions to save within the process?

Should we only work with wholesale clients?

Every financial indicator has its formula — numerator, denominator, or addends. These are your levers of influence. A manager must clearly know which lever to pull.

Let’s consider a situation: the goal is to become top-3 while maintaining a positive balance in the account. The financial director goes to marketing to understand the cost of leadership. If the cash forecast for such an aggressive strategy is insufficient, we form a solution: attract credit or private capital. As a result, at the end of the year, we achieve top-3 status, debt, and a surplus in the account. The goal is achieved, but there can be different pathways to reach it.

The primary task of our program is to teach managers to understand the criteria by which the external party (owner or management) will evaluate their success. You have to not just look at the dashboard, but understand how your daily decisions change the financial picture of the entire company.

What main challenges do participants come to the "Finance School for Non-Financial Managers" program with, and what primary problem does it help solve?
N.T: The major trigger that leaders (CMO, CPO, CIO, or CTO without a financial background) face is the “language barrier” within the company. The situation usually looks like this: a manager generates a great solution, calculates it based on their own experience or “moral-willpower,” presents the project, and… encounters the financial function. Financial experts can easily crush the idea with terminology to which the manager is not accustomed.

I often start teaching with the question: “Do you often hear EBITDA being thrown around?” Because when someone tells you: “The project is great, but it severely cuts our EBITDA,” and you don’t quite understand how you “cut” it or what EBITDA even is, the dialogue hits a deadlock. Participants come with the request: “We know we are doing great things but cannot speak the same language as the financial people.”

The program teaches not just terminology but deep understanding of processes:

How exactly are the indicators formed in my company?

What does "effective project" actually mean for us?

What questions should I ask the finance team to understand their evaluation criteria?

For example, you propose implementing artificial intelligence. You’re told: “It’s expensive; the subscription costs a thousand hryvnias per person; we won’t approve such a budget.” If you possess financial reasoning, rather than walking away empty-handed, you would say: “Wait, thanks to this, we will optimize the work of several departments, save such an amount on operational costs, and will break even by then.”

The main request from participants is to learn to convey the value of their ideas to those who make decisions. The first barrier on this path usually stands with the financial director. The program helps to remove this stagnation, learn to understand the remarks of the finance function, and lead an argumented dialogue at the stage of approving any of their decisions. This training focuses on how to make your expertise visible and compelling through numbers.

What does the "gap between operational actions and financial result" mean, and why do managers often fail to notice the true cost of their decisions?
N.T: This gap arises when executives do not calculate the real financial impact of their steps, opting for the simplest solution on the surface. In finance, it’s always about choice: to open an in-house service department or outsource it? To buy equipment or lease it? Or maybe, do nothing at all and work within the throughput capacity of the current line according to the theory of constraints? Each of these pathways will reflect differently in reporting, and not always the one that seems the easiest will be positive for the company.

This is most evident in marketing. For instance, the team comes with the idea: “Let’s launch a new product! It will give us that coveted +5% market share.” The owner gets excited because it aligns with the strategy. The team convinces that the expenses are minimal: “We’ll just refine the old product, three weeks of the designer’s work, new packaging will add just 2 hryvnias to the cost — the margin will even be higher than now!”

However, at this moment, no one considers the “invisible” factors:

Alternative costs: to have the designer working on this project for three weeks, we need to pull them away from other tasks. What will we lose as a consequence?

Technical costs: to release a new product on the current equipment, the line needs to be stopped and reconfigured. How much does an hour of downtime cost?

Administrative costs: to service this additional 5% of the market, we will need a new logistician, financial analyst, and sales manager.

Legal risks: if this is an entry into a new market — add the taxes of another jurisdiction and registering a new legal entity.

This is how an attractive idea of “just redoing the packaging and three weeks of design” turns into a financial trap. Our program teaches managers from various departments to view the creation of any new service or product through the lens of financial evaluation. This helps to “filter” their plans through the logic of reporting before the start, to avoid conflicts and losses in the future.

The program may seem more challenging for managers without an economic education compared to those with some foundation. How does it create value for both categories of participants, and will the absence of experience be a barrier?
N.T: The value of the program is evident for both parties, as in real business all managers — regardless of their diplomas — meet at one point: the budget committee. There, no one measures background; they speak solely the language of effectiveness.

I am convinced that finance can be explained to everyone. My task as a teacher is to convey the concept to people even without an economic education, explaining complex things deeply but simply. I do not rely on my 15 years of experience as armor and say: “If you don’t know what a debit and credit are — go read textbooks.” We don't have such an approach. On the contrary, my ability lies in bringing the group together and providing tools that work in practice, not just in theory.

The main value that a participant obtains is the ability to engage confidently and adequately in any budget committee. This removes that "most feared fear" of the financial function. The program is not about accounting entries, but about understanding the logic of numbers, justifying decisions, and seeing the financial result of one’s work. Therefore, it will be equally useful for those who want to structure existing knowledge and for those starting from scratch.

What exactly does a participant gain after completing the program, and how significant will the changes be in their work and in the company's life after implementing this knowledge?
N.T: The main result that participants feel on a qualitative level is confidence. Confidence in justifying their decisions and a deeper understanding of their company’s processes. My favorite measure of success is when participants leave the program with a list of sharp and relevant questions to their financial director. This means that the barrier has disappeared and constructive dialogue has begun.

To structure the specific value, a participant addresses the following requests:

Argumented dialogue with the finance function: you finally speak the same language and understand what exactly finance people mean.

Economic justification of ideas: the skill to transform a “great idea” into a calculated project.

Assessment of alternatives: the ability to choose between different implementation options (e.g., outsourcing or in-house department) through hypothesis checking and numbers.

Budgeting and planning: transitioning from “guesswork” to realistic forecasting.

I believe that simply teaching metrics or KPIs is now outdated. The program is built on financial thinking. My task is to form neural connections so that a manager can translate any work question into the language of finance and assess it from the perspective of economic logic. Practically every topic — whether marketing, logistics, or HR — is connected to finance.

For example, one of the most powerful topics is economic evaluation of projects. It is universal for any industry. We learn to prepare a project budget not “for the sake of it,” but as a tool for managing risks and outcomes.

Ultimately, we do not just teach calculations. We teach the manager to be a full-fledged partner to the owner or board of directors, who understands where the business is heading and knows how each of their actions affects the financial outcome. Numbers don’t lie, and after the program, you will learn to see the truth behind them.