Facility cost line is usually amongst the second or third highest of most companies’ expenditures. As a result, facilities attract a lot of the attention from the Financial Department. Therefore, in order to have a successful relationship with this department and with the Board, the Facility Manager cannot leave financial issues aside. A Facility Manager must have skills oriented to the interpretation and presentation of financial data, understanding of the impact of his budget to the company’s financial estate and must also be familiar with financial ‘lingo’ and technics.
Excellent Facility performance and a team focused on good service delivery and quality make a solid foundation to reach the department’s success within the company, but at the end of the day every business decides around money. Language, tools and technics used by the finance teams are basic and must be understood and used by Facility Managers.
As a minimum, a Facility Manger’s financial knowledge must include expressions such as Immediate Liquidity Coefficient, Return of Investment (ROI), Net Present Value (NPV), Internal Rate of Return (IRR), Return on Capital Employed (ROCE), etc. This could be the hardest topic for a Facility Manager as the ‘lingo’ used by financial professionals to describe and manage corporate finance may become an insuperable obstacle for the uninitiated.
Registering, controlling and follow-up of building expenditure is a vital process that helps maintain the department´s funding and also fulfils the obligation of mandatory reporting. On the other hand, the same process gives useful information on tendencies, opportunities and problems that a Facility Manager needs in order to make efficient decisions and which enables him to explain the reason of any future action to be taken. As a result, Facility Managers need to spend part of their work time understanding the accounting systems used in order to fulfil the legal requirements and so that budgets and assets are properly managed and financial information is produced.
Proper cost budgeting and provisioning is a very important task for any Facility Manager. Fixed costs can significantly cut unforeseen expenses. The lack of understanding of these issues can entail big problems when companies are looking for cost reduction. Good financial management will help predict future costs through reference to past costs. This is a critical area within the financial knowledge any Facility Managers must use to support their planning and future decision making.
Financial planning of any Operational actions to take place and the control system designed to measure its results must be thorough in order to allow the company’s success as a whole, but of course we should not forget the Cash Flow, as it is a company’s fundamental mechanism for income and expenses control. As a result, and taking into account the huge amount of costs that derive from buildings and its services, we conclude that Financial Management must be a matter of interest and concern for any Facility Manager.
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