Facility managers must create strong ties with the business managers of the company. This can be done by knowing the business you support, learning the language of the business and demonstrating it in the company’s strategic plan.
For example, an effective way to form a good working relationship with the vice president of marketing is to show how effective facility management can improve the performance ratio of sales to cost through cost reduction and avoidance.
The modern Facility Manager needs to be on top of the facilities group’s financial performance to truly understand not only how it’s doing but exactly what’s working and what’s not working.
By digging into the numbers you can determine where there are issues and most importantly, how to address them. Determining exactly where issues are cropping up is critical to improving effectiveness and efficiency.
Three Key Financial Statements
- Income Statement
- Balance Sheet
- Cash Flow Statement
Sometimes called a profit and loss statement, an income statement covers all the flows for a business in a given period (typically 12 months). It lists revenues (the money coming in) and expenses (money going out to all the vendors and service providers in the company).
Finally, it shows the difference between revenues and expenses—profits. Revenues minus expenses equal profit. As a Facility Manager, you need to understand the expenses that your part of the Facilities Management process contributes. This will give you a clearer idea of what effect you can have on the overall profits of the business.
The balance sheet shows assets and liabilities at a specific point in time, usually the end of a fiscal year. Assets are all the things that the business owns, such as a checking account, any properties held, and the receivables that are due to be collected from clients. These are all positive contributions to the balance sheet.
On the other side of the balance sheet are liabilities and equity. Liabilities and equity, added together, total up to assets.
The liability component is comprised of anything owed to someone. If you have 30 days of bills on the books that you owe to your vendors, that would be a liability. Any money that you owe your clients in deposits that are held on the balance sheet would also be liabilities.
Equity is the component of the business that the shareholders or property owners contributed to fund the assets.
Cash Flow Statement
The third key financial statement is less used, but nonetheless quite critical.
A cash flow statement takes the cash balance at the beginning of the year, goes through all the revenues and adds them in, removes all cash expenses, adds in any changes in capital expenditures or new capital expenditures, subtracts that from the cash, then adds in money that might have been borrowed from the bank.
It concludes with the cash balance for the end of the year. This statement enables you to understand the cash flow of the business.
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