An understanding of accounting is a valuable HR competency.
Human resources oversees the people assets that push and pull an organization toward its goals and objectives. Senior management regards HR policies and programs as success factors because they guide worker performance, which in turn has an impact on profitability. Those seeking a career in HR should follow the Society for Human Resource Management’s advice and take business courses, including accounting, to become well-rounded business people. Successful HR professionals in today’s competitive global market need to be financially intelligent. Like their counterparts in sales and marketing, they need to understand the language spoken by management: accounting
Budgeting
HR managers develop and control departmental budgets. An accounting background prepares them to regard budgeted items such as training, recruitment, staffing, incentives and performance evaluation in terms of their cost and dollar benefit to the organization. When accompanied by and based upon payback analyses, HR budget requests give senior management the information it needs to decide how to allocate available funds. Exposure to accounting also helps an HR manager appreciate corporate cash flow in the budgeting process. Employee vacation costs, for example, might be charged monthly rather than when actually incurred for quarterly financial reporting.
Proposals
When an HR manager wants to introduce a policy, service or program, he needs approval. Belief that the new activity will solve a problem is not enough; the cost must be justified. To sell his proposal, the HR manager must anticipate senior management’s questions. If he has studied accounting, he will be able to demonstrate the viability of his idea in dollar terms. When he wants to overhaul the orientation process to reduce new-hire turnover, for instance, his proposal should evaluate the current cost of hiring, training and lost productivity against anticipated savings and efficiency from the new program. This approach presents new-hire orientation as a profit-contributing business driver, not merely an HR nicety.
Return on Investment
Management wants to know that its decision to spend money will make money for the organization. An accounting class will teach an HR manager how to perform a break-even analysis and calculate return on investment to demonstrate cost-effectiveness of HR initiatives. The HR manager should be able to write proposals that show management how an investment in HR can increase productivity and improve profitability. Without this ability, HR professionals will be unable to convince management of the merits of their plans, particularly in regard to software and systems projects.
Performance Measurement
Accounting helps an HR manager grow comfortable with crunching numbers and interpreting performance measurements related to inventory, customer satisfaction, sales and quality control. More importantly, the HR manager trained in accounting can look beyond his department to identify troubling trends that might be HR-related. For example, an increase in shrinkage in a retail store may indicate the need to revise staffing levels, hire loss-prevention personnel, develop training programs and introduce employee incentives. The HR manager can illustrate the need for action by applying accounting principles to paint the solution as a cost-savings exercise that reduces theft.
Author: Samuel Boadu ( MABE,AMABE)
Network Marketing at Helping Hands International
