Employees within your company may be experts at their jobs, but many who are outside of finance probably don’t understand accounting practices or even basic finance—even when their jobs require it. Oracle recently surveyed more than 9,000 consumers and business leaders in 14 countries, finding financial literacy is poor regardless of age, gender, or country, and that seeps into the workplace. The resulting report, Money and Machines: 2021 Global Study, looks at the role of robots and AI in consumer and business finances. Today, we want to dive deeper into the data regarding our findings around the lack of financial literacy in the workplace — and discuss how finance teams can improve it.
According to the survey, most people say they are managing personal and business budgets with little to no formal financial education. The majority of people learn about finance either on their own or through trial and error—and 39% are still learning. Given that eight in ten respondents report never learning about finances in school, financial literacy is a business challenge with real consequences.
Without a financial foundation, non-finance employees may not be performing their workplace duties as well as they could, and they may not be optimizing all the potential opportunities possible.
April is National Financial Literacy Month, which makes it a good time to hone financial knowledge and identify the gaps, both personally and professionally.
As consumers struggle to get a handle on their personal finances, many bring those same challenges to work. In the workplace, this lack of knowledge can impact entire departments and introduce mistakes that find their way to the bottom line. For example, non-finance department heads who manage their own budgets, profits, and costs centers may miss signs that the numbers they’re working with aren’t accurate and make poor decisions based off those bad numbers.
It’s not unusual for business leaders inside the C-suite to come from non-finance backgrounds. Regardless, their decision-making roles directly impact the bottom line. Consider the costs of choosing a cloud vs. on-premises ERP system. On the surface, a CIO or CTO might just look at the initial cost of on-premises vs. the monthly cost of cloud-based. However, to truly understand the financial impact of the on-premises solution, they need to understand the implications of capitalizing assets and depreciating them from a GAAP and tax perspective. Whereas with cloud, most costs are expensed as they are incurred.
Without an understanding of these basic financial principles, it’s difficult to know the true TCO of both options and to make a well-informed decision that reflects how this purchase will affect the bottom line, both today and several years down the line. This lack of knowledge—which many employees may not even realize they have—hampers understanding of how today’s decisions affect future business health.
In the consumer world, many recognize their lack of financial knowledge and acknowledge the need for help. According to the study, many believe that artificial intelligence can reduce unnecessary spending and increase on-time payments.
Business leaders, too, are turning to robots for core financial tasks such as approvals and invoice matching—as well as to help make their budgets and forecasts more accurate. Transactional, repetitive tasks are the best candidates for automation, and many believe that AI can eliminate human error and increase productivity. In fact, 73% of business leaders say they trust robots more than themselves to manage finances.
While people trust robots to manage finances, they still want people to help make big decisions. Consumers want personal financial advisors to provide guidance on major purchasing decisions, such as buying a house (45 percent), or planning for retirement (38 percent). Business leaders still want finance teams to focus on communicating with customers (40 percent); negotiating discounts (37 percent); and approving transactions (31 percent)
How does this come into play in the workplace? People across the organizational structure, including business leaders, now get financial information via self-service from enterprise resource planning (ERP) systems like Oracle Fusion Cloud ERP. Bolstered by chatbots and AI, these systems can give CEOs, COOs, and other department heads real-time data to support finance-related decisions.
But for those without a strong foundational knowledge of finance and accounting practices, it may be difficult to understand what is behind these numbers and foresee the ramifications of the decisions they make. That’s where finance teams come in.
While AI and machine learning are proving to be invaluable tools for automating repetitive tasks, improving accuracy, detecting fraud, and trendspotting, they are not a replacement for financial literacy.
To ensure that business leaders are equipped with adequate financial knowledge to make sound business decisions, organizations need finance professionals to level up to the more strategic roles of advisor and mentor. Finance professionals must take it upon themselves to leverage their financial expertise to help business leaders learn and make strategic decisions.
They can help fellow C-suite leaders interpret complex financial data and turn them into actionable insights, while encouraging junior members of their team to help their non-finance counterparts.
This presents a unique opportunity for financial professionals to become strategic partners and mentors, drive long-term growth, and make an impact within their organization.