Question

Based on the readings, video clips and your professional experience, explain why accounting/finance is an important knowledge skill for Human Resource (HR) managers, and the purpose of financial statements for HR managers’ career advancement.

Answer 1

Human resources are now considered as an asset for any organisation. Recent developments and researchers have regarded human resource as one of the significant factor of success, survival and profitability of an enterprise. Hence human resource management should be coupled with financial accounting for effective and efficient handling of the human assets. This said so, following are the ways were human resource manager can use financial accounting:

• For planning and budgeting: Planning and budgeting is an effective tool for development and controlling of resources. For a human resource manager, the area of knowledge is budget for training and development of skillets of human resources, talent acquisition activities, incentives and performance appraisal, etc. An HR Manager requires thorough knowledge of financial management and accounting to understand and make decision on these matters. Moreover they are in the advisors chair where they advise the top management with inputs and alternatives whole framing the human resources budget. Further they need to analyse the actual cash flows against that budgeted to look for any variations.
• For evaluation of proposals: A business is changing and every change is towards progress. Hence a change may involve new plans of hiring, developing or firing of resources. As such every plan may have the up side and the flip side. They have costs and benefits and above all, they've got alternatives. Hence the HR Manager may require to analyse these set of alternatives, their costs and benefits to make decision that are sound and viable to the business entity. Thus this requires better financial literacy.
• For Presentation in numerals: The top managers understand better when proposal is in numbers than comprehension. Hence an human resource manager should present the investments, their returns, including some break even analysis and other terms in numerals. He has to explain how the proposed idea of hiring, firing, developing or increase in pay will increase the productivity and profitability of the enterprise. All this will be possible when the HR Manager posses adequate financial tools and knowledge.
• For negotiations: Acquisition and retention of human resources is major challenge for any organisation and the front force is the HR. They negotiate and induce the potential resource to join or stay within the company. This may include bargaining with the employee. Hence the HR Manager should consider his range of bargain for acceptance or rejection for the price quoted by the resources. This again requires the manger to understand the cost and benefits as explained above.