Finance for non-financial managers in the canton of Geneva: how can managers distinguish margin from cash before approving expenditure?

Geneva brings together private banks, international organisations, commodity trading houses and watch brands within a small area, with multicultural teams working in both French and English. For SHR's finance programme for non-financial managers, the management question is precise: how can we check that a manager distinguishes the effect of expenditure on margin from its effect on cash before approving it?

What the literature establishes

Annamaria Lusardi and Olivia S. Mitchell (2014, Journal of Economic Literature) review research on financial knowledge and its role in economic decisions. Their review documents links between financial understanding and behaviour while examining the difficulties of identifying causality. It supports taking these skills seriously, but does not demonstrate that an accounting course automatically improves managerial decisions.

Simple rules that make concepts usable

Alejandro Drexler, Greg Fischer and Antoinette Schoar (2014, American Economic Journal: Applied Economics) experimentally compared conventional accounting training with instruction based on simple rules among microentrepreneurs in the Dominican Republic. The simplified approach improved certain financial practices, particularly among participants with weaker initial skills. For managers, one teaching option would be to ask separately “when is the expense recognised?” and “when is the money paid?”: this is an application to test, not a finding of that study.

The hasty conclusion

It would be tempting to conclude that finance can simply be replaced with a few rules of thumb. Yet a positive margin does not, by itself, tell us whether cash is available to finance inventories or accommodate payment delays. In a hypothetical Geneva commodity trading case, a commercially attractive transaction could therefore tie up cash before the customer pays; the simple rule should open the analysis, not close it. (our executive and employee training programmes)

What the evidence and current practice cannot establish

These studies do not concern managers in Geneva's private banks, international organisations or watch companies, so their transferability requires examination. Relevant indicators also differ between these activities, and shared vocabulary does not guarantee shared understanding. In a bilingual team, translating “profit” as “bénéfice” does not establish whether everyone distinguishes accounting profit, available budget and bank balance.

A practical check in Genève

For a Geneva team, a practical application of the SHR programme would be to work through a hypothetical watch order involving an advance payment to a supplier, delivery and deferred customer payment. Before and after training, use two versions of comparable difficulty, in French and English, and ask participants to place expense and revenue recognition alongside cash payments and receipts on a timeline, using explicitly supplied accounting conventions. The measure would be the proportion of responses correctly identifying a period of cash need despite a positive margin, against an answer key approved by the finance function. This check would make learning verifiable without, on its own, proving a lasting improvement in actual decisions. To go further: explore the Finance for Non-Financial Managers training in Geneva in the canton of Geneva, or browse our executive and employee training programmes in Switzerland.

In pictures: Finance for Non-Financial Managers in Geneva

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