Learning about finance will help you to be more successful as a maintenance engineer at every stage in your career
According to Harvard Business School, understanding finance is an important factor in career success. “Every individual makes a measurable impact on the success of the company,” says the article, “and understanding the impact of your job, using the tools of finance, can be the best first step to reaching a higher level of performance.”
This principle applies to those who work in maintenance engineering as much as any other sector, so here we explore why having a grasp of financial principles is useful and how you can develop your skills in this area.
Improve your chances of securing investment
Knowing how the financial cycle in your organisation works puts you in a stronger position when you need to make a request for funds.
“They don’t always understand that it’s not about whether it’s a great idea”
Ian Bell, Vice President of Engineering and Facilities, RS Group
“It’s really important for engineering managers and technicians to understand how the financial cycle in the business works in terms of budgeting and forecasting,” says Ian Bell, Vice President of Engineering and Facilities at RS Group. “Because they don’t always understand that it’s not about whether it’s a great idea – it’s about whether it’s possible to fund it.
“Engineers don’t always get that because they naturally think: ‘This is a good idea. We’ve got a problem. We need to fix it.’ But each business relies on funding to make the changes.”
Know when to have crucial conversations
All public and private sector organisations create a budget for their forthcoming financial year. This shows what the business expects to receive as revenue or funding as well as how much it intends to spend in each area of the company.
Begin discussing it with your manager as soon as possible
The process for creating the annual budget, however, typically begins at least six months before. Keep this in mind if you anticipate a major expense within the upcoming financial year and begin discussing it with your manager as soon as possible.
You need to ensure that they are convinced enough by your case to include it in their departmental plan for the year before it is submitted to the senior leadership, who decide how much of the budget to allocate and what to authorise.
Appreciate potential constraints
What about an unanticipated expense such as a sudden breakdown?
Organisations usually have contingency funds set aside specifically to cover emergencies. They also adjust their budgets over the course of the financial year by updating monthly and quarterly forecasts along the way.
There are, therefore, further opportunities to request funds. That said, large costs can still cause problems, especially for companies listed on stock markets who are under pressure to deliver what was forecast to investors. Deviating to cover an unexpected expense may make it more difficult to raise money from investors in future.
Ensure you’re adding value
Maintenance engineers also need to understand how they contribute financially.
In every project you work on, follow the finances throughout the life of an asset, urges maintenance engineering academic Dr Moray Kidd.
“It’s absolutely imperative that engineers are aware of whether we’re adding value or eroding value when it comes to key decisions in major projects,” says Kidd. “If you get that wrong, some poor decisions can make the entire project, from concept through to decommissioning, a basket case.”
“It’s about using your resources most efficiently to generate business value”
Dr Moray Kidd, maintenance engineering academic
Identify the company’s key business goals and how you can add value to them too.
“In operations, engineering practices increasingly come back to understanding what the corporate objectives are and how, as a maintenance engineer, you support them,” continues Kidd. “Year on year there will be big budget challenges but it’s about using your resources most efficiently to generate business value.”
Speak the language
Being familiar with business terminology, and confident enough to use it, is a vital skill.
“It’s fantastically important that engineers understand the language of business,” argues Richard Jeffers, founder and Managing Director of plug-and-play Industrial Internet of Things (IIoT) platform RS Industria.
“I have to be able to look at that financial modelling and…have a coherent conversation about it”
Richard Jeffers, founder and Managing Director, RS Industria
“My finance colleagues do financial modelling for me,” he says, “but I have to be able to look at that financial modelling and understand it so that I can have a coherent conversation about it.”
Bell agrees. Mastering the language of finance “changes your perspective and makes you feel more engaged with the business,” he states. “It’s a great concept to get engineers to lift their heads up and think about financial mechanisms.
“It just helps them play their game a bit better.”
Seize opportunities to develop
Look for sources of support if necessary.
Gary Harvey, Head of UK Field Services at RS, recommends that maintenance engineers take part in financial training for non-specialists if that’s available through your organisation. He attended a finance-for-managers course and found it invaluable. “It was just a fantastic thing for me to do,” he recalls, “because it equipped me for a grown-up conversation with my finance manager.”
“You also need to…be able to have a proper conversation about the business”
Gary Harvey, Head of UK Field Services, RS
This becomes even more important as your maintenance engineering career advances. “When you’re at a junior level, it’s pretty easy: all you’re doing is asking for money and trying to spend it,” says Harvey. “But when you become a manager, all of a sudden you go from asking for permission to spend to managing a budget for which you take responsibility.
“You also need to share the agenda of your colleagues across the wider business and be able to have a proper conversation about the business.”
Take your seat at the table
Bell shares this enthusiasm.
“The single best training or knowledge gain I’ve ever had was the finance for non-financial managers course I went on, especially coming from my background, which was engineering and operations,” he says.
“It makes you more able to survive in meetings where terms like gross profit and net profit are being thrown around”
Ian Bell, Vice President of Engineering and Facilities, RS Group
“If it does nothing else, it makes you feel clever. It makes you more able to survive in meetings where terms like gross profit and net profit are being thrown around,” he adds. “And once you are a manager, people assume you’ve already got this and you’re not able to stick your hands up and say, no, I haven’t.
“So, if you want to be better at your job, understanding finance is absolutely spot on – the most important thing you can do.”