Finance 101 for Facility Management

October 24, 2012


Sometimes it can be difficult for facility managers to effectively communicate worksite success and needs to CEOs. Facility Managers have one language, and CEOs have another.

A significant portion of a CEOs lingo centers around finance. The first part of your job as an effective and proactive facility manager is learning this jargon so that you can appropriately communicate the objectives and value of your team and their work. Review the following terms and ensure that you have a working knowledge or their meaning and application:

  • ROI (Return on Investment)
  • IRR (Internal Rate of Return)
  • FTE (Full Time Equivalent)
  • Productivity
  • Simple Payback Period
  • Sunk Cost
  • Interest Rate
  • Annuities
  • Amortize
  • Depreciation
  • Reorder Quantity

The next step to communicating with company leaders and financiers, is realizing that your time and the time of your team has a monetary value. The old adage that “Time Is Money” is true – not only that, but the value of money fluctuates depending upon the economy here and outside of the U.S. That being said, rarely will your time and money be worth now what they will be worth only a year from now. As negative as this may seem, once you understand this, you will understand why company leaders are quick to tighten budgets and cut out the wiggle room. One of the most important skills you can develop as a facility manager is the ability to make cost effective decisions and present your projects to your leadership team using sound financial principles.

Research financial calculators and use them as a guide post to your worksite project planning. Become comfortable using the terms above so that you can apply them correctly in a formal presentation setting. And remember, whenever possible look for savings and alternative cost cutting measures to conserve your budget – your facility’s leadership team will be impressed with your careful thinking and planning and your ability to make their concerns your own.

For a detailed breakdown on how to conserve your budget during special projects, please contact the experts at Vanguard Resources directly.