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CTOs at most Fortune 500 companies do not need a strong working knowledge of double entry accounting beyond accruals and capex and how it depreciates. You can

CTOs at most Fortune 500 companies do not need a strong working knowledge of double entry accounting beyond accruals and capex and how it depreciates. You can be ahead of most technology peers by simply knowing the basics of accrual accounting. How to learn it? When working on a project, talk to the finance person you work with about the accrual process. They will be happy you asked. If they don’t help, google “when should I accrue an expense or revenue” Once you get that down, you will want to spend a little time doing some NPV practice. When it comes time to getting your project approved, you want to show benefits in your NPV model. 99% of this is not the math around the NPV, that part is easy. The hard part is getting business partners onboard with supporting the benefits case. Most finance people at large companies are mainly doing basic math, but doing it well and spelling out logic in a small program called a financial model. The best way to get good at this besides working in finance is to model everything you can. Small widget models are the key to building that skill

jonahbenton 6y ago
Absolutely, very few CTOs in my experience understand double entry or know how to read a balance sheet. To their detriment, IMO, but there are all kinds of effective CTOs across all kinds of orgs. But OP was asking for guidance in learning how to engage on those topics- as opposed to communicating about technical things to that audience. Hence the recommendations. I agree about the value of NPV, tho I would argue that NPV without some accounting chops is tricky waters. "Value" in that context has an accounting meaning, not the largely useless goofy ROI calculations that tech folks usually create.
- wtvanhest 6y ago
  People are too quick to recommend accounting and finance books. Or... recommend super complex material because they think the subject is complex. If his/her goal is to learn what it takes to be more effective at the finance piece, they should follow my advice. If they want to go deeper for fun later, they can, but it won’t have as much value as improving the 3 things I mentioned.
  - jonahbenton 6y ago
    Don't necessarily disagree, but the point about what to accrue- I would posit that ground knowledge of both accounting and tech is important. An asset is from a tech perspective is different from an asset from a finance perspective. A given effort towards a specific end may be considered creating an asset from a finance perspective and creating debt from a tech perspective. Conversely, it may be valuable from a finance perspective to classify work as opex that is actually asset building from a tech perspective. The language and semantics don't translate cleanly. Agree tho they can start in those areas- and of course just talking across domains is infinitely valuable on its own accord. Cheers.
  - conductr 6y ago
    I’m a Corp finance guy and agree with your comments more than most on this thread. Very little value in knowing double entry accounting. It’s actually a key difference between most finance and accounting. I don’t even deal with that stuff. I know all about how it works sure, I had to take accounting classes in college but it’s not a routine part of my job and certainly no other executives. Accrual is important. Mostly because it impacts timing and gives you some levers to adjust to make the financial statements the way you want. Eg depending on your goals, you may want to form a strategy on when to sign a vendor contract. Financial statements is where it’s at though. And it’s easy to learn from a book. However, what you need to learn, is how this general knowledge fits your company. This is really the difference between good and bad CxOs (and I’ve seen my share of both). This is a different path. It’s metrics and KPIs. It’s strategy and knowing what’s important for the company. Are you conserving cash, are you growing at all cost, prove you have an ROI on your project, prove you can execute the project as promised, articulate why a project is off the rails (signal risk). A lot of this is financial politics, but if you talk the talk and earn credibility you’ll be seen as has a strong fiduciary over your domain. Also, depending on the size of your company, get a finance guy that reports or has a dotted line to you. If company is too small for that, you can just build a very good relationship with the finance team. I’m my experience, 25%-50% of our job is partnering with other executives; meaning we educate them (comprehension And prep for meetings with other executives/BOD) and we have full scope knowledge of what every other department is doing.

jonahbenton 6y ago

Absolutely, very few CTOs in my experience understand double entry or know how to read a balance sheet. To their detriment, IMO, but there are all kinds of effective CTOs across all kinds of orgs. But OP was asking for guidance in learning how to engage on those topics- as opposed to communicating about technical things to that audience. Hence the recommendations. I agree about the value of NPV, tho I would argue that NPV without some accounting chops is tricky waters. "Value" in that context has an accounting meaning, not the largely useless goofy ROI calculations that tech folks usually create.

wtvanhest 6y ago
People are too quick to recommend accounting and finance books. Or... recommend super complex material because they think the subject is complex. If his/her goal is to learn what it takes to be more effective at the finance piece, they should follow my advice. If they want to go deeper for fun later, they can, but it won’t have as much value as improving the 3 things I mentioned.
- jonahbenton 6y ago
  Don't necessarily disagree, but the point about what to accrue- I would posit that ground knowledge of both accounting and tech is important. An asset is from a tech perspective is different from an asset from a finance perspective. A given effort towards a specific end may be considered creating an asset from a finance perspective and creating debt from a tech perspective. Conversely, it may be valuable from a finance perspective to classify work as opex that is actually asset building from a tech perspective. The language and semantics don't translate cleanly. Agree tho they can start in those areas- and of course just talking across domains is infinitely valuable on its own accord. Cheers.
- conductr 6y ago
  I’m a Corp finance guy and agree with your comments more than most on this thread. Very little value in knowing double entry accounting. It’s actually a key difference between most finance and accounting. I don’t even deal with that stuff. I know all about how it works sure, I had to take accounting classes in college but it’s not a routine part of my job and certainly no other executives. Accrual is important. Mostly because it impacts timing and gives you some levers to adjust to make the financial statements the way you want. Eg depending on your goals, you may want to form a strategy on when to sign a vendor contract. Financial statements is where it’s at though. And it’s easy to learn from a book. However, what you need to learn, is how this general knowledge fits your company. This is really the difference between good and bad CxOs (and I’ve seen my share of both). This is a different path. It’s metrics and KPIs. It’s strategy and knowing what’s important for the company. Are you conserving cash, are you growing at all cost, prove you have an ROI on your project, prove you can execute the project as promised, articulate why a project is off the rails (signal risk). A lot of this is financial politics, but if you talk the talk and earn credibility you’ll be seen as has a strong fiduciary over your domain. Also, depending on the size of your company, get a finance guy that reports or has a dotted line to you. If company is too small for that, you can just build a very good relationship with the finance team. I’m my experience, 25%-50% of our job is partnering with other executives; meaning we educate them (comprehension And prep for meetings with other executives/BOD) and we have full scope knowledge of what every other department is doing.