For those of us whose financial year starts on 1 January, I would imagine you, like me, are deep in budgeting and forecasting future years. This is the time of year where I find myself:
- Operating on the absolute minutiae of each nominal code and how that expenditure will be mapped across the year.
- Trying to remember which projects are being proposed by each department and working out whether these align and are achievable.
- Pulling all these reports together to one coherent master sheet for senior leadership team (SLT) review.
I find it too easy at this point to focus on ensuring that all the data reconciles, that the spreadsheets are pulling through correctly and that the overall figure is in line with strategic intent.
Different audiences with different needs
This process ignores the different needs of SLT, directors and trustees, who all require different information and data presented to enable them to enhance their decision-making.
Finance, as we know, is one part of the puzzle – one chapter in the book – that needs to be pulled together to enable the trustees and executive team to tell the story.
How do we make the budget and forecasting fit into the story needing to tell?
The story that needs to be told to each audience will differ:
- SLT/management team will need the finance chapters to be detailed, bringing each departmental story together, showing how each impact on each other and what decisions need to be made to bring the story to press.
- Directors/chief executive will need a concise version of the story detailed above, with outstanding issues raised.
- Trustees: the finance chapter should be one short chapter that clearly shows how the proposed budget will impact on the key ratios and metrics. This should then be joined with other chapters (such as the strategies from other departments) to provide a full story to trustees of how their strategy will be delivered.
Of course, to extend the analogy further, trustees need to be reminded of the back story (the prequels?) – what is the balance sheet worth, what have they agreed as their target reserves etc?
These stories should not be a point-in-time book, but one that shows the reader how the author expects the story to develop (for instance, the fundraising ratio is budgeted to be 2.45:1 but should improve to 3:1 in year two because of…).
Each group needs to understand the risks that will prevent the story being told and how the story will change if those risks materialise (both as opportunity and failure risk).
I may have stretched an analogy to breaking point, but hopefully it acts as a useful piece to think about.
What audiences are we talking to? What different stories do they need to hear?
Does the chapter we, in finance, are writing align with the rest of the story?
Chris Coopman is financial controller at RABI
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