Judith Miller: Does Brexit mean we need to reinvent our approach to financial leadership?

Confident financial leadership is now a must to handle the ambiguity of uncertain times, says the partner at Sayer Vincent

As an accountant, I’ve been thinking about the consequences of Brexit and the impact on charity finance directors. I’ve concluded that it is less about what we do and more about how we do things. How we show leadership now will make the critical difference.

The principles of effective financial governance remain unchanged and much of the day-to-day financial management will be business as usual. Dealing with uncertainty and challenges has been the norm for many of us since 2008 – so we’ve had plenty of practice.

Confident financial leadership that helps organisations to make decisions is a must now to handle the ambiguity of uncertain times. But what does that mean in practice? As a treasurer and a non-executive director of a couple of organisations, there are a few things that I am emphasising.

Cash flow is really important and it is easy to prepare a cash-flow forecast at a fairly high level. For example, I don’t want masses of detail, but just a few rows to summarise the payments our charity makes. The payments are mainly staff costs and HMRC, with a few regular payments for purchases and office running costs.

Identifying the timing for the receipt of income will show whether we have a problem coming up. The value of a cash-flow forecast is that we can update it regularly for the actual receipts and payments, and extend it a few months each time we prepare it. I like to be always looking ahead 12 months.

Then I think we should have an income pipeline that looks ahead as far as we can. What is committed income, probable, possible and just hoped for?

In order to prepare forecasts and pipelines, we need to be talking to our colleagues. You have to listen carefully, be ready to answer queries, and sometimes interpret a stream of consciousness into a financial plan. You can support colleagues by helping them to cost new activities, and even more importantly to price new projects. If a new contract is being discussed, finance should be helping to determine whether VAT applies, what the payment terms should be and how much work we should be promising to deliver for the fee proposed.

I find it particularly useful to coordinate a forecasting exercise once you have the half-year management accounts. Encourage people to stop worrying about whether they are going to stick to the original budget agreed long ago – it’s best to focus on six months actual and then forecast the next six months. It should give senior managers and trustees a much better idea of what is really happening. We often overestimate how much we can achieve in setting budgets and so actually underspend by the end of the year. It’s good to have such conversations and find out what is really likely to happen.

Non-financial managers are often nervous about budgets, contracts, forecasts and making decisions about money. Very often managers know much more than they realise and just need to build some confidence about financial plans and forecasts. A key role for today’s financial leader is to build the organisation’s confidence. Finance is not a mystery – we just need the right tools for the job.

Judith Miller is a partner at Sayer Vincent

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