What the lessons of the past can tell us about the future

Finance departments should pay attention, says Chris Harris of Cipfa

My organisation, Cipfa, is in its 125th anniversary year.

A great number of charities were founded in the second half of the 19th century, and many survive today. Cipfa as a charity is fairly recent, having been registered in the 1960s, but the organisation remains true to the principles agreed at our first meeting in Manchester in 1885.

There is some fun to be had thinking about what life was like five generations ago. However, according to Tim Smit, co-founder of the Eden Project, writing recently in a National Trust magazine, we are all too obsessed with the past and should instead give more thought to current issues. So how should we react to history - is it all bunk, or can it be a source of enlightenment?

This question matters for finance people, because we often have to bring historical perspectives to an issue. We are relatively good at history - trends can be picked up from easy-to-source data and presented with a degree of confidence. The future is a bit more tricky: our projections are often laced with plenty of caveats to cover us should matters not work out as we have indicated.

When organisations are looking for help in deciding what to do in the future, the first place they look is the past. And it is the duty of the finance director to provide as much enlightenment as possible.

If information about the past is going to be of value, there are three points to remember. First, all the relevant numbers should be included. Without them, a table might appear to tell a simple story of success or failure. But a growth in income, for example, should be compared with the degree of investment made to achieve it. Simple stuff - but in the world of charity fundraising in particular, the payback period is often several years. An organisation must have the full picture for long enough to judge accurately the relative success of a particular activity.

Second, the numbers need context. What was happening in the wider environment? An overseas aid charity fundraising in the wake of the 2004 tsunami would have had more success than before the disaster; historic data should identify the relevant external issues.

Third, the numbers need to relate to the action being considered. It is often the case that numbers are provided because they are available, rather than because they are linked to the issue in question. The best option may be to postpone a decision until the numbers are available - that can be a test of the extent to which decisions are really based on information.

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