Budget setting calls for parenting skills

Finance directors should help other departments with their figures, says Chris Harris of Cipfa

Chris Harris
Chris Harris

Budget setting can be a painful experience. With the current level of change and uncertainty over the next year or two, some will be tempted to opt out of the experience altogether.

It might be assumed that finance people relish the prospect of making others squirm under the budget- setting spotlight, but in fact many of them would welcome the chance to miss that opportunity.

However, there's no getting around it - financial planning is even more important during times of economic uncertainty, and finance people have a key part to play.

There are various approaches that make it sound like budgets have been dispensed with, but managers are often disappointed to learn that these involve even higher levels of financial literacy. The charity sector is full of people who are passionate about what they do, but often they are not equipped for the discipline of financial planning, so it is the role of the finance person or team to help and advise - safeguarding the hopes and ambitions that managers have for their services and asking enough questions to provide reassurance about the level of risk being taken.

The primary drivers that set the financial agenda are often formed by individual or organisational experience. Managers and trustee boards generally rely on what was done last time, often underestimating the risk of existing activity and therefore overestimating the risk of new activity.

The senior finance manager needs to discern the natural prejudice of the charity and ensure that some compensating views are provided. Making the risk appetite of the charity explicit is a helpful technical approach that aids understanding of a cultural and social matter.

Setting a budget is not a neutral act, and it is the role of the senior finance manager to ensure that the decision-makers have been supported in coming to well-informed conclusions.

Parenting is a useful metaphor - the senior finance manager should not only look on dispassionately as decisions are taken, limiting their input to providing advice when asked, but should also ensure that the decisions are taken with the best information available. They would not want to be over-indulgent by making decisions for a manager, nor would they wish to appear too demanding by expecting an unreasonable level of financial sophistication. The level of support should be suited to that required by the budget manager.

Do it right and you allow hope to flourish, while making sure that there is a safety net appropriate to the task.

Chris Harris is resources director at the Chartered Institute of Public Finance and Accountancy

More Finance & IT at: third sector.co.uk/resources/goodpractice

Finance Advice

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in
RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now