The stereotypical image of the accountant is that you must be good at maths and spend all your working hours crunching numbers and staring at a computer screen. This is based on the misconception that finance is a technical subject. It does have its own language and rules, but you do not manage financial sustainability according to a formula. You cannot just look up the rules for running a charity's finances and press a button.
The data we accumulate in accounting and other records is worthless unless you see it as a symptom. The accountant is like the GP who gets various test results and then has to consider various explanations for those symptoms. Some explanations can be eliminated quickly if other data does not corroborate them. You build pictures of possible scenarios, then seek evidence to support or contradict your hypotheses. You might hold a hypothesis for a few months while you test it, sharing the results only once you have been able to see whether it stands up to scrutiny.
For example, you notice that the number of bookings on training courses fluctuate, so you start looking at the bookings month by month to seek a pattern. You can see there is a seasonal pattern, but it does not seem to be the same every year. You mention it to your assistant, who says she has noticed there is always a rush of bookings when school term starts. That's it - these are bookings from people with childcare responsibilities. The organisation knew the courses needed to be held in term time, but had not thought about the booking process. So you suggest the courses are planned and advertised much further in advance. Attendances rise by 25 per cent.
Recently I was asked to help at a not-for-profit where the chief executive felt the finances were out of control. About six months before, it had introduced project accounting systems, integrated timesheets and a new accounting system. It had more data than ever before. So why did it feel it had less control? I concluded there were a couple of significant factors.
First, it was looking at data only in granular form - lots of separate small amounts in various accounts made no sense. We needed to find meaningful ways to group the data and relate expenditure to sources of funding - that is, convert the raw data into information. Too little time had been spent on thinking about reports when the new system was set up - the charity should have started from the reports it wanted and worked back to how it should enter data.
Second, it was looking at data from one source. You build confidence in your data if you validate it by using different sources. The accountant and I looked at bank statements and got a sense of the trends for receipts and payments so we could produce a cash-flow forecast.
Producing the numbers is only the start. Data is meaningless unless it's translated into a language others can understand. This is the job of the accountant.
Kate Sayer is a partner at specialist auditors Sayer Vincent