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8 October 2014, 13:04

Freedom from the pursuits of profits

Last year I started writing a column for Third Sector magazine. My brief was to make finance more interesting and exciting. Now, whether I’ve succeeded to that end others will judge. But I think that as finance is actually interesting (and I might even go as far as exciting!), my job shouldn’t be that hard.

 Good financial management is the lifeblood of any successful organisation, whatever the sector. It’s perhaps even more of an imperative for charities; not because the bottom line is the driver but because it is not. Consequently, I think charity finances are so much more engaging and important than their business equivalents. When your goal in life is to maximise return to shareholders, financial information and its role is quite linear. Your success is measured by the financial results. But in charities, whilst we clearly need money, it is just a means to an end. It’s not the end in itself.

So in charities, financial information can be liberating. We’re often told that we can learn so much from business. Yes, there may be lessons to heed. When behaviours are professional, aid our pursuit of appropriate commercial opportunities or help us conduct our activities with legal and procedural rigour that drives out inefficiency and avoids the risk of abuse, it’s worth listening. However, when the sweet spot of inspiring financial leadership within a charity is found, it is charity finance professionals who could aid their business peers.

As the economy recovers, I wonder whether the emphasis on what, and not how, business is done, alongside the relentless pursuit of profits, might lead to a backwards step into “profit at all costs”. For example, Tesco found itself in the headlines recently. Share prices dropped to a decade low, members of the executive team were suspended, lawyers and a Big Four firm called in to investigate suspicions of an overstatement of profit. Why? Perhaps because Tesco appear to be losing ground to their budget supermarket rivals? Whilst clearly I don’t know the full facts, if there has been an overstatement is it because success is measured only by financial performance? Charities, on the other hand, have overt permission to measure their success by understanding their impact; how and what they are doing to deliver public benefit. If a business focus makes us judge what we’ve achieved on the financial performance alone, or sidetracks us into thinking that there is a perfect amount to spend on admin, a magic fundraising ratio or a universal figure to keep in reserves (dictated by our size or nature rather than what we do), then we undermine the power of financial information.

So why do I find it exciting and stimulating writing about charity finances and good financial management? Because finance is an underrated tool; one which, when stripped clean of the imperative to turn a profit, can release you to make intelligent decisions in the interests of your beneficiaries. Call me sad, but that rather floats my boat! Caron Bradshaw, Chief Executive, CFG

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