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Management Accounts: Parkinson's Point of Vanishing Interest

Post by CFG

Although written over half a century ago, C. Northcote Parkinson's humorous observations in Parkinson's Law * are as relevant now as when they were first published. Here we learn such things as the Science of Committology and the fact that the most important deciding factor in how the voting at a meeting will go is not the eloquence of the arguments, but the seating plan.

However, it is the chapter on High Finance, where we are first introduced to the Law of Triviality (the time spent on any item of the agenda will be inversely proportional to the sum involved) which I think is of most interest. Here his phrase “the Point of Vanishing Interest” neatly sums up the situation that I am sure many will have experienced:  we arrive at the finance part of the agenda and previously animated trustees fall silent, shuffle the strange looking papers in front of them and look, if not out the window or at the clock, then to the Treasurer for comfort. Is the lack of any questions a sign that all is clear and understood by all? I think not.

Why is it that so many lay trustees – and by that I mean those who are neither professional accountants nor, in the view of their fellow trustees, the ones who understand numbers – seem to fail to be engaged by the management accounts presented to them? The rainy day we have long been saving for is here, so it’ is more important than ever that all trustees feel confident that they understand the underlying finances of the organisation and are able to take the right decisions to weather the storms ahead.

My years of accountancy training have taught me that a nice page of figures tells a story, possibly a very revealing one. I long to produce a set of management accounts which lets all trustees, not just the financially minded ones, read and understand that story for themselves and feel confident that they can ask questions, without heavy guidance in one direction from a commentary.

There are no rules where management accounts are concerned but there are plenty of conventions. If the existing management accounts are not catching trustees’ attention then it is time to turn the conventions on their head, start again with a clean slate and take an imaginative look at the problem from the trustees’ point of view. And that is just what the Adrian Randall prize is going to let me do.

Hilary Seaward is the winner of the 2013 Adrian Randall Prize to improve charity finance. Hilary’s proposal is to make management accounts more accessible to trustees from a non-finance background. CFG will be working with Hilary in further developing her idea and she will be providing an update of her progress at the Annual Conference on 08 May 2013. * Parkinson, C Northcote (1958) Parkinson's Law or the Pursuit of Progress, London John Murray.

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