Each month end the figures produced should be robust and compiled from high quality working papers, but also cover all the material issues that can impact on the end forecast position. Credibility is on the line and finance teams should have this firmly in their sights when carrying out their duties as Boards should be not be given any excuse to think the unthinkable and outsource elements of the finance team.
There should be no great surprise that March every year that the forecasted position is the actual position, with only material and genuinely unforeseen items making the actuals different than the forecast.
This is not to say that every estimate and accrual has to be recrafted and reworked each month end, which may have the smallest of changes to that accrual, the materiality concept should be at the forefront of senior finance staffs mind when agreeing the month end routine.
Finance departments are full of staff who are creatures of routine and feel that they aren’t doing a quality job if they don’t check every last detail, but this does not add any value to the close down process, if the accrual is much the same every month. Remember we are dealing in millions here, think materiality at all times.
Credibility, why does this matter, after all as accountants we just report the actuals. Well I’m afraid that’s not strictly true, yes one of the roles of an accountant is to report accurately what has happened but equally as important is the ability to forecast the outturn. This is particularly the case in todays NHS, where Control Totals are paramount and there is less slack in the wider system to absorb any blips that may arise across the system.
Focus the team on that which is important and constantly review, this isn’t to check upon anyone it’s about letting as many pairs of eyes (and minds) look at the whole picture regularly. Peer group review can be a useful tool here, where colleagues question each other on what has been done, this will hopefully flush out the very obvious things and allow a broader based ownership of the out turn position. One where the team can monitor, review and adjust throughout the year to deliver what the team has been saying it will deliver through the year.
Crucial to this peer review is ensuring that the finance team is “hardwired” into the workings of the organisation and that they are seen an integral part of the service team, in much the same way a nurse would be part of the service leadership team. Understanding the business is not a new concept but its fundamental to the success of the finance team if they are a major part of the senior leadership of each service team, and then to provide the appropriate and considered view as to what is achievable at the year end.
See you on the other side!!