In Hilary Mantel’s wonderful Man Booker Prize-winning book, Wolf Hall, Thomas Cromwell gives the household accountant Thomas Avery a copy of Luca Pacioli’s Summa de Arithmetica. Cromwell has great hopes for Thomas Avery. “It’s easy to employ some child who will total the columns and push them under your nose, get them initialled and then lock them in a chest. But what’s the point of that?” he ponders.
“The page of an accounts book is there for your use, like a love poem. It’s not there for you to nod and then dismiss it; it’s there to open up your heart to possibility. It’s like the scriptures; it’s there for you to think about, and initiate action. Love your neighbour. Study the market. Increase the spread of benevolence. Bring in better figures next year.”
As I read, it occurred to me that this fictional soliloquy from 1532 could hardly be a better starting place for the FD. The whole point of accounting, in my view, is to create something that can be acted on. Even (or especially, shareholders might say) annual accounts are the basis for some pretty big decisions, including the ability to pay dividends. It would be a good test for any finance function to ask of every accounting report: “what is this for?” and “what decisions are expected to be made by the readers from it?”
Those questions lead to considerations of whether the reports are going to the right people and within the right timescale to make pivotal decisions. And further, they lead to considerations of whether or not anyone can reasonably be expected to make those decisions off the back of such reports, delivered in their current format and to their current timing.
But you don’t need consultants to do a review of this sort. While external help may be required to effect the necessary changes, that help will be better focused and managed if the “Thomas Cromwell” test of Hilary Mantel’s masterpiece is first applied by the preparers and receivers of the reports themselves.
This is ever true at board level, where the need for independent directors to receive sufficient, but not excessive, information in time to digest and talk about it with the FD prior to board meetings is essential but not always achieved. How often have we all been faced with too much data, too little analysis and opinion, too late to digest, debate or correct the matter? More often than most of us would care to admit, I would wager.
Of course, the above criticism applies in spades of equal measure to reports from auditors and to advisers. The pressure from below, combined with perceived regulatory pressures to demonstrate to the senior partner that everything has been covered, far too often leads to excessive verbiage or pages of supporting data that only serve to obscure the real issues, not illuminate them. The opposite problem.
Even in small enterprises, cost pressures often lead to the accountant producing the bare minimum – not necessarily in good time – and without much in the way of analysis. Cloud accounting is enabling the balance between preparation and analysis to be reset. Thomas Cromwell would approve.
Perhaps all accounting reports need a preface along the lines of: “the purpose of this report is to enable X to decide Y.” If this were done from the most basic summary reports in accounts payable, payroll or receivables departments upwards, the sense of ownership and pride in work within the accounting function could be enhanced. And it would promote the belief of those elsewhere in the business, that the finance team is making a worthwhile contribution.
I wasn’t expecting a holiday read about the rise to power of Thomas Cromwell and Anne Boleyn’s winning of Henry VIII to take me off into musing about the purpose and usefulness of accounting statements, but it did – and at far less cost than I have seen paid for less useful advisers, systems reviews and the like.
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