#18 Lunch and learn: Trust your accountant, but trust your gut more

I’m sure this has happened to you too.

Yesterday I took my four children out for a quick dinner (which sounds fabulous but in reality just reflects a home with an empty fridge). When we finished I went to the till to pay and was a little surprised by the amount. It just felt more than I expected.

But with 3 bouncy boys and a busy toddler under my arm I thought I’d probably made a mistake in my mental arithmetic so I just paid up.

On the way to the car though I paid a little bit more concentration to my mental maths and the number still didn’t feel right.

So I turned back, asked for the detailed bill, and sure enough we had been charged for some things we didn’t have.

It was an honest mistake and this sort of thing happens all the time. I wasn’t (that) cross with the cafe, but kicked myself for not trusting my initial judgement.

And that’s what today’s tip is all about: making estimates and trusting your gut.

What it is

Permission to trust your gut ahead of the brains of an expert.

Why it works

Experts make mistakes, more often, in fact, than our gut instinct. I know this sounds a little far fetched but much has been written on the subject (a great book if you are interested is Blink by Malcolm Gladwell), and you’ve probably got personal experiences to back it up too.

What you do

Well really the message is that if your gut is telling you anything, stop and listen to it.  But in business I think it’s important to act on your gut feelings when experts are involved, particularly accountants and bookkeepers.

Now, I’m not singling accountants and bookkeepers out because they don’t do a good job – they do – but because we tend to trust the numbers they produce more than we trust our sense of what the numbers should be. And that can have dire consequences.

I once worked with a business that had employed an accountant to look after all the financial records. For the 18 months after the accountant arrived the owner was pleasantly surprised at how the revenue line was growing. Okay, so the cash wasn’t coming in but at least people were buying. Except they weren’t. The accountant had made mistakes in the, albeit complicated invoicing process, and had effectively double-billed the customers. Nearly two years after the accountant started, the owner discovered that his business was only half as good as he had thought. And barely profitable.

When I asked the owner how he hadn’t noticed, he said that he thought it ‘felt a bit too good to be true,’ but that he trusted the accountant because he, himself,  was ‘rubbish at numbers’

And there are lots more similar stories.

Accountants and bookkeepers are human, and humans make mistakes. So if something doesn’t feel right to you, keep nagging until you get an answer you are satisfied with.

What if you don’t have a natural gut instinct with numbers? Well you can still be on the look out for odd information but doing just a little bit of upfront thinking. Here’s how:

Treat your accounts like a restaurant bill.

When you eat out I’m sure you, like I, tally up in your head what you  – roughly- expect the bill to be and then you check your guestimate to the actual. If your number is close to the total, well you might just say that’s good enough to pay, but if it’s not you’re sure to double check the invoice detail.

Same with your accounts.

Before you get the monthly (quarterly or annual…..) accounts that your bookkeeper or accountant does for you, estimate your revenue, gross margin, overhead costs and profit. You don’t need to go into detail and/or find information you help you, you simply think about it and write down what you are expecting.

When you get the accounts compare them with the numbers you though of. Are there any big anomalies? If so have a chat to your accountant about the detail until you are happy as to why your number and his/her number are not in line with each other.

This is such a good discipline, and you will be surprised at how many misunderstandings and mistakes you find! It also works well for checking your own figures, if you have bravely taken on doing the job yourself.

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