Renee’s Rule™: Know what you don’t know.July 19, 2009
Over the years, I have had the pleasure of working with many wonderful CPA’s who truly put their clients’ interests ahead of their own. They ask the key questions. They know what they don’t know.
I have also, however, seen some CPA’s do some really appalling things; e.g.,
- Providing inappropriate advice ( When I arrived at my very first client, the company was on credit hold or COD with all vendors, bleeding cash, and faced with a threatened shut-down by the IRS. The CPA, blissfully unaware of the severity of the problems, was billing the customer for business planning assistance.)
- Being unwilling to recommend a change of CFO when that CFO was clearly unqualified (I’ve seen this multiple times and don’t know whether this happened because the CPAs did not realize the failings of the CFOs or because the CPAs did not want to risk losing their clients.)
- Recommending consultants based on industry or turnaround “experience” rather than on RESULTS (For the dangers related to this, please visit my post, THE EXPERIENCE FALLACY.)
- Giving false assurances (Several years ago, I had as a client a third-generation family-owned business. The company had experienced increasing losses for three years straight. The CPA had told the elderly majority shareholders, “Everything will be all right.” When I arrived, however, the company was at Death’s Door. The company survived, but it was an extremely difficult situation. We had to implement an out-of-court Chapter 11.)
- Preparing unrealistic financial projections because the CPA did not understand the business
It is really important that CPA’s–and other professional advisors–know what they don’t know.