The first way to know if you are getting bad financial advice in your business is when the advice starts with, “My friend told me” or “I heard that.” I have people tell me all the time that their friends are doing X, Y, Z and so they want to do that too when it comes to their business’ finances or their tax situation. Unless your friend is a qualified accountant, or perhaps an economist, then relying on their second-hand description of a financial strategy that they think you should employ is not the way to have sound financial advice. The financial strategy of your business should hinge off your business, and your vision, as well as your own personal circumstances. There is not a one-size-fits-all financial strategy, and so the advice that your mates might give you down at the pub, although I am sure 100% well-meaning, is not the way to go when it comes to your business’ finances.
The next way to know if you are getting bad financial advice in your business is when it comes from a professional, or otherwise, who has not actually asked you about your needs and your business’ needs. You cannot get great advice around your business’ finances if the person has not asked you a lot of questions about your business and the financials, questions that go deeper than they can just read from a profit and loss account. Does your accountant really understand your business? If they don’t, if they don’t really understand what you do, if they don’t really understand your vision, then how can they support you fully in achieving it? The short answer is that they can’t. Sure they can pull together your annual accounts and your tax return, but are they really supporting your business and your business’ finances, and are they actually in reality best placed to be giving you financially strategic advice?
The third way to know if you are getting bad financial advice in your business is if you feel pressured or rushed into a decision by the person giving you financial advice. You should never feel pressured into accepting financial advice from anyone, whether it be your bank manager, an insurance sales person, or your accountant. Finances are extremely important and if you need time to think through decisions that affect your financial situation that is neither good nor bad. It is what it is, and you should be respected in that decision.
So how can you protect yourself? First off, trust your gut even if the other person is a financial professional. If you don’t feel happy with the advice then don’t take it. If you need to seek a second opinion on that then do it. Next, understand what you are looking at when you see a profit and loss and a balance sheet. Know what your business’ financial reports are telling you. If you don’t understand then ask someone to explain them to you. It is not a stupid question. It does not make you seem silly in any way to ask for those things to be explained, and make sure you check out reviews and recommendations for the financial professionals that you do choose to use. I hope this episode has been useful for understanding how to know if you are getting bad financial advice. Thank you so much for listening. Until next time, let’s find the clarity in your numbers, increase your wealth, and get more money in your pockets.