Let me tell you a story.

I started working with a client (we’ll call her June) who has a degreed accountant doing her bookkeeping and an outside tax person handling tax accounting. We started doing some cleanup work reconfiguring the balance sheet accounts and income statement accounts so they more readily measured June’s business.

One of the things that needed to happen was reclassifying owner expenses. From the operating perspective, those expenses didn’t belong in the operating costs of the business, so we appropriately classified them as such.

But her bookkeeper (we’ll call him Sam) insisted, “that’s going to trigger a tax audit.”

He got worked up about it, fed that back to June, and got her all spun up about it.

She understood what was happening after we explained that we were presenting the numbers properly in accordance with good accounting principles and trying to get financial statements to reflect the company’s operating position and results, rather than her personal piggybank.

But she told us: “Sam’s been with me for a while, and I trust him.”

That comment triggered me to look into what creates trust and what trust truly is.

The Three Types of Trust

As it turns out, there are three different types of trust in organizational relationships:

Deterrence-based trust. This kind of trust is based on the fear of reprisal if trust is violated. This type of trust is fragile.
Knowledge-based trust. This type of trust is based on the behavioral predictability that comes from a history of interaction. This type of trust is where we at TurboExecs come in.
Identification-based trust. This is the highest level of trust, based on an emotional connection between two parties. It’s earned over time.

It’s clear to me that June had knowledge-based trust with Sam…but that knowledge was never verified. How do you combat that?

Some of it is due diligence. We don’t always know what people’s credentials are and the knowledge they bring to the table. That can be verified through their website, conversations, talking to a trusted advisor with expertise, references, etc. I think that never happened with Sam — but it showed me an important lesson.

Trust…and verify.

Your financials are so important that you can’t trust them to just anybody. And I don’t think you want to!

Trust and verification go together. When we automatically trust someone due to their profession or degree, we can get in trouble and give our trust when it hasn’t been earned.

Trust is the foundation of relationships that develops over time. Verifying credentials is the due diligence you perform in order to not give that trust away blindly. It allows you to rely on another person because you feel safe with them and have confidence that they will not hurt or violate you.

At TurboExecs, some of the ways we build trust are with references, testimonials, referrals, and conversations. We know that there needs to be an “entry level” of trust with anyone who comes to us since we work with some of the most sensitive data a business owner has. Only by performing our services with the highest ethical standards, confidentiality, and professionalism do we build the levels of trust with our clients that allow them peace of mind to grow their businesses with complete confidence.

Click here to read more on the importance of trust.

Your CPA Shouldn’t Be Your CFO!

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