Financial and Administrative Vigilance - Trust, but verify. . .

"Trust, but verify". . .

President Reagan was right

It was during the 1980’s, when dealing with Russian leadership, that President Reagan uttered the famous phrase, “Trust, but verify”. It struck a chord with the nation back then. And when it comes to managing finances and operations, that phrase rings through today with the same clarity.

Yet, it’s interesting when observing closely-held or small businesses, that although a high level of trust is normally placed with the bookkeeper-accountant or administrator, there is often a relatively low level of transparency, and an equally low level of follow-up or interaction to verify and/or cross-check his/her activities. The results can sometimes lead to disaster.

To set the stage, let’s make it clear that trust is a wonderful trait. The world and relationships are based upon trust, and that’s a good thing. People who work in the field of finance and administration with substantial responsibility expect to earn and receive our trust and confidence. If they haven’t done so, they shouldn’t be there in the first place.

However, for me as an individual who has specialized in the field of finance and operations, with an understanding of my fiduciary responsibilities to stakeholders, it has always been my expectation and assumption that in my role I must be transparent and above reproach. Furthermore, I've found that when transparency and openness are present, it builds and solidifies the level of trust, and ultimately the entire relationship.

So, where’s the rub? . . . The problem is that not all people working in the field of finance/administration have and understand this mindset, especially those working in smaller organizations. As an independent finance and operations consultant, I’ve been called into organizations to fix some type of problem/concern. And most of the time, it means interfacing with persons from the finance or administrative department, often the sole bookkeeper. On more than one occasion I've encounter some type of push-back and/or resistance when I start inquiring about specific accounting or finance matters, or request back-up documentation. Having started out as an auditor, this type of behavior naturally sets off an “alarm” with me, prompting me to delve deeper and to be “on alert”.

What are the findings? . . . Over the years, my experience in these situations has taught me that there may or may not deeper/hidden problems. Of course, when they don’t exist and everything’s fine, everyone is relieved. Nevertheless, it almost always comes to pass that the person in question has a disconnect with respect to the organization and his/her role within it. Usually in the mind of that individual, there was not a clear understanding, that along with having been granted trust with the finances and administration, comes the responsibility to be open and transparent, while providing the stakeholders with the right to verification when/if so requested. But as a sad example of a disconnect, I’ve heard comments from bookkeepers who have said, “if you need to verify or know exactly what I do, then you obviously don’t trust me.”

What’s the solution? . . . In any case, encountering this type of mentality always tells me that the finance/administrative person in place does not properly understand his/her role or responsibilities as a fiduciary to the stakeholders. Sometimes it’s a matter of simply having a direct one-on-one conversation to explain and clarify expectations. And other times, it’s matter of bringing in someone more experienced in the field of financial leadership to fully explain and demonstrate the finance/administrative role and its responsibilities and obligations. Either way, it needs to be crystal clear that openness and transparency come with the territory.

The bottom line: Without transparency and the ability to verify, trust is undermined. In the long-run, there’s too much at stake, and yes, President Reagan was right.