Every so often, as a Finance Director, you encounter something that doesn't quite add up. Maybe it's a disparity in the books, an oddity in a financial report, or perhaps an anomaly within the operational processes. The discrepancy might seem negligible or even negligible, but there's a nagging sense that something is off.

This is your instinct talking, a powerful and often underutilised tool in the arsenal of every successful finance leader.

Despite the numbers-driven nature of the finance industry, a large part of leadership training involves learning to listen to these gut feelings.

Why should you trust your gut instincts?

Firstly, our gut instincts are often based on our experience and accumulated knowledge, both of which are invaluable in a finance role. Your intuition might be alerting you to a potential risk or issue that isn't immediately obvious in the data.

Secondly, ignoring these instincts can lead to significant problems down the line. A small anomaly today could become a major issue in six to thirty-six months. In contrast, addressing potential problems head-on displays proactive leadership and helps to mitigate risks.

I have had personal experience with this, both good and bad.

Let's start with the bad!  For one company I worked for as a manager, I saw that the tax amount on the balance sheet didn't quite look right in an entity outside the UK.  I didn't go digging, as I made the assumption that the in-country accountants knew what they were doing.  I was wrong.  In hindsight, I should have poked around and asked questions.  Instead, an audit picked up the issues.  Yikes.

Another example, was that the Accounts Receivable balance of a particular startup looked like it was growing over a 2 month period and this also didn't feel right.  So I started to poke around in Operations (who were in charge of collecting) to find out.  I discovered that the process had huge holes and we needed to fill these gaps quickly.  There were a few credit notes to issue for duplicates, but thankfully it hadn't become overly material yet, but if I didn't do that initial dig - it could have been very material.  Having a month with low revenue due to poor operations is not what you want in a small company looking for funding!

Here are a few tips to help you tune into your instincts and use them effectively:

1. Pause and Reflect: When you get that nagging feeling, take a moment to consider it. What exactly is causing your unease? Is it something specific in the data, or is it a broader concern about a process or decision?

2. Investigate: Rather than dismissing your instinct, delve deeper. Review the data, ask questions, and seek additional information.

3. Validate: Check your findings with others. Discuss your concerns with team members, leadership team, or even industry peers. They might offer different perspectives that help you to understand the situation better.

4. Act: Based on your investigation and validation, decide on the appropriate course of action. If there's a problem, address it promptly and decisively.  Often it'll be process improvement requirements that you can potentially lead / collaborate on.

5. Learn: Reflect on the situation afterwards. Did your instincts lead you to discover an issue? Were there any red flags that you missed? Use this reflection time to fine-tune your instincts for future situations.

Trusting your gut instinct is an essential leadership trait for a Finance Leader. It complements the analytical and strategic aspects of the role, contributing to effective decision-making and risk management.

Learning to trust and follow your gut instinct is an ongoing journey, but one that will surely pay dividends in your leadership and career growth. Remember, when something looks wrong, it probably is. Ignoring it won't make it disappear. Instead, it could evolve into a significant problem down the line. Show strong leadership by trusting your instincts and taking proactive steps to address potential issues.

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