Every business owner approaches financial transparency differently. Some are open books. Others, with no ties to outside debt or investors, may never share their company’s financials (other than with Uncle Sam for tax purposes, of course). But as your business grows, there will inevitably come a time when you need to share your financial data.
Here are three ways to achieve greater financial transparency while still keeping your sensitive financial data secure:
Know Where You Stand
It’s true that you may already have an innate sense of how your business is operating even beyond what your financial statements tell you. But how well do you understand your company’s performance in relation to your peers or, more importantly, your competitors?
One of the main reasons that proper accounting and preparation of financial statements follow standardized rules if or comparability. Sharing financial data with other trusted business owners, your CPA and key finance professionals will help you gain insight into how your company compares to other businesses. Many larger companies’ financial statements are publicly available and, even if you’re not quite at their level, it’s smart to compare key ratios, margins and levels of spending as benchmarks for your growing business.
Align Your Team
From 2012 to 2016, the percentage of private companies sharing financial data with employees has more than doubled, and for good reason. According to business strategist Jack Stack in The Great Game of Business, sharing sensitive financial data with employees will empower them to do their jobs more effectively with a greater sense of ownership and loyalty.
Adopting a more transparent approach to sharing your company’s financials will help your employees understand how their individual contributions affect the performance of the business. Team members will gain a vested interest in seeing the business succeed – not just for the individual gain of a paycheck, but for the greater good of the team itself.
According to Harvard Business Review, 70% of employees are most engaged when senior leadership continually updates and communicates company strategy. No, we don’t recommend sharing every intimate financial detail, but by selectively sharing you’ll set your business up for long-term success.
Always Be Prepared
If you haven’t experienced it already, there will come a time (hopefully multiple times) when you’ll have no choice but to share your financials with another entity. Whether you’re raising capital, taking out a larger bank loan, selling your business or bringing on a partner, each of these situations will require an external party looking at how you account for your business. Are you ready? When it comes time, will you be excited or embarrassed to show off your financial function? If you chose the later, know that Acuity is here to help. We utilize third-party enterprise-level password vault security to keep your valuable financial data safe and sound.
Have questions about how Acuity can help you gain financial transparency and peace of mind? Feel free to reach out to one of our trusted financial advisors today.