Running any type or size of business without being transparent about your financial position is not only dodgy but it puts your business on a micro-scope from authorities and gives your employees a sense of uncertainty.
Transparency and accountability go hand in hand; transparency creates accountability, and this leads to concrete action. Once a business has a clear view of how their approval process works, they determine who’s accountable for each process.
Why is it so important as a business to be financially transparent?
When you openly avail your financial statement with relevant stakeholders such as potential investors – you prove to them that they can rely on you.
Financial statements serve as the main guide to fully analyze a company’s business operations and strategies, and that’s why any investor would rely heavily on these for deciding on where to put their money. While some companies would rather mask than disclose financial information, businesses should definitely consider the value of having their financial performance out in the open. High-quality and truthful financial reports indicate that the company is well-oiled, minimizing the feeling of a “risky move” for investors.
Empower employees to make business and financial-related decisions
Do you want your staff deferring to you for every decision and doing exactly what you say? Then you can provide less information. Just remember, you will end up taking the burden. If you would like your staff to be empowered to make business-related decisions, you need to give them insight into the workings of the business. Most businesses are somewhere in the middle, empowering employees with sales and revenue data, but failing to share costing or margin information.
Building integrity into your organization’s name starts with accountability and transparency, and that definitely takes a long time to prove. You need to always be honest account for every transaction made that affects your business’ cash.
Better Chance of Credit Grant
Accurate financial reporting done consistently and effectively serve as a leverage for growing businesses that are loaning from the bank without any considerable collateral. Financial statements contain the significant information needed for banks to base their lending decisions on, and again, high-quality and truthful financial reports lessen the need for requiring substantial collateral.
Help employees track their goals and manage profitability
If your employees’ targets are financial, you need to share relevant financial information, and on a timely basis. For example, if an employee is responsible for managing profitability for a given department, they need to be able to view that departmental profit and loss statement.
Transparency in financial reporting should never be taken for granted, as it can make or break one’s business. All organizations should have a financial transparency system in place for it is essential in investments and in doing business, and undeniably pays off especially when the inevitable time of judgment comes.
Are you sure about the accuracy of your financial records? If not, get in touch with me and let’s make your financial books investor ready!