Open and honest communication engenders a transparent business culture which in turn builds trust, enhances clarity and inspires loyalty. To be truly successful, this transparency should lie at the heart of everything you do: the way you set up processes, talk with your teams and deal with suppliers. But most importantly, you should be transparent in the way you communicate your financial positioning, report to your stakeholders, share your data as well as communicate your mistakes and your successes. Financial transparency will unite a team in such a way, you will be stronger together in some of your weakest times and ready to celebrate your strengths with unity.
What is financial transparency?
Financial transparency is where you share financial information with employees, investors and stakeholders. A lot of businesses are so clandestine when it comes to money whether that be profits, debts or salaries. However, if everyone – particularly employees – understood the company finances or decisions directors take that impact the financial health of the business, then they would be empowered to think like business owners. This is likely to engender a collaborative leadership approach, particularly in smaller businesses, and as a result it will unlock growth. After all, many minds are better than one.
The corporate condition
In today’s world, global reporting systems for corporates are designed to provide a level of privacy for businesses; it ensures a relatively balanced playing field in terms of minimum requirements of published financial and non-financial data.
Corporates have, to a certain degree, a high level of control over what they want the world to see. And when we say ‘world’, we’re talking primarily about analysts; financial analysts, investment analysts, pension fund managers and interested parties who are ultimately looking to hand over cash to these corporates by way of debt or equity investment.
On the whole, the system works but it’s not perfect as is anything which involves human beings.
But:
- What if the system changed as did the way we value information?
- What if access to more information was valued greater than increasing profit margins?
It sounds wonderful – in fact, as a consumer, wouldn’t you like to work with a business like that? That sort of company is attractive, not just for the customer, but for potential employees, suppliers and investors too.
A business that values honesty, transparency and integrity above profit is the type of business that will effect change and make a positive impact.
The benefits of financial transparency
Efficient teamwork
Restricting access to information, can create doubt or worry. It can cause employees to become distracted and therefore reduce productivity. However, if a team is privy to financial forecasts, figures and resources and understand how those numbers are obtained they are more likely to be able to work in a streamlined way towards the same end goal, happy the business is healthy (and will remain that way) if everyone continues to work together.
Attracts investment
When anyone is looking to invest in your business, they are going to approach the task with a healthy dose of scepticism. They are going to want to go through your financials with a fine toothcomb as part of their due diligence. It will be obvious if you are withholding information so being fully transparent really does engender confidence. Even if you feel such transparency doesn’t show your business in its best light, your honesty will be refreshing. Financials can be improved, and your integrity is more likely to open the door to investment than inflated financial reports ever would.
Builds credibility
It won’t be long before corporate companies are ranked in terms of transparency and integrity instead of their profitability. Transparent businesses are credible: they will set realistic targets based and a lot less likely to commit financial reporting fraud. This level of credibility will make business highly attractive to work for and as a result, business will attract and retain global talent.
The future of financial transparency
The invention of Bitcoin started a revolution of decentralisation and integrity. Created in response to the 2008 financial crisis, Bitcoin uses an emerging technology called blockchain, which creates timestamps to ensure data cannot be tampered with. Prior to the 2008, there was a lot of tampering with financial information which led to the crash itself – all because companies wanted to appear better than they were: success by deception.
Integrity, transparency and honesty are built into blockchain transactions by design. Theoretically, no single person, organisation, or government, has control over the information held within a blockchain.
So, what if blockchain becomes the platform for reporting financial information in the future? What if blockchain technology becomes the new basis for financial reporting and data is available in real-time and available to all?
How to be more financially transparent to unlock your business growth today
With blockchain technology still in its infancy, there are still ways you can be transparent with your financials without it. This means you can still lead the revolution in transparency, allowing you to unlock your business growth. That’s because transparency is set to give businesses a competitive advantage in a very short space of time; how transparent you are, will form a significant part of your corporate marketing strategy.
You don’t want to be seen as withholding information when all of your competitors are freely flaunting it. You must also think about who people are going to want to buy from, work with or give credit to.
So, here is how you can be more financially transparent without having to wait for technology to make it easier – or even mandatory.
Own your data
You need to be 100% responsible for your data and being responsible begins with looking at it, checking it, knowing what you have and understanding what you’re missing which his best achieved through a Data Gap Analysis.
It can be argued that CEOs, COOs and CFOs do this on a regular basis: it’s their job to know the financial and non-financial statistics inside out but how often is it really put to the test? Once a quarter if they’re a publicly traded company? Once a year if they’re privately owned?
The C-Suite needs comfort that data is being captured accurately and timely. They need to know employees are fully aligned with the values and the mission and that financial data is being harnessed in the most efficient manner and being used to its fullest potential.
Be clear with your presentation
It sounds obvious but messy spreadsheets aren’t going to cut it in business. If something is presented in a convoluted manner, it could appear you don’t fully understand it either. If it’s not clear, then people will find it difficult to trust whatever it is you are trying to show them.
If you are clear with the way you input your data, then you will get clear data back that is easy to share. If employees and other members of the team are able to understand and share the information this again engenders trust and elevates efficiency in all areas of the business from sales to marketing.
Make it a team effort
By being clear with your presentation, you are inviting team members to both analyse and review the financials. Finances are not exclusively for one department. In fact, you should be allowing the person doing the bookkeeping to see more than just the Profit and Loss report or the marketing team to see how much revenue their campaigns brought in to the business. People want to know where they fit in to the larger picture and when they do, they are more likely to generate ideas that could improve efficiency, sales or savings. They will go beyond what is expected of them rather than doing simply what they have to, so they’ve ticked a box. By involving the team, it creates a sense of empathy throughout the business rather than any ‘issues’ that arise simply being someone else’s problem.
Clear communication strategies
Another way to ensure you create a team effort is to establish clear communication strategies. If you are small business, you can set up weekly or monthly briefings to encourage open and honest communication among your team. If you are a larger company, you could appoint your heads of department to hold these meetings on your behalf or send out company newsletters or reports that communicate the truth, the whole truth and nothing but the truth.
Hidden control isn’t always a conscious decision, so by making sure these systems are in place, you will avoid any unintentional suppression of information.
Financial transparency is about so much more than fundamentals, risk factors, price levels and profit; it’s about the human desire to trust, belong and contribute. By opening your business finances to more than the ‘select few’, you will access benefits, insights and potentially ideas you would never have otherwise as well as outside investment.
As with any revolution, all it takes are one or two pioneers to challenge and change perceptions. While it won’t happen overnight, it will happen and with social media and technology on its side, it could happen relatively quickly. Establishing process to enhance financial transparency today could set you in good stead to be the leader of tomorrow and truly unlock your business growth.
About the Author
Philippa Scobie is a leading expert at leveraging a company’s assets in terms of time and people, to reduce financial waste, grow exponentially and establish a world-class company culture that attracts global talent. Empowering businesses with the financial systems and processes to boost growth and productivity, she has worked closely with numerous fintech start-ups and hypergrowth companies, quickly transforming them from founder-managed ventures to multidimensional organisations with 7-figure+ turnovers.
She lives in Bedford, UK, with her husband and two young sons and is a firm believer that happiness is a journey, not a destination. The very act of striving to achieve great things is where the real fun, growth and reward lie rather than simply in the results.
Web: www.financialmomentum.co.uk
LinkedIn: www.linkedin.com/in/philippa-scobie-395a48a1
