When Financial Transparency Helps or Hurts Your Business

Financial transparency can be a tricky issue for small businesses.

You may be tempted to keep the majority of your financial information on a need-to-know basis among only your top leadership team. But there can be benefits to sharing this type of information with your team, especially for small, early-stage businesses.

Frederic Kerrest, COO and co-founder of identity management company Okta wrote about his experience with financial transparency though various business stages for Inc. He said:

“Todd and I founded Okta in 2009, and back then we were incredibly open with our numbers. We discussed share count with prospective employees to get them invested (pun intended) and we sent emails with specifics every time a sale closed. Sharing our numbers was an easy way to bring our early hires into the inner circle and help them feel confident about our direction. Being transparent about our finances built trust among our small team; it gave employees a sense of ownership and responsibility.”

By sharing this type of information, you’re basically showing your team members how important they are to your operation. You’re showing them that you trust and count on them enough to keep them informed about important and sensitive company information.

This may motivate them to work even harder toward your company’s objectives, especially if they are officially invested in the company. And it can even improve your company’s overall reputation.

Especially if you are relying on investors to fund your business early on, you should at least be comfortable sharing this type of information. And treating your employees and others with the same respect as you would a potential investor can only help your cause.

As your company grows, this may change, especially if you are considering going public at any point. Kerrest recommends gradually shifting away from relying on sharing financial info to make your employees feel included. This can help you avoid an all-at-once shift from being completely open with your team to letting them learn your numbers at the same time as the general public.

But you still need to keep employees in the loop on other aspects of your business, especially if sharing those financials isn’t an option. Treating your employees as important members of your team rather than just replaceable workers can have an impact on many areas of your business. And especially early on, it may even have an impact on your bottom line.

[“Source-smallbiztrends”]