• Rayce Rollins, Founder

Why You Should Share Your Financial Reports with Your Employees, and How to do it in QuickBooks Onli

One of the best business books that I ever read was The Great Game of Business by Jack Stack. At its core, the book advocates for more transparency around company financials and key metrics simply because the status quo is so dysfunctional. Most privately held companies rarely share the financial reports with their employees, which creates an inherent disconnect with management since business decisions are often made based on what those reports say. Shouldn't employees have a contextual framework for understanding how decisions are made within the company?

Why Companies Don't Share The Financials w/ Their Employees.

There are several reasons why companies don't want to share the financial statements with their employees. As bookkeepers, we've heard them all. Here are the most common reasons why business owners don't share them:

  1. My employees don't need to know, because they can't do anything about it.

  2. I'm embarrassed by what the numbers say -either we're not making enough money or I'm making too much money and I don't want my employees to find out because they'll leave or resent me.

  3. I don't want the numbers to fall into the wrong hands (competitors, competitors, competitors).

All of these arguments stem from the same root which is a lack of trust. Let's unpack and discuss each reason.

My employees don't need to know, because they can't do anything about it.

My rebuttal to reason number 1 is a follow up question. If your employees can't do anything about the numbers (the bottom-line) why are they working for you in the first place. Every job at the company needs to add some sort of value -they can either facilitate things and reduce costs, or they can generate opportunities through marketing and innovation. However, there has to be an economic justification for the position, otherwise the position needs to be removed altogether. With that being said, the roles and responsibilities of each position should be documented with clear deliverables. Explicit, written down deliverables serve as metrics that the employee can track to appraise their own performance on the job. Lastly, to make the deliverable truly meaningful to the employee, management should show them how their actions (or lack there of) impact the financials (the bottom line).

I'm embarrassed by what the numbers say...

Gary Vaynerchuk once said, "that this is greatest era of fake-entrepreneurship in the history of mankind." It's never been cooler to be an entrepreneur. The word carries a gravitas and a certain level of respect in the world. The problem is, as Gary points out, entrepreneurship is tough and most people will fail at it (which is okay , too. Failure and wisdom are kissing cousins). It's better to have tried and failed than to have never tried at all. What's not okay is pretending that your company is doing well when things are imploding -all the while you're lying to your employees as if everything was copesthetic.

You'd be surprised, tough financial times can really be a rallying point that brings your team together. Sharing the financials with your employees could provide some much needed context and air cover for the difficult decisions that you have to make. To me, honesty and transparency is the best policy.

On the other end of the spectrum, what if you were making too much money and you just didn't want your employees to know how much you're raking in? Wouldn't we all want to be in such a predicament? I mean really, what a conundrum. But seriously, even companies in these situations should share the numbers and here's why. Business owners (or anyone else for that matter) should never feel ashamed if they are financially successful. Duet 8.18 says, "Remember the Lord your God, because it is he who gives you the ability to create wealth." I believe that God endows some people with the ingenuity and good fortune to make a lot of money. Such individuals can do a lot of good in the world with their wealth. If it's from God, meaning that it's legal and acquired with integrity, then wealth is a blessing -nothing to be ashamed about.

Some employees might take the position that their contribution is such that they deserve a bigger piece of the pie. If they have a case, you should pay them more. If not, let them leave and start their own venture or replicate their performance at another company. Either way, it's a win-win. The financial reports could help facilitate the discussion. In my experience, employees often have difficulty quantifying the total cost and overhead expenses needed to run a company. Sometimes they think, "the company earns A and I get paid Z", as if there weren't any other variables in the equation. You could educate them with the financial statements.

I don't want the numbers to fall into the hands of my competitors.

As business people, we've been socialized not to talk about numbers. We tend to guard the financials as if they were the coca-cola formula. Well, in all honesty, financial statements are nothing more than a report card. They really don't contain the secret sauce. In fact, every publicly traded company on earth publishes their income statement, balance sheet, and statement of cash flows on a quarterly basis. It's a requirement. And guess what, competitors read them all the time. But if you think you can successfully build a business by reading financial reports you are in for a rude awakening. Business is not that simple. So what if you competitors know how much you make? Revenue is just a data point, a really insignificant one at that. The secret sauce is always in your company culture, people, processes, products, ability to innovate and market your brand. Financial reports are only interim report cards.

In conclusion, sharing your financials with your employees will foster a lot of trust and transparency, two components of any health relationship. If you use QuickBooks Online, you can grant read-only access to the financial reports for your employees and they won't be able to screw up your bookkeeping. It's a beautiful thing!

#bookkeeping #quickbooksonline #ReadOnlyReports #ReadOnlyAccess

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