Small business financial transparency: How much should you share with your employees?

Ask a small business owner what type of financial information to share with employees and you’ll likely get a range of different answers. Some may say “nothing” and others may say “everything.” While many owners of privately held businesses are terrified of sharing margins and other deep dark secrets with their employees, others believe in sharing all of their operating results. Information may be disseminated differently based on the role, seniority, maturity or other factors.

We’ve shared before about how salary transparency can help you compete for talent. Overall, a fear of disclosing too much information can prevent you from giving your team the information they need to help achieve financial objectives, so you may want to reframe the way you look at it. There are implications on both the bottom line and employee morale. Some small business owners believe employees with too much information will do damage, but if that is the case, you probably haven’t hired the right employees.

The benefits of financial transparency

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.

Help employees track their goals and manage profitability 

Set your team up for success! If your employees’ targets are financial in nature, 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.

Enable employees to build budgets and forecasts

If you want your employees having a hand in building budgets, they will need to know your actual results from (at least) the prior year. Normally, that would include your income statement at a minimum. Some companies get input from employees on the revenue targets and don’t include them on the expense side of the budget. This could be a mistake. By giving them a subset of information you relieve these employees from responsibility for the balance of the operating results.

Demonstrate trust and engagement

Employees value transparency and it helps build trust. Manage the perception of your company and eliminate speculation and gossip by maintaining open and honest communication. If employees feel they are trusted with financial information, they are likely to be more satisfied with their job.

Examine your own views about sharing financial information with employees and determine what is right for your business.