Best Practices for Financial Transparency in Business
Business people working at office desk, they are checking tax forms and calculating costs, finance and management concept
Being a trustworthy business is paramount for success in any industry. Looking for ways to increase the trust clients, investors and employees have in your business? If you are, financial transparency is one place to start.
What exactly is financial transparency?
When a company regularly publishes detailed financial reports and encourages open communication about fiscal matters, they show crucial hallmarks of high transparency.
But if a business doesn’t do these things and instead seems to employ unnecessarily complex business structures and financials, it may be hiding something. This is the sort of business that wise investors will avoid, as they may suspect it of trying to hide debts.
You may find that your financial processes are putting people off, even if you’re not actually trying to hide anything. For example, you may be struggling to keep pace with ever-evolving accounting standards. If this is you, it’s important to take a step back and reassess the situation before finding some strategies to address this.
Why is business transparency important?
Businesses that are open and honest about internal processes, revenue and spending may enjoy higher levels of customer and employee satisfaction.
Securing the support of investors is pivotal, no matter where your business is in its lifecycle. If you run a start-up, investors may see you as high-risk, so it’s all the more important to establish trust.
3 Best Practices to ensure financial transparency for business
So, what are some actions you can take to increase the financial transparency of your business?
- Be open about both the good and the bad. Give your employees an overview of how the business is doing, financially, at least every quarter. If the results are not as you would have hoped, share with them your strategy on how to improve and make it clear that suggestions are welcome.
- Make sure your auditing procedures are clearly established. Your annual financial audit is not just a compliance exercise. Rather, it’s a key process you can use to show investors and other stakeholders that your financial statements robust and give maximum clarity. Ensure that your business audit is provided by a high-quality service that can tailor their services to your requirements.
- Be clear about your financial goals. This goes not just for conversations with your investors, but conversations with your employees. If you already work hard to keep your employees happy, including them in your financial vision will only incentivise them further! People like to know that their hard work has a tangible effect.
A culture of openness about your business’s financial situation is always better than one that’s unclear. Many employees and investors are happier to take a bit of a risk, as long as they know about it first. But few are interested in a business that isn’t upfront about their situation.
Alongside this, leveraging external audit services and standardised accounting software demonstrates your commitment to transparency. This is how you secure stakeholder confidence.
