How CFOs Can Foster a Culture Of Transparency in Financial Reporting

8 min read

January 16th, 2024

As CFO, you hold a wealth of financial information, and it’s up to you (and the executive team) to determine how much of your business’s financial information you want to share with the rest of the company, and it’s best not to hold all of your cards too close.

Choosing to foster a culture of financial transparency can improve your business’s overall operations, employee satisfaction, and performance. 

Read More: The Pros and Cons of Outsourced Accounting Services for Businesses

Financial transparency is all about communicating to help everyone at every level in your business understand how it operates so that they can actively work to improve its operations. You can create transparency regarding expenses, revenue, and value in addition to performance with respect to short and long-term goals. Sharing performance metrics each month or quarter can help your entire team take ownership and a more active role in achieving positive results. 

How Leadership and Transparency Are Connected

Company leadership sets the stage for transparency. As a business leader, you hold the key to all aspects of your organization and its information such as operations, management, decisions, strategy, and finances. So, it’s up to you to determine how much information is shared, what kind of information is shared, how often, and how it is shared. This means your leadership style can have a major impact on how transparent your business is (in all aspects, including finances).

Business leaders naturally fall into a level of transparency that feels comfortable within their instinctive leadership style. However, it’s important to consider whether the level of transparency you’re fostering and encouraging in your company is the best for your workplace culture, employee engagement, short-term goal achievement, and long-term goal progress. 

Read More: Financial Reports vs. Management Reports: What’s the Difference?

With more financial transparency, you empower each of your employees to become their own leaders within your organization, providing them with the tools to make data-driven decisions to improve the efficiency and productivity of their individual pieces of your operation to bolster the company’s overall financial success. 

Why Transparent Financial Reporting Is Essential for Strong Organizational Leadership

To understand what you are doing and understand how best to do it, you need to understand why you are doing it. In other words, employees need to have a clear understanding of the purpose of their roles within your business in order to do their jobs well. Fostering financial transparency helps employees put all of the pieces together so that they can see and understand the “why” of their jobs. 

The Benefits of Transparent Financial Reporting

• Increased Engagement – Financial transparency helps employees at all levels be more involved in the bigger picture and strategy of the business. They understand more clearly how their role directly contributes to the company’s progress and success. 
• Increased Accountability – Financial transparency increases accountability as a direct result of employees’ better understanding of how their choices and actions impact the business’s finances. They will naturally become more aware of the costs and value generated by certain tasks while also being more mindful of waste and inefficiencies. 
• Increased Efficiency – When employees see the consequences of their actions, they are motivated to work more efficiently. 
• Better Decision-Making at All Levels – Having transparent financials helps to improve decision-making at all levels of your organization. All leaders and employees will be more apt to make better financial choices, choosing to cut costs and improve operations to help achieve visible financial goals. 
• Open Communication – Financial transparency fosters better transparency throughout the organization, helping to improve communication at all levels. 
• Strengthened Trust – Financial transparency demonstrates respect for and value in the employees in your organization. It shows that they are integral to the success of your business, and transparency shows that you value employees, their work, and their input enough to include them in the bigger picture of your business. When you bring employees into the strategic fold, you strengthen their trust in your leadership, foster their involvement in the company’s success, and increase their loyalty. 
• Better Workplace Culture – When employees are left in the dark about company finances, they’re left to guess and make assumptions about what’s going on. When people aren’t given facts, their assumptions tend to be off-base and inaccurate. Increased financial transparency helps to reduce rumors and speculation about the business’s finances, health, success, and goals. As a result, your employees feel valued and trusted, which creates a more psychologically safe and positive workplace culture. 

Additionally, financial transparency that extends beyond your business’s walls can also help to attract investors by positioning yourself as a trustworthy partner and your business as a sound investment. 

4. Data Visualization

Presenting data with visuals like charts and graphs can be helpful for less financially-minded employees. The visuals make data easier to understand and digest at a glance, without the need for in-depth inspection and assessment. 

5. Distribution Plan

Have a plan in place for distributing financial information. Whether you organize monthly meetings to discuss the numbers, email a regular progress report, or give employees access to a central file with updated information, you should ensure that you communicate the numbers on a regular basis. It’s also important to make sure that reports and updates are always dated to prevent confusion with old, printed reports that might be floating around the office. 

6. Create Financial Accountability

Go in-depth when discussing your financial strategy by explaining how your business operations are designed to support the strategy and achieve your goals. Explain the role that each employee plays in carrying out the plan, and create financial accountability by setting individual benchmarks for each employee. This will help them take more responsibility for the company’s financial health and help them understand how the job they do each day contributes to the larger success of the business. 

7. Celebrate, Recognize, and Reward Achievements

Understanding why they do their jobs and how to do them well helps to improve performance and motivate employees. To further boost employee engagement and satisfaction, business leaders should tie employee performance to compensation, rewards, and recognition by offering performance-based incentives or a profit-sharing program. 

In addition to offering monetary rewards, be sure to recognize employee achievements individually and also celebrate group successes together.