Every business owner approaches financial reporting transparency differently. Some are open books. Others, with no ties to outside debt or investors, may never share their company’s financials (other than with Uncle Sam for tax purposes, of course).
But as your business grows, there will inevitably come a time when you need to share your company’s financial reporting data. Below, we’ve listed five simple ways to achieve greater financial reporting transparency, while still keeping your sensitive financial data secure.
Know Where You Stand
It’s not uncommon to see startup and small business owners struggling to understand their financial reports, such as balance sheets or their income statement. Either that, or they can’t seem to find their financial data very useful. If that’s you, we suggest learning more about common pain points you might be facing. Because, of course, step one is getting your financial statements in a place that makes sense to you.
However, it might be true that you already have an innate sense of how your business is operating, even beyond what your financial data tells you. But how well do you understand your company’s performance in relation to your peers or, more importantly, your competitors?
One of the main reasons that proper accounting and preparation of financial reports follow standardized rules is for comparability. Sharing financial reporting data with other trusted business owners, your CPA, and key finance professionals will help you gain insight into how your company compares to other businesses.
Many larger companies’ financial statements are publicly available and, even if you’re not quite at their level, it’s smart to compare key ratios, margins, and levels of spending as benchmarks for your growing business.
Your first reaction might be, what is GAAP Accounting? GAAP stands for “Generally Accepted Accounting Principles,” and they’re a need-to-know if:
- You’re an entrepreneur raising capital from large venture funds
- You’re required to have an annual financial statement audit
- You’re looking into going public (or be acquired by someone who is)
However, many startup and small business owners are unsure how to create GAAP-compliant financial statements – or even about GAAP compliance in general. To learn more about GAAP Accounting and when you need it, click here.
Financial Reporting Using Dashboards
Running your business well starts with good data – reports that are digestible and accessible. Not only will this give you insight into your current financial standing, but it will also allow you to plan for what lies ahead.
One of our partners at Acuity is Jirav, a financial reporting software that makes analysis easy, with shareable dashboards, finance forecasts, and real-time reports.
Getting your business set up in Jirav can help provide financial transparency and accountability, helping you to make better financial plans. It’s also the perfect tool for leading exec team meetings as well as informing important business decisions.
So, if Jirav isn’t already on your radar, we highly recommend that it is now. In fact, we recommend it enough to offer Jirav’s Lite reporting dashboard to all Acuity clients for free. To start setting up your financial dashboard today, click here.
Align Your Team
The bottom line is financial transparency is a powerful tool. According to business strategist Jack Stack in The Great Game of Business, sharing sensitive financial data with employees will empower them to do their jobs more effectively and with a greater sense of ownership and loyalty.
Adopting a more transparent approach to sharing your company’s financial data will help your employees understand how their individual contributions affect the performance of the business. Team members will gain a vested interest in seeing the business succeed – not just for the individual gain of a paycheck, but for the greater good of the team itself.
We recommend sharing as much intimate financial detail you are comfortable sharing because by building transparency and trust you’ll set up your business for long-term success.
Always Be Prepared
If you haven’t experienced it already, there will come a time (honestly, hopefully multiple times) when you’ll have no choice but to share your financials with another entity.
Whether you’re raising capital, taking out a larger bank loan, selling your business or bringing on a partner, you’re going to need an external party to help you account for your business.
When Financial Reporting Transparency Is Necessary, And How To Do It Right
But are you ready? When it comes time, will you be excited or embarrassed to show off your financial function? If you think you might be the latter, know that Acuity is here to help. Schedule a time to talk to Tyler to get started on your journey of financial reporting transparency today.