The definition of financial transparency is the open and reliable disclosures about a company’s financial performance so that investors can make an informed investment decision. In other words, investors go for companies whose financial statements, business operations, and strategies are easily understood, clear, and reveal rather than hide information. Not only this, lack of transparency or visibility is generally a significant concern and causes problems for the business in the long run. Transparency creates openness between managers and their employees; this builds trust and good communication and leads to a successful organization.
Financial transparency or business transparency has various advantages. Some might even say transparency is a glass door between a struggling workforce and an innovative team. Effective teams will eventually need transparency for collaboration, cooperation, and collective decision-making within the firm. Some of the benefits are as follows;
Increased Employee engagement is one of the most critical factors in employee satisfaction in workplace transparency. It shows the employees that their feedback and contributions have value, and their hard work brings rewards. Employee Engagement increases productivity as employees can see the inner workings of the company and its strategic plans. Workplace transparency also builds trust between the managers and the employees and welcomes open conversation. All of this combined results in increased employee engagement, improved morale, and better employee performance.
Improved workplace culture with increased employee engagement and trust among the employees and management comes to improved workplace culture. Trust plays an essential part. Employers have to make a conscious effort to show their employees that they are honest leaders willing to engage in open conversation and can be trusted; this can only be done by providing the proper transparency to the employees. Clarity gives the employees the security that co-workers or managers won’t steal the credit for their work, and they will be able to set and achieve realistic goals. As a result, you will see a strengthened workspace environment.
Attract investors
Before extending funds to a business, investors consider all significant financial statements of the business. Investors review these financial statements to judge the company’s financial health and then decide whether to invest in the company or not. These financial statements help them analyze the company’s plans. Transparency makes this analysis more accessible and lowers the risk for investors when investing in stocks. If a company withholds information, it will be perceived as trying to hide something; hence the investors will automatically back off.
Attract quality candidates
You are more likely to attract quality candidates in your recruitment efforts when you are open and honest about your company’s structure, priorities, financial position, culture, and salary range for the position. This clarity will allow the candidates to have an insight into your company. You will attract genuinely invested candidates in your mission and can genuinely make a difference by working in your company for both your company and themselves. If the company information is hard to obtain, worthy candidates might apply somewhere else. Once hired, these employees will be welcome to workplace transparency, making them feel valued and heard creating a sense of trust and loyalty. This culture will also work in your favor to retain employees.
Well-managed expectations and financial transparency provide a clear picture of the company’s goals and expectations to both the employees and the employers; this prevents any misunderstandings or false assumptions regarding the company or the employee’s job. It also avoids setting any unrealistic expectations, which lead to unmet goals. Greater clarity also keeps everyone within the company on the same page.
Boost brand reputation
Accountability and transparency build the credibility of a business. A company in the public view is more likely to enjoy a positive image and boost its reputation by giving financial transparency to its employees, competitors, and the market in general.
Better shot at getting a loan
If you own a small business or require a loan from a bank for your business, you will have to show a clear picture of your financial statements. Transparency is necessary for such instances. The lender will analyze your financial position using these statements and then decide whether to extend credit or not.
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