If you approached an employee at your company and asked them who creates the financial numbers in your company, what would they say?
Odds are, they’d probably point to the accounting department. Sure, accounting has a lot to do with your company financials, but they don’t really create them. Your employees create the financials through the decisions they make and the actions they take.
So how do you help your employees understand their part in creating the numbers and how their actions can affect those numbers? We recommend you follow the five golden rules of teaching employees about company financials:
1) Teach Numbers, Not Accounting
Focus on numbers that matter most to your company, not those that appear in an Accounting 101 textbook. This includes understanding how profitability is driven, how assets are used, how cash is generated, but most importantly: how employees’ day-to-day actions and decisions impact business success. Employees rarely need to know about debits and credits or how to do an adjusting entry. But, depending on the company, they may very well need to know how production efficiency is calculated, or why receivable days matter, or how the purchase of a new computer system will affect the income statement and balance sheet.
The bottom line is this: people remember what they find relevant and useful. The purpose of financial literacy training is to give everyone in the company a common language so they can understand the numbers that measure their performance, talk intelligently about improvements and make better, more informed decisions.
2) Teach Business, Not Just the Numbers
Remember, your employees aren’t learning the financials to pass a CPA exam. They’re learning so that they can understand what their company is about, how it makes money, where it’s headed and how success is ultimately measured. Business can be exciting! It’s where you match wits with the marketplace - and where, if you’re successful, you can create real wealth. So convey a little of this excitement. Gather your people together and talk about the big picture. People are curious about the company’s market, its strategy, its competitive advantages, and what it’s focusing on over the next couple of years. They want to know what’s in store for them. Without that context, they won’t have any reason to care about the numbers.
3) Establish a Line of Sight
Ultimately your employees want to know how they can make a difference. It’s critical to the success of your financial literacy efforts to always make a connection between what they do every day, both individually and as a team, and the financial outcomes of the business.
4) Support Formal Training with Informal Practices
In other words, use The Game to teach people the business. Remember, you’re trying to educate people about your business, not create a bunch of accountants. Make the learning events casual, interactive and impactful to them. Continue to put things in context for people, and then reinforce the lessons in frequent engagements around the real numbers. Ultimately, you want your business literacy efforts to become just another part of your everyday culture. At SRC, we often use short Training Bites like this one to teach basic concepts during our weekly Huddles.
5) Repeat. Repeat. Repeat.
Give your employees the opportunity to see and use numbers regularly. Eventually, they will begin to understand and remember them.
Would taking this approach help your employees to better understand your financials? Consider attending the Get in The Game Workshop to learn best-practices for becoming transparent in your business.
Other articles you might like:
- 7 Reason Organizational Knowledge is Power
- Are You Too Afraid to Open the Books
- 4 Reasons Your Employees Aren't on the Open-Book Bandwagon