Your company’s financial results make perfect sense to those with financial acumen, but they can be bewildering for some teammates. Not only might some find the numbers confusing, but according to MIT Sloan School of Management, nearly two-thirds of managers are unaware of the strategic priorities that drive these numbers.
Providing transparency and helping employees understand the significance of the organization’s financial health and progress against goals can empower and motivate them to connect what they do to what investors care about. Improving their financial literacy also will enhance their productivity, their engagement and their overall job satisfaction, in turn benefiting the business.
Here are some ways to weave financial education into your workplace to help develop your people’s financial literacy and enhance the business they serve:
No. 1 — Promote and teach financial literacy
According to an “S&P Global Financial Literacy,” only 57% of adults in the US are financially literate. While professionals in the business world, especially shareholders, are arguably more financially savvy, most can benefit from a refresher course on finance.
You likely already have internal accounting and financial planning and analysis teams. Encourage, empower, and develop these teammates to deliver training and share basic financial education across the organization, from onboarding and training to team and group meetings. Company town halls meetings are an excellent place to celebrate meeting internal goals and an opportunity to tie success to financial objectives and milestones, bringing the numbers to life.
Remember the goal is not to create financial experts or to descend into too many details. Instead focus on the metrics that matter. For example, at AvidXchange, that is revenue, gross profit and EBITDA. Explaining these metrics helps employees understand how the business makes money and how their work correlates.
For example, explain that revenue is the money the business earns by delivering value to customers while gross profit reflects the profit that the company keeps after the cost of delivering that revenue.
The people, processes and technology that support the products and services provided to customers, including implementation teams that get the product up and running for customers, customer service teams that ensure support and the underlying technology and business processes that ensure customer and product success—all are costs to deliver the revenue.
From gross profits we deduct operating expenses to derive earnings before interest, taxes, depreciation and amortization or EBITDA. Operating expenses include marketing and sales investment used to attract customers; research, development and engineering required to create and deliver a product or service; and the back-office functions that hold it all together, such as HR and Finance.
No. 2 — Simplify the business model and connect teammates to key metrics
With a baseline of financial literacy, and an understanding of the critical few financial outcome metrics, ensure that the primary emphasis in financial discussions and updates is focused on what teams are connected to and can control.
To do so, it’s critical to simplify and explain your business model to help teams make sense of your company’s financials. At AvidXchange, we describe our business using a Flywheel analogy, distilling down to four simple gears that drive our business.
Providing transparency and helping employees understand the significance of the organization’s financial health and progress against goals can empower and motivate them to connect what they do to what investors care about.
This analogy provides an effective narrative that helps our people understand how their work and costs align and where they fit in the model. We make sure everyone in the company understands those four gears, and their role in contributing to revenue, gross profit and EBITDA across those gears.
By understanding how their work contributes to costs and performance, they can make more educated decisions about how to spend their time and where to put their efforts, in turn increasing overall enterprise performance.
No. 3 — Establish an open, transparent culture
Numerous studies show that an engaged corporate culture leads to increased productivity, aids with retention, and is vital to a company’s success.
Providing visibility into your organization’s financials helps to build an open, collaborative workplace and fosters a more engaged business culture. It creates transparency, a shared language, and a place to reiterate key messages and objectives.
Having an engaged corporate culture also creates a sense of trust—teams know they can get honest information about the business straight from the source rather than depending on news commentary or employee gossip.
An open and transparent culture is also a big draw for attracting new hires, helping organizations address staffing challenges that are evermore present amidst a record-breaking labor crunch.
No. 4 — Taking the guesswork out of your financials
Implementing strategies to simplify and consistently share the vernacular of business and make sense of complex financial reports will empower people across all disciplines to think like CFOs.
Your people will have a broader perspective of the business and take on a more strategic view of their work. Your organization will reap the benefits, from better decision making, higher productivity, to more invested, motivated teammates.
Cameron White is Senior Vice President of Finance for AvidXchange, where she leads the financial forecasting and planning process across the organization, including the long-range planning and budgeting processes. Prior to AvidXchange, she served in several roles at Benefitfocus, with her last role as VP, Finance leading FP&A, Treasury and Procurement. Prior to that, she held both corporate and business unit finance roles at Blackbaud, including Finance Manager of the International Business Unit. She received her bachelor’s degree in physics from the University of Virginia and her MBA from the Kelley School of Business, Indiana University.
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