Let’s face it; even though the concept of company-wide financial transparency was introduced more than two decades ago, not all executives are ready to open the books for all employees. More forward-thinking executives, ones who embrace data, feel an open-book management strategy boosts employee engagement and can generate higher profits.
It’s important to realize, however, that just passing out those data-rich quarterly or monthly reports won’t automatically transform red ink to black if your workforce isn’t capable of interpreting and acting on the data in those reports. For example, in 2013 almost 1.7 bankruptcy cases were initiated, in progress or resolved - according to data collected by the United States Bankruptcy Courts - highlighting the importance of improving financial literacy in the workplace. Any CFO planning on being transparent with financial data also has a duty to assure all employees have a baseline understanding of how this data impacts them.
IGNORANCE ISN’T BLISS
Unless all workers have access to relevant financial information and can apply that information to decision-making processes, an organization won’t be able to optimize financial management. Consider the following situations:
Chief financial officers expect mid-level managers to make wise financial decisions, but bankruptcy numbers suggest at least some probably don’t have the skills or knowledge to meet those expectations. Workers on the production floor may get discouraged – and wrongly assume leadership is hyper-frugal, rather than simply using wise financial planning strategies when decisions are made to repair aging equipment instead of upgrading to the newest state-of-the-art machinery. Sales team members may continue to wine-and-dine prospective clients when a more modest approach could be just as effective and more appropriate.
While, financial illiteracy is a huge disincentive to sharing financial information with the full workforce, improving financial literacy offers many positive gains. CFOs who invest in improving financial literacy across all departments stand to reap rewards when workers better understand how their actions impact numbers and the proverbial bottom line. Increased financial literacy should also serve to decrease absenteeism, high turnover rates, lower health care costs and high expense reimbursements.
Taking baby-steps toward total transparency may be the key to moving closer to an open-book management style. There are initiatives that CFOs can initiate in order to increase financial transparency. For example, investing in automated expense management solutions provides total transparency into expense spend.
Implementing new financial management strategies that include expense report software and invoicing management software (e.g. letting employees snap a picture of a receipt immediately after incurring a charge and send the expense for reimbursement) can help reduce lost receipts while speeding up reporting and reimbursement. And even though these online tools don’t require users to have comprehensive knowledge of accounting principles and practices, financial literacy training is necessary to make sure your organization understands the financial objectives and benefits of everyday activities like expense reporting.
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Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care.
We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.