Some of you immediately thought, “You’ve got to be kidding”. I’m not.
Here’s why it is a good idea:
By showing the company financial statements to your employees, they learn and understand what cost really is. They learn and understand profit, loss, and overhead. Once they understand these concepts, they are usually more conscientious about waste as well as their significance to the bottom line.
If you are like most contractors, the major reason that you don’t want employees to see financial statements is because you don’t want them to see compensation. However, you can lump all of the salaries in one line.
Once your employees really understand that profit is necessary for growth, for increased wages, and to fund great benefits, training, increases in receivables and inventory, they discover what profit is used for. And, if you bonus employees on a piece of the bottom line rather than random Christmas bonuses, they will work towards an increasing bottom line because their bonuses increase. Email me if you’d like my bonus structure (rking@ontheribbon.com).
Some contractors keep all financial information secret from all employees. Employees have no clue as to the profitability of their projects or the company as a whole. Many of the employees in these companies feel that the owners are making a lot of money whether or not it is true. “They’re made of money. They can afford it” is common thinking when employees don’t have a clue about cost and profits.
Other contractors share financial data with their employees. The owners have taught them about profits, how they are derived, and why they are important for company survival. These employees know the profitability of their projects and the profitability of the company overall. They understand how they impact profitability. They don’t know the exact details with respect to everyone’s salaries, the rent cost, etc. However, they have an appreciation of how they contribute to the bottom line. In these types of companies, when profitability is an issue, the employees often come up with ways to increase profitability.
Show your employees your financial statements…at least in summary form. You’ll have a stronger, more profitable company.
Want a financial statement review?
Every business, large and small, can benefit from taking a closer look at its numbers. We’re happy to do a quick review – showing you what appears to be good and some areas you might want to pay attention to. (This is where Financially Fit Business can help too). Click here for more information.
And, pass along this offer to your business friends and colleagues who could benefit from this review too!
Ruth King is well known as “The Profitability Master.” She is passionate about helping small business owners become profitable and stay profitable. For over 40 years she has coached, trained, and helped contractors and others achieve the business growth and goals they wanted to achieve.
Contact Ruth by emailing ruthking@hvacchannel.tv.
