Open Book Sharing: Best Way to Help Your Employees Understand Company Finances

Employees often think the big cheese is making a huge amount of money because they are not aware of all the expenses that it takes to run a business.  To create a tangible, accurate way to explain your finances to your employees, first get one hundred 1 dollar bills.  Have a company meeting.  On a flip chart have two sheets – 1) with a break down of how $100 comes in to your organization – % for each revenue stream and then 2) a break down in % of all your expenses.

First explain how the $100 comes into the company, X for this service, X for this product etc. until it equals 100.

Then hand out the dollar bills to employees around you based on each expense – until all of the dollars have been handed out except for profit, saying for example:

• you are my utilities you receive X number of dollars
• you are my insurance you receive X
• you are my marketing you receive X
• lastly do payroll – you are my employee payroll and benefits

X of course being equal to the % that expense reflects in your Profit and Loss statement.

(Note: include owner compensation in payroll)

Then show them how much profit is left.  And explain that the profit has to be used to pay off debt as well as to be reinvested in the company for it to grow.

Also empower them to participate in helping the financial health of the company by explaining which numbers they can impact directly through their efforts (to make or save the company money) and which ones they can’t.

This visual is extraordinarily powerful to help your employees understand one, the boss doesn’t go home with all the money from customers minus the employee salaries, and two, their role in helping the company be financially successful .  It also helps employees be more compassionate when the company cannot afford what would seem like a painless expense.