Imagine running the business of your dreams only to find that the finances can't support it much longer. You decide to incorporate some financial accountability to help turn your business's fate around.
After a bit of strategy and planning, the change works. But if you let that accountability slide, your company will slide downhill with it. You need a thorough understanding of financial accountability to make it an ingrained attribute of your company’s operations and culture.
When it comes to running a business, you should understand the basics of financial accountability. Accountability means that you and your team hold each other to high standards so that the work gets done well.
If no one working in your business is accountable, a lot of errors can occur that could cost you sales and long-term customers.
If someone makes a mistake, you won't be able to forecast profits as accurately which might cost you an investment or a major client relationship.
Accountability also involves recognizing the potential consequences of an action. Perhaps an accountant doesn't ask someone to review their work, and they make a mistake that someone may catch.
You and your team need to be able to take personal responsibility for your tasks, and this applies to all departments. However, financial accountability for the accounting department is crucial.
Benefits of Financial Accountability
While all forms of accountability can help improve your business, financial accountability is the best place to start. If you don't have accountability regarding your numbers, it will be hard to keep your business running.
You expect your finance department to be accountable; it’s a built-in attribute that is essential for the operation of the entire company. Less obvious is that you can extend financial accountability to marketing, sales, and HR to achieve the following advantages.
When you hold your employees accountable, their accuracy and productivity improves. Everyone knows that someone will review their work, such as financial reports, and it helps reduce errors caused by casual or highly speculative projections.
If someone finds an issue, they should be free to question the assumptions and return it back to the originating employee. Then, the originator would have to provide at least minimum support for their assumptions or at most redo the work. If you don't hold empolyees accountable, they can keep ignoring the importance of the financial implications of their work.
Financial accounting standards can also make your company appear more legitimate. If you ever decide to bring in an investor, you'll need to demonstrate that your company is worth the investment.
They can look at your processes and see how you and your team members are holding each other accountable to do your best work. If your financial records are accurate, potential investors will have an easier time believing you will be a smart investment.
You might also find that customers and clients trust you more. Having accountability throughout your company can keep you from missing important deadlines through better forecasting, cash flow management, and resource allocation.
Accountability is also essential to running a company. It improves transparency when speaking about financial reports and other activities within the business.
If you have co-owners, you can keep each other accountable. This results in all parties having confidence in the numbers and projections because they are built up from an accountable process.
Good governance can help employees feel better about working at the company and potentially decrease your turnover rate. It will also help you hire and maintain the best people in all departments.
Financial accountability is a great way to encourage employees to work together on various projects. Instead of having the accounting team working in a silo, they can and should be integrated within teams to provide advice. Their involvement will give the accounting department deeper insights on how to use their skills to make the entire company perform better.
Ideally, employees in all departments would work together and with people who have compatible personalities and the adaptability to communicate well with those who are less compatible. You would be amazed at the problems caused by our failure to understand others’ communications needs.
Being accountable also forces you to set clear priorities for everyone in the organization. Employees may have individual goals they want to achieve at work, but they should understand how to incorporate those in a way that focuses on helping achieve company goals.
Clear company goals help ensure that everyone works toward the same objective. Having the same target can make it easier for employees and managers to hold each other accountable.
While priorities may change over time, the way you implement accountability can also change. For example, you may move from using paper financial records to software, so your priorities may lie in uploading transactions instead of organizing physical files.
Holding your employees accountable can also make them want to grow as individuals and members of a team. With clear goals to work on and a psychological investment in the outcomes, they may be more likely to work harder and more efficiently.
Another big topic we cannot cover adequately here is how your company’s vision, mission, and values – along with new thinking about how to motivate employees – creates a learning culture and deeper engagement with the outcomes. This can help employees learn more about their roles and grow as professionals. Eventually, you may decide to promote certain employees for their work, and you can count on them to be accountable in their new positions.
How to Implement Accountability
Financial accountability is an important part of any successful company. While it's nice to understand the basics and benefits of the concept, you need to know how to implement it.
That way, you can make sure your employees focus on their performance and work toward the priorities you set. While the exact steps you take can depend on your industry and goals, the general areas to consider remain the same.
Doing this will help you initiate change within your organization and prevent your changes from failing. This helps end the frustration of unsuccessfully trying to hold people accountable.
Set Strategic Goals
One of the most important parts of accountability in business is setting strategic goals. Many business owners use SMART goals, where each letter stands for an aspect of a good goal.
The S stands for specific, and the M stands for measurable. SMART goals are also achievable (A), relevant (R), and time-based (T). Consider having a general goal to increase sales and how you can turn it into a smart goal.
Instead of saying you want to increase sales, perhaps you want to earn more revenue rather than just get more small sales. That's specific, but it's hard to measure, unlike the goal of earning $3 million in revenue.
For some businesses, $3 million in revenue is too easy, while it's hard for other businesses. Think about your business and the achievability of your goal and adjust your number accordingly.
It’s likely that the goal to increase revenue is relevant, but maybe it would be even better to earn $3 million in revenue on a new product. Finally, you should set a deadline, such as by the end of the year. That will help everyone understand the goal and hold each other accountable.
Be Open and Honest
Once you set a goal, you should be open and honest about it with your employees.
Use those mistakes as a coaching opportunity so your team learns from them, helping them avoid similar problems in the future.
Let employees be open with you about any questions or concerns they have. Whether there's a team conflict or some other issue, you should resolve it as quickly as possible to help everyone stay accountable.
If you can be open about goals, people will want to hold themselves accountable. You and your managers won't have to do as much to stay on track as teams self-correct.
When you set goals, you should also ask employees to give their feedback. For example, the accounting department may be able to share specific numbers with you regarding what goals may be achievable.
It can be great to set a goal of earning $10 million in revenue this year. But if you haven't made close to that, you might want to set a smaller goal because the figure is simply unrealistic.
Ask your employees for their feedback on the goals and how easily it will be to reach them. That way, you can determine if accountability will even work to meet the goals you propose.
Do You Have Financial Accountability?
Financial accountability is vital to the success of a growing business. If you don't have accountability regarding your money, you won't know how quickly or easily your company can expand.
Fortunately, implementing accountability is straightforward. Once you get started, you can hold other departments accountable as well as the finance team.
Do you want to learn more about new ways of looking at how results and growth in your business or department can achieved? Get in touch and let’s talk. Brian Tracy USA: 877.433.6225 Email Me