Academic journal article Journal of Accountancy

No. Should Firms Share Financial Information with Staff?

Academic journal article Journal of Accountancy

No. Should Firms Share Financial Information with Staff?

Article excerpt

How much should staff members know about a firm's financial status? Does openness boost morale and productivity or cause confusion and resentment? Partners' answers to these questions tell a lot about how they run their practices and work with their clients. But which approach makes for a more successful firm? Two practitioners describe their own management styles and how they have benefited their firms. aspects of accounting, yet we hide the business side from them. We take pride in hiring and developing the best staff to help clients solve their business problems. Why aren't we using their skills to help solve our business problems?

One possibility is that we hide this information from staff because we don't understand it either-or at least what it means to our firms. Although CPAs are experts in advising clients, many don't apply their expertise to their own businesses. They are blind to the problems-and opportunities in their own firms. Among the benefits they miss are those gained by sharing financial information with staff, which are similar to those in teaching: The teacher learns rapidly to try to stay ahead of the students.

Sharing financial information forces us to take a fresh look at ourselves. Managers often miss something obvious but staff can see things immediately in ways we do not. This sharing creates a synergism that benefits staff and owners.

Each time I attend a management of an accounting practice conference I come away amazed at the new information I obtain. The most valuable insights usually are picked up in roundtable discussions of how other practitioners run their firms. The conference atmosphere allows participants to meet on an equal footing and share their insights in a relaxed environment.

Opening up such a forum to our staffs will accomplish similar results. I advocate periodic presentations to staff, similar to the stockholder meetings that public corporations hold. This sort of openness creates a partnership between staff and owners and makes staff feel more connected to the firm. Sharing financial information also helps prevent misinformation and rumors. There is always a mystique about something kept secret; once it is revealed it becomes more routine in nature.


Firms that adopt this policy ensure themselves a sophisticated and knowledgeable pool of future firm leaders. Management skills will be the secret weapon of the more successful firms in the future; our clients as well as our staff will demand them. If we don't create the environment in which management skills can be developed, clients and staff will leave. It doesn't make sense that we allow our staff to study the clients' books and make recommendations about how to run their businesses, but we don't trust them to play this role in our own firms.

Sharing financial information forces staff and owners to be accountable to themselves and to each other. As part of this accountability, firms must develop a cost accounting system capable of measuring results, plus a clear vision of where the firm is headed and why. In addition, the regular distribution of financial information provides an incentive for the collection of operating data. I know of firms that don't keep time records, don't prepare monthly financial statements and don't bill at least monthly. These are the same firms that don't make much money, don't take time off and don't have much fun.


Financial openness also fosters an entrepreneurial atmosphere without the risk. This atmosphere is vital to the future of the profession because the up-or-out philosophy and pyramid organizational shape are obsolete in today's business climate, while profit-sharing nonowners are the wave of the future. This change has come about in part because of the attitude of the generation now at or near management age-the baby boomers, those workers born between 1946 and 1964, who today are between the ages of 27 and 45. …

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