Every business wants to improve its operations and finances. They seek ways to increase profitability in any way they can while maintaining the quality of their product and service. But this can only happen with a powerful team that's literate in finances.
Even if a manager is in charge of improving profitability, she ultimately depends on the team to carry it out. It’s impossible if members of the team struggle with understanding the financial backbone of businesses.
Why is it essential at every level? Whether it is a sanitation worker, customer service representative, or manager, each person can directly impact the bottom line.
We can give them rules and processes, but without a full understanding of finances, there’s room for mistakes and blind spots in the operations. Even more importantly, there’s more innovation when employees understand how your business works.
“Financial literacy is not an end in itself, but a step-by-step process.” -George Carl
The Benefits of a Financially Literate Team
The more employees have an understanding of small business finances, the better off we'll be. But how does one employee affect your business? Is it worth the investment? Here are some benefits you can expect from implementing a training program for financial literacy.
Your Team Understands Your Vision for Finances
As you lead your business, you develop multiple financial goals: revenue, expenses, and overall profitability. You can communicate these things to your team and provide a blueprint on how to implement them, but you’ll always face two challenges.
They don’t see its importance. If you want to implement a vision, people have to believe in it. If members of your team don't understand how finances directly depend on their actions, then they'll have a hard time doing the best for the organization. Clarify that they determine the success of your company.
They aren’t fully equipped to implement it. If a team only follows tasks and rules, they won’t identify significant problems like avoidable waste and expenses. When they fully understand why and how you can save costs or increase revenue, they’ll identify opportunities.
A strong financial foundation allows everyone on the team, from every level, to play a vital role in the big picture.
They Provide Creative Solutions for Your Business
Your employees are at the front line of your organization. The sanitation employee sees what is being wasted or areas that we could do better; your customer service representative knows what takes up most of their time and possible solutions to common problems.
When we equip our teams with quality financial education, they can implement it throughout their day-to-day jobs. They can find missed opportunities and present them to leadership.
Innovation and creativity can only happen with the right environment, set of tools, and encouragement to take initiative. Financial literacy equips your team to find solutions.
How You Can Train Employees for Financial Literacy Today
1. Introduce Profit and Loss for Onboarding & Training
Employees should understand the fundamental principles of profit and loss. Once they know what it is and how it works, they should fully understand it in the context of your business.
What are the differences between the cost of goods sold and expenses? How does their training to prevent waste impact the bottom line and what would happen if they cut corners? These are things that should be very clear.
For example, one business owner stated how they had a very effective salesperson. But while they were successful in increasing revenue, they didn't understand the costs associated with acquiring new customers.
These costs kept increasing and the profit did not grow as it should have. If the salesperson understood the cost of acquisition and other miscellaneous costs, they could’ve helped maintain the same cost (or decrease it) while increasing the customer base and revenue. Instead, costs grew and growth stalled.
During a hire, they should learn these principles right away. Train your current employees and develop a consistent program to make sure everyone is on the same page.
When your team understands these principles and how it relates to the company, they can help you improve your bottom line.
2. Host a Teaching Session Regularly
If it's important, it should be said more than once. The more we communicate regularly, the better chance we have at employees adopting our financial responsibility expectations and maintaining consistency.
Teaching sessions, or workshops, are a perfect way to reinforce your principles and expectations. These employees already have a foundation and know your vision. These sessions focus on re-affirming everything and serve as an opportunity to build upon what they already know.
Review your principles and vision for a financially healthy company. Then address areas that you and your team could improve on. Open the floor for suggestions and ideas on how to solve it. Then, teach any new concepts or additional expectations for the future.
Regular teaching sessions make sure that your communication is consistent and often. That's critical for achieving your goals.
3. Create a Positive Culture Around Finances
For employees that need it the most, financial literacy isn’t a fun topic. It often evokes stressful obstacles and unpleasant feelings. This can seep into the culture of the organization and stop your initiative before it can do any good.
Facilitate a culture that’s excited about better business finances. This starts by explaining how even small decisions can affect the business and therefore the future success of each employee. As the business does better, so does everyone's life.
Introduce success stories, possibilities, and communicate the benefits for the business when everyone applies financial knowledge to the company. Employees need constant encouragement. Offer fun challenges, incentives, and other ways to measure improved finances.
A positive culture empowers teams and increases the likelihood of success.
4. Make it Relevant and Practical
Training is worthless if it isn’t put to action. Find ways to combine education with practical steps and processes that your team can implement right away.
You can start by providing tools and resources to continue their education. Remind them that while they begin to understand business finances, they could also use it in their own lives to save money and invest in their future.
Point out the areas of opportunity you see within the company. Where could you improve? Ask employees to get creative and think about solutions as they work. They are the most qualified to have the best ideas since they are on the frontline.
5. Designate a Leader
Financial literacy education and implementation can be a difficult road if it's up to the person alone. While your employees will have their peers and friends by their side, there may be a time when they need extra help or someone to give them a push.
Identify who can lead the program. It should be someone who is in a leadership position, respects privacy, has a strong sense of integrity, and who does well in understanding finances.
If you find it difficult to get the right person, you also have an option to hire a consultant for a season. You may be able to combine it with a course that comes with certified consultants to lead the way.
Having a teacher, mentor, or leader that can give accountability and help with difficult challenges makes a huge difference in the success of the program.
6. Host Financial Reviews
Similar to teaching sessions, a financial review is for team communication. The difference is that you’re focused on what has already happened.
This is a great opportunity to ask questions about certain areas of the P&L Statement to relevant employees. You can also ask about small details you may have noticed in all areas of the business. Ask what went right, what went wrong, and what your team needs to achieve their goals easier.
These reviews should be an opportunity to voice the wins and concerns. Use this information to improve your process and help shape your future teaching session.
7. Introduce a Business Self-Education Program
The more your employees know about finances, the better it is for your business. All the prior steps you would have done so far help create a foundation for everyone. But there will be some who are more eager to learn and improve their literacy for your business and their own lives.
This is a great opportunity to facilitate that passion to learn. You could introduce a program that equips your employees to learn at their own pace. Create a budget that can fulfill this need.
Types of programs:
- Online courses
- Monthly book allowance for business, finances, and leadership books
- Subscriptions to relevant magazines and forms of content
A strong program strengthens the financial literacy of your team.
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When we train our employees to fully understand finances, we build a healthier workplace. Employees add value to the company. As a team begins to improve their financial literacy, they implement it within your organization. They’ll identify problems and opportunities that you can’t do by yourself.
You can start today by following these steps and creating a strong financial literacy initiative to help your employees and company.