Disclosing business and financial information can be risky for any business owner. Disclosure has distinct advantages for a business's public relations image, but disclosing certain financial and business information can put business growth and financial plans at risk. That's why small-business owners must thoughtfully weigh the advantages and disadvantages of disclosure in specific situations against strategic goals and objectives to determine whether disclosure will help or harm operations.

Public Relations Perspective

Disclosure can significantly enhance a business’s public image, which is why the Public Relations Society of America incorporates disclosure in its official code of ethics. Taking a stand and committing to honesty, accuracy and transparency in all business communications can be a disadvantage, however, if the business or its employees do something that could damage its reputation. Ethics and finances have to be considered. In many cases, the business owner has to decide if protecting the business’s long-term reputation is more important than any short-term financial benefits that going public might bring it.

Business Competition Considerations

Disclosing business and financial information can be a way to keep the public informed, increase consumer confidence about the financial health of the business and generate excitement about future plans. However, it can also put the business at a significant competitive disadvantage. Although a business can alter the type of information and level of detail and use information timing to mitigate potentially damaging effects, the question is whether the information released will have the intended effect. The more significant the potential competitive disadvantage, the greater the need for a business to keep information private for a longer time.

A small business must balance the financial cost of disclosure against its advantages. A main disadvantage -- especially of disclosing financial information -- is that full disclosure requires a business to comply with generally accepted accounting principles, or GAAP. This significantly increases annual reporting requirements and adds the costs of gathering, processing and auditing financial information. Don Whalen, director of research for Audit Analytics, reports that external audit costs are starting to increase. According to Whalen, companies paid an average of $472 in audit services for every $1 million in revenue in 2012, compared with $476 per million in 2011. For small businesses especially, full disclosure may be limited by the size of the business’s annual budget.

Cost of Doing Business

A business committed to full disclosure can find the cost of raising capital to expand the business less expensive. Full disclosure and the transparency it provides allows lenders and other potential creditors to better assess the business as a financial risk. The lender, the amount requested and borrowing objectives may make full disclosure -- including submitting the results of an external audit -- a must for some businesses. With a short-term loan or vendor credit, the degree of disclosure will affect the interest rate charged. In either case, the business will have to determine whether the advantages of meeting growth or purchasing objectives are worth the cost involved in fully or partially disclosing financial information.