Automation and technology have become increasingly important in the world of financial planning and accounting. The rise of technology has introduced numerous innovative tools and software solutions designed to streamline tasks and improve precision in financial planning and accounting. While automation excels in repetitive tasks and data entry, it is imperative to recognize that human proficiency is still required for interpreting data, offering insights, and making strategic decisions. Financial professionals must acknowledge that technology should complement, rather than replace, their skills and knowledge.
One of the key benefits of technology in financial planning and accounting is its ability to automate repetitive tasks and streamline processes. For example, software programs can automate data entry, reconciliation, and reporting. This not only saves time and reduces errors, but it also frees up CPAs to focus on higher-level tasks such as analysis and strategic decision-making.
Technology also provides tools for data visualization and analysis. With the ability to collect and analyze large amounts of data, financial professionals can gain insights that were once impossible to obtain. This allows CPAs to provide better advice to clients, make more informed decisions, and identify opportunities for growth and improvement.
However, it is important to remember that technology is not infallible. While software programs can perform tasks with incredible accuracy, they are only as good as the data they are fed. It is up to people to ensure that the data being input is accurate and complete. It is up to CPAs to interpret the data and provide insights based on their experience.
The Importance of a Personal Touch
When it comes to financial planning and accounting, there is often a personal element involved. Clients want to feel like they are working with someone who understands their unique needs and goals. While automation has proven valuable in handling data entry and generating reports, it falls short in delivering a personalized approach to financial planning and accounting. This is an area where human experience truly shines, as it encompasses several critical aspects:
Building Relationships with Clients: Developing trust and rapport with clients is essential in the financial planning and accounting sphere. It is the human touch that fosters lasting professional relationships, ensuring clients feel valued and understood.
Understanding Client Goals and Concerns: A personalized approach requires a deep comprehension of each client’s financial objectives, risk tolerance, and concerns. Human professionals can empathize and adapt their advice to match the client’s unique financial situation, which is beyond the scope of automation.
Providing Tailored Advice and Solutions: Financial planning and accounting professionals can create customized strategies and solutions that align with their clients’ specific needs, preferences, and circumstances. Automation, on the other hand, may lack the flexibility and adaptability necessary to address the nuanced complexities of individual financial situations.
The Value of Human Proficiency
While automation can handle many tasks, there are some things that only humans can do. For example, financial planning and accounting often require skillfull analysis and interpretation of data. This involves not only understanding the numbers, but also understanding the broader economic and market trends that can impact a client’s financial situation. Additionally, human proficiency is important when it comes to identifying opportunities for cost savings and improving financial performance.
Balancing Accounting Efficiency With Quality
While automation can improve efficiency and save time, it is important not to sacrifice quality in the process. Financial planning and accounting services require accuracy and attention to detail, and it is important to ensure that these standards are met even when using automated tools. This requires a careful balance between using technology to streamline processes and maintaining a high level of quality and accuracy.
The Future of Financial Planning and Accounting
As technology continues to evolve, it is likely that automation will play an increasingly important role in financial planning and accounting services. However, it is important to remember that people will always be necessary to interpret the data, provide insights, and make strategic decisions. The key is to find a balance between people and automation that allows for efficient, accurate, and personalized financial planning and accounting services. Outsource your financial planning and accounting to Lavoie CPA to see how combining the right technology with human experience can benefit your business.
A 10x valuation system refers to a method where a company’s investors are willing to pay up to 10 times the company’s current worth due to its potential for rapid growth and profitability.
It has gained popularity in recent years, particularly amongst startups because it attracts investments and positions businesses for long-term success.
In this blog post, you’ll learn what the 10x valuation system is, and understand how it works. We will also explore the advantages and disadvantages, and also look at some examples of companies that have successfully implemented it.
What Is a 10x Valuation System?
A 10x valuation system is one where investors are willing to pay 10 times a company’s worth. However, its success and implementation depend on factors like industry and competition. Other common valuation methods include:
Asset valuation: This is calculated based on assets belonging to a business
Relative valuation: This is calculated by comparing the assets of a similar business
Historical earnings valuation: This is calculated based on a business’s cash flow, gross income, and ability to repay debt
Advantages of Using a 10x Valuation System
1. High ROI for Investors
The system provides high returns for investors as companies who have adopted it focus more on long-term growth rather than quick wins (which have proven to be detrimental). An example is the fall of Elizabeth Holmes’ Theranos.
It allows companies to set high goals and develop strategies for achieving them, increasing the chances of generating substantial returns for investors.
2. Encourages a Focus on Building the Right Business Model
It also encourages the development of a business model that’s sustainable and scalable with the potential to generate high ROIs.
The 10x valuation system gives companies a deep understanding of their finances, revenue structure, and cash flow. This allows them to mitigate risks and set their business for potential long-term success.
The system attracts top-tier investors due to its ability to project promising financial growth. It shows that a company can take a significant share of the market comfortably.
A 10x valuation system allows brands to attract investors willing to pay a premium for the next big thing in their industries as they are always on the lookout for companies with the potential to become dominant players in their field.
4. It Rewards Creativity and Innovation
The system also rewards creativity and innovation by forcing companies to pursue different problem-solving approaches. It encourages companies to explore new markets while thinking creatively about how to address the needs of those markets to reach 10x their worth.
It also encourages companies to take risks and experiment with new models that focus on sustainable long-term growth. Additionally, it creates a culture of innovation within a company where employees think creatively to come up with new ideas to help the company grow, and stay ahead of its competitors.
Challenges and Limitations of using a 10x Valuation System
1. Requires a High Level of Growth and Scalability
While the 10x valuation system has numerous advantages, it might be difficult for some companies to implement. The level of growth required makes it difficult for companies operating in markets with limited growth opportunities to adopt it successfully.
Additionally, achieving high levels of growth and scalability requires significant investments in research and marketing. This poses a problem for businesses unable to access the funds for these investments. The pressure forces companies to acquire additional debt, or dilute their equity to raise capital – which creates financial risks over the long term.
2. Not Effective For all Types of Businesses
Implementing the system is also not successful for all types of businesses because of the market size and differences in risk tolerance.
Businesses that are unwilling to take risks will not be a great fit for the 10x valuation system as it requires taking calculated risks and investing significantly in research and marketing.
3. Can Lead to Overvaluation and Unrealistic Expectations
Sometimes predictions about growth rates and a business’ market capitalization are wrong. Market dynamics might change, and new competitors with better UVPs can spring up.
The system also expects companies to attain high growth rates very quickly, typically within months or a couple of years. However, building a sustainable business takes time, and such expectations might not be met.
Companies valued under this system may face significant pressure from investors. This might lead to aggressive growth strategies that can pose potential financial risks for everyone involved.
Strategies for Implementing a 10x Valuation System
1. Identify a Large and Growing Market
Since the 10x valuation system rates businesses based on their potential to achieve significant growth, companies need to identify large and growing markets where they can capture significant shares of the market. This lays the foundation for development and attracts investors on the lookout for high-growth opportunities.
To recognize large and growing markets, companies should conduct extensive research to understand the dynamics of each market and its unique trends.
2. Build a Strong Team of Individuals with a Proven Track Record
Another strategy necessary to implement this system is building a team of individuals with track records of success. A strong team possesses the necessary skills and experience needed to execute strategies successfully. Proven track records indicate that team members can deliver results.
Investors prefer to work with companies possessing strong teams because they have proven abilities to execute growth strategies successfully.
3. Focus on Innovation and Disruption
Focusing on innovation and disruption is an effective strategy for implementing this system as companies that bring groundbreaking products and services to the market experience exponential growth. They carve out a niche for themselves in the market, and competitors find it difficult to replicate their successes.
To do this, you’ll need to challenge the status quo of traditional industries by taking a fresh perspective on marketing and product design or introducing new technologies that challenge established players in the market.
4. Implement a Scalable Business Model
A scalable business model is one that can easily be replicated and expanded as the company grows. This involves finding better ways and strategies to market and using the right advertising channels and methods.
A scalable business model has underlying profitability, a strong distribution network, and the ability to automate numerous activities. It allows companies to grow rapidly and efficiently, while still maintaining focus on efficiency.
Real-world Examples of 10x Valuation Success Stories
1. Uber
In 2011, Uber’s private valuation was $60 million, eventually increasing to $76 billion in August of that year. The car service is considered an attractive business by investors because:
It’s a category leader revolutionizing and disrupting the status quo by changing laws in some cities and receiving prohibitions in others.
Its business model is effective and scalable, offering a great alternative to poorly-funded public transportation.
It increased to 10x what it was worth initially and became the world’s most valuable startup.
2. Airbnb
In 2014, Airbnb was valued at $10 billion, and in 2020 valued at $100 billion. As of March 2023, its market capitalization is ~ 75 billion.
Airbnb was founded in 2008, and quickly gained traction in the market with its innovative business model which allowed homeowners to rent out their spare rooms. The company:
Focused on identifying a large and growing market by targeting travelers who were seeking unique and affordable accommodations.
Built a strong team of individuals with proven track records of success in the technology and hospitality industries.
Focused on innovation and disruption by challenging the traditional hotel industry.
In 2014, Airbnb was valued at $10 billion, and in 2020 valued at $100 billion. As of March 2023, its market capitalization is ~ 75 billion.
3. Slack
Slack, a cloud-based communication platform for teams is another company that successfully adopted a 10x valuation system. This allowed Slack to achieve a $1 billion valuation after eight months of launching its product.
One vital factor that contributed to the success of slack was its focus on solving a major problem businesses face; the need for effective communication between teams and collaboration tools. Another strategy Slack implemented was building a strong team. Slack’s co-founder, Stewart Butterfield had a successful track record as the co-founder of Flickr.
4. Zoom
Zoom is another example of a company that successfully implemented the system through a combination of strong market demand, a focus on innovation and disruption, and the adoption of a scalable business model.
It capitalized on the large and growing market for video conferencing software to capture a significant share of the market, and its freemium model also allowed users to sign up for free.
As of March 2023, Zoom was worth ~$19 billion – more than 10x what it was worth some years ago.
Conclusion
The 10x valuation system is a popular method for startups and businesses to attract top-tier investors and achieve rapid growth. By focusing on innovation and disruption, adopting a scalable business model, and building a strong team, companies can create a strong foundation for success.
It is however important to note that it can lead to unrealistic expectations and overvaluation if applied to the wrong business. It requires a strong understanding of the market, and a willingness to take risks. Contact Lavoie CPA today to help take your business to the next level. Start implementing these strategies in your business today.
As a business owner, managing finances and staying on top of financial obligations is crucial for success. To achieve this, businesses need two important financial services: bookkeeping and accounting. In this blog, we will explore the differences between bookkeeping and accounting services and discuss how each service can benefit businesses.
What is Bookkeeping?
Bookkeeping is the process of recording, organizing, and maintaining financial transactions. A bookkeeper is responsible for managing accounts payable and accounts receivable, reconciling bank statements, and preparing financial reports.
There are two types of bookkeeping systems: single-entry and double-entry. Single-entry bookkeeping is a simple system where each financial transaction is recorded once, either as income or expense. Double-entry bookkeeping is a more complex system where each transaction is recorded twice, once as a debit and once as a credit, ensuring that the books are always balanced.
What is Accounting?
Accounting is the process of analyzing, interpreting, and summarizing financial data. An accountant is responsible for preparing financial statements, analyzing financial data, providing tax advice and planning, and performing financial audits. There are different types of accounting services, including financial accounting, managerial accounting, tax accounting, and auditing.
Bookkeeping vs. Accounting
While bookkeeping and accounting are both essential financial services for businesses, there are key differences between the two. Bookkeeping is focused on recording and maintaining financial transactions, while accounting involves analyzing and interpreting financial data. Bookkeeping is typically more transactional and repetitive, while accounting is more analytical and focused on providing insights to help businesses make decisions.
Bookkeeping Services
Bookkeeping services include maintaining financial records, managing accounts payable and accounts receivable, and preparing financial reports. For small and medium-sized businesses, bookkeeping services can be especially helpful as they allow business owners to focus on running their business instead of spending time on financial record-keeping. Bookkeeping services can also provide insights into financial trends and identify areas where businesses can improve.
Accounting Services
Accounting services include tax preparation and planning, financial analysis, and audit support. Larger businesses may require accounting services to help with complex tax issues, financial analysis, and audit preparation. Accounting services can also help businesses make informed financial decisions, reduce tax liability, and improve overall financial performance.
Bookkeeping and Accounting for Healthcare
For healthcare businesses, like any other type of business, bookkeeping and accounting services are essential to ensure financial stability, compliance with regulations, and strategic decision-making. However, there are specific considerations for healthcare businesses when it comes to these services.
Bookkeeping services for healthcare businesses typically include the management of accounts payable and accounts receivable, payroll processing, financial statement preparation, and tax preparation. Bookkeepers in the healthcare industry must have knowledge of industry-specific regulations, such as HIPAA, and be able to manage financial data related to patient care, insurance claims, and reimbursements.
Accounting services for healthcare businesses involve more advanced financial analysis and strategic planning. These services include financial statement analysis, budgeting, forecasting, tax planning, and audit support. Accountants in the healthcare industry must have knowledge of healthcare regulations, such as the Affordable Care Act, and be able to analyze complex financial data related to patient care costs, insurance claims, and reimbursements.
One key consideration for healthcare businesses when it comes to bookkeeping and accounting services is the need for accurate and detailed financial records. Healthcare businesses must comply with strict regulations related to patient privacy and data security, so it is important that financial records are managed in a secure and confidential manner. Additionally, healthcare businesses must be able to track and report on patient care costs accurately to comply with regulations and ensure financial stability.
Another consideration for healthcare businesses is the need for specialized knowledge and experience when it comes to financial management. Healthcare regulations and industry-specific financial practices can be complex, so it is important to work with bookkeepers and accountants who have experience in the healthcare industry and understand the unique financial needs of healthcare businesses.
Bookkeeping and Accounting for SaaS
For SaaS businesses, bookkeeping and accounting services are just as important as they are for any other type of business. SaaS companies deal with a unique set of financial challenges that require specialized experience and knowledge.
Bookkeeping services for SaaS businesses include maintaining accurate financial records, managing accounts payable and receivable, and preparing financial reports. Since SaaS businesses often operate on a subscription-based model, bookkeepers need to be able to track recurring revenue and monitor changes in subscription levels. Additionally, bookkeepers may need to manage revenue recognition for SaaS businesses, which can be complex due to the nature of subscription-based revenue.
Accounting services for SaaS businesses can include tax planning and preparation, financial analysis, and audit support. SaaS businesses may have unique tax considerations, such as sales tax compliance across multiple states. Additionally, financial analysis can help SaaS businesses identify trends in customer behavior and usage, which can inform product development and pricing strategies. Audit support can also be important for SaaS businesses seeking to raise capital or undergo a merger or acquisition.
When choosing a bookkeeping or accounting service provider for a SaaS business, it is important to consider their experience and understanding of the unique challenges facing SaaS businesses. Look for a provider who has experience working with SaaS businesses of a similar size and complexity. Additionally, it can be helpful to choose a provider who uses up-to-date technology and software to streamline processes and improve accuracy.
Bookkeeping and Accounting for Private Equity and Venture Capital
Bookkeeping and accounting services play a crucial role in the success of private equity and venture capital businesses. These businesses face unique financial challenges that require the proficiency of experienced professionals to manage their financial operations effectively.
Bookkeeping services for private equity and venture capital businesses involve maintaining accurate records of financial transactions, managing cash flow, and preparing financial statements. These services help businesses keep track of their financial performance, identify potential risks, and make informed decisions.
In addition to basic bookkeeping services, private equity and venture capital businesses may require more advanced accounting services, such as tax planning and compliance, financial analysis, and audit support. These services help businesses manage complex financial issues, reduce their tax liability, and make informed investment decisions.
One area where accounting services for private equity and venture capital businesses are particularly important is in managing their investment portfolios. These businesses typically invest in a wide range of companies and assets, which can create complex accounting and reporting requirements. Accounting professionals can help businesses manage these requirements, including tracking investment performance, valuing assets, and preparing financial reports for investors.
Another important area where accounting services are essential for private equity and venture capital businesses is in managing their fundraising activities. These businesses often rely on raising capital from investors to fund their operations, which requires careful financial planning and reporting. Accounting professionals can help businesses develop and implement effective fundraising strategies, prepare financial projections and forecasts, and provide guidance on how to meet investor reporting requirements.
Choosing a Bookkeeper or Accountant
By outsourcing your financial operations to a trusted service provider, you can achieve greater success and focus on growing your business. Once you have decided whether your business needs bookkeeping or accounting services, it is important to choose the right service provider. Factors to consider:
Cost: Bookkeeping and accounting services can vary greatly in cost, depending on the provider, the level of service, and the complexity of your business. It is important to choose a provider that fits within your budget, but also provides the necessary level of service.
Experience: Look for a provider with experience in your industry, as well as with businesses of a similar size and complexity. You want a provider who understands the unique challenges and needs of your business.
Availability: It is important to choose a provider who is available when you need them, whether it be for monthly bookkeeping tasks or year-end tax preparation. Consider their response time and availability during peak periods, such as tax season.
Technology: Technology has become increasingly important in the world of bookkeeping and accounting. Look for a provider who uses up-to-date technology and accounting software to streamline processes and improve accuracy.
Referrals and reviews: Ask for referrals from other business owners or professionals, and read online reviews to get a sense of a provider’s reputation and level of service.
Communication: Choose a provider who communicates clearly and regularly with you, and who is willing to explain financial concepts in a way that you can understand.
Tips for Selecting a Service Provider
You should schedule an initial consultation to discuss your business needs and ask questions about their services.
Ask for references and follow up with those references to gauge their level of satisfaction. Look for certifications and affiliations with professional organizations, such as the American Institute of Certified Public Accountants or the National Association of Certified Bookkeepers. Request a detailed proposal or engagement letter outlining the scope of services, fees, and terms of the engagement.
Both bookkeeping and accounting services are essential for businesses of all sizes. By outsourcing your financial operations to a trusted service provider, you can achieve greater success and focus on growing your business. Contact us today to learn more about bookkeeping and accounting services.
Bookkeeping and Accounting FAQs
Q: Are bookkeeping services necessary for all businesses?
A: Yes, bookkeeping services are essential for all businesses, regardless of their size or industry.
Q: Are accounting services necessary for all businesses?
A: Accounting services are typically more necessary for larger businesses with more complex financial needs.
Q: Can outsourcing bookkeeping or accounting services save businesses time and money?
A: Yes, outsourcing bookkeeping or accounting services can save businesses time and money by allowing them to focus on running their business instead of spending time on financial record-keeping, and by providing insights into financial trends and identifying areas where businesses can improve.
For investor-backed companies, like start-ups, an outsourced accounting firm, also known as a financial operations management and outsourced accounting firm, offers many benefits that allow start-ups to scale, save time, and reduce operational costs and risk. Learn how to leverage a financial partner to help you and your team keep up with the demands of expansion, regulators, and investors.
What is Outsourced Accounting?
An outsourced accounting firm is a professional firm that provides financial services to client businesses. These firms are hired to provide specific services like cost reduction, financial reporting, payroll processing, and system and process assessments. An outsourced accounting firm can provide more comprehensive and reliable services than an in-house accounting team.
Common functions that investment-backed companies outsource include:
How Investor-Backed Companies Can Benefit from Outsourced Accounting
In the early stages of development, start-ups don’t usually have an established or consistent revenue stream, making growth and long-term financial stability essential goals.
As start-ups do grow, they need the right financial infrastructure in place to handle the rising cash flow, regulation requirements, and overhead costs.
This is where an outsourced accounting firm can deliver immediate value by offering these benefits:
Build Trust With Investors
Outsourcing accounting services can be a smart move for start-ups looking to impress their investors. By working with a reputable accounting team, start-ups can demonstrate to investors that they are serious about their financial management and have taken steps to ensure accuracy and financial transparency.
Additionally, an experienced accounting team can provide valuable insights and recommendations that can help start-ups make informed financial decisions and optimize their cash flow. All of these factors can contribute to a more positive perception of the start-up by investors, increasing the chances of securing funding and building long-term partnerships.
Access to Specialists Without Overhead
No one in business disputes the value of a quality CFO, but affording one with a start-up budget can put this essential role out of reach. Outsourced accounting firms make industry-leading proficiency financially accessible. Trust our knowledgeable outsourced CFO professionals, who possess industry-specific insights and a wealth of experience, to guide your financial decision-making.
They bring a level of experience to the table that start-ups may not have in-house or cannot afford to bring in-house. By leveraging the knowledge and skills of an external accounting team, start-ups can ensure that their financial management is accurate, compliant, and up-to-date without diverting internal resources away from core business activities.
Improve Internal Controls
Without a CFO in place, investor-backed businesses have no one to spot signs of fraud, like unusual transactional or billing activity. This puts companies at greater risk, which can be eliminated with an outsourced accounting partner.
Enhanced Data Security
Financial operations management firms protect business data with encrypted cybersecurity programs. This can be a real point of confidence for a start-up’s investors and employees, knowing that personal customer or employee information is safe.
Flexibility to Scale
A good outsourced accounting firm will tailor its services to meet its clients’ most immediate needs. This is good news for investment-backed companies who need to stay financially lean. By outsourcing financial duties, a start-up can save money by limiting spending to critical areas only.
Start-ups only pay for the services they need. Plus, start-ups can scale and decrease services with the ebb and flow of businesses. With an in-house team, you have to pay salary and benefits regardless of the workload.
More Time For Growth
Outsourcing can also free up time and resources for start-ups and their leaders, allowing them to focus on growth strategies.
First and foremost, outsourcing allows start-ups to delegate time-consuming and complex accounting tasks to an external team of specialists, freeing up internal resources. This can be especially important for start-ups, which often have limited staff and resources.
Outsourced accounting for start-ups can also provide access to advanced accounting tools and technology that they may not be able to afford or implement in-house. This can help to streamline accounting processes, reduce errors, and increase efficiency, making growth an attainable reality for start-ups.
Advanced Services You Can Expect from an Outsourced Accounting Firm
In addition to the benefits above, a financial operations management and outsourced accounting firm can provide these added perks to your invest-backed business.
Cash Flow Management
Use your outsourced partner to run an analysis of your expenses and profit statements. With this information, your partner can plan effective strategies to deal with potential roadblocks.
Forecasting
Leverage your partner firm’s forecasting experience to map out strategies that address performance needs in the short and long term.
Growth and Exit Strategies
Let your outsourced accounting firm prepare business plans, forecasts, and other essential documents needed to raise more capital for growth.
Who better than an outside financial specialist to advise on areas where your start-up can improve efficiencies? This includes things like month-end reporting, credit and collections, and even your business strategy to maximize returns.
Potential Cons of Partnering With an Outsourced Accounting Firm
While there can be some potential obstacles when working with a financial partner, most can be avoided with good communication up-front and by finding a firm that feels like a natural fit.
Outsourcing for the First Time
If you’re not familiar with using an outsourced accounting firm, you may not know how to fully leverage the firm’s capabilities. To avoid this, start-ups can ask potential partners to walk them through their typical work process.
Cost
While using an outsourced accounting firm can save investment-backed companies money, if not carefully managed, the partnership can cause costs to soar quickly. This can be prevented by asking potential partners for a detailed estimate and factors that would impact the price. Also, be upfront about your budget. A good financial partner will tailor a solution to match it.
Poor Communication
Bad communication can result in many of the issues above. From the start, make sure you and your outsourced accounting firm are in agreement on the process and modes of communication, as well as goals and objectives.
Bad Fit
Just as there are numerous types of investment-backed businesses, there are also numerous investment firms that specialize in niche sectors. Look for a firm that has experience with a company similar to your size, structure, and industry.
Tips to Help You Choose the Right Financial Partner
As we mentioned, many of the potential risks of hiring an outsourced accounting firm can be avoided if you’re able to find a firm that understands your culture, verticals, and goals. Here are questions and considerations that can help you find the best fit.
What Are Your Short and Long-Term Business Needs?
Start by taking into account your specific business needs to determine if they’ll be met in your partner’s tailored package.
What services or support do you need? What type of data is being shared with external personnel, and which tasks should remain in-house because of their confidential nature? For instance, if your company requires tax accounting or bookkeeping but not payroll processing, these duties are ideal for outsourcing.
What Is Your Budget?
If you are unsure about how much it will cost to outsource your finance and accounting services, don’t fret. You can make an educated guess based on some key factors.
Ask yourself:
How much can my organization afford to spend on outsourced services?
What specific services does my organization need?
What value will the services bring to my organization?
Are the costs of an in-house team and technology stack cheaper than the cost of an outsourced team and technology stack?
Keeping these questions in mind can help you make an informed decision about the cost of outsourcing your finance and accounting services. You can also compare and contrast pricing between your top picks.
Check the Firm’s Reputation & Experience
It is important to do your research when looking for potential providers. Check out what previous customers have to say about them, and make sure they have experience in industries or with clients similar to yours.
It is important to find a financial outsourcing partner that has experience in the industry and understands the complexities of your business. Make sure to ask for references from previous or existing clients.
Ask Questions
Here are a few questions to get you started, but you’ll likely have questions specific to your business structure.
What experience do you have working with start-ups?
What services do you offer, and what is your pricing structure?
How do you ensure the accuracy and timeliness of your services?
How do you communicate with clients?
Are you familiar with any tax regulations specific to start-ups?
What is your experience with raising capital?
What other services do you offer that may be beneficial to a start-up?
Are you willing to provide references from other start-up clients?
Next Steps
If you’re ready to start your search for an outsourced financial partner, here are a few to-do’s to complete before you begin your search:
Are you open to new and updated accounting practices?
Are you willing to share access to your financial data with a partner?
Is your team ready to adopt process improvements your financial partner may recommend?
Contact Lavoie
If you answered yes to the questions above, it’s time to find a partner you can trust. With the right partner, you can gain the knowledge, skills, and experience required to optimize your financials and reach the goals you have for your start-up.
Contact Lavoie today to learn how their experienced team of financial professionals can provide you with the support you need to successfully manage your finances. We have extensive experience supporting investment-backed companies.
Investors like funding good ideas, but only if they know an experienced team will manage that good idea to its full potential.
Investors will be looking at how well your team works as individuals and as a group before trusting your firm to source, negotiate, monitor, and exit fund investments.
So, when meeting with potential investors, you want your team laser focused and ready to answer every question investors throw your way, like:
How forward-thinking is your team on issues that impact private equity?
How comfortable is the team managing a complex portfolio like mine?
Describe the technology you use to implement proactive portfolio strategies.
How quickly can the team produce high volumes of customized reports?
Your team’s biggest barriers to making a good impression?
Admin Distractions
If your team has to manage basic accounting tasks or stay on top of regulation changes, their focus will be split between essential and non-essential business functions.
An unfocused team has a greater risk of delivering reactive and lackluster strategies or accruing costly regulator penalties.
Disorganization
When your team doesn’t have a central platform to store, view, and extract financial data, it’s easy for teams to mistakenly (and unknowingly) work off of inaccurate or dated information. Without a centralized location to store client data, your team is more likely to stumble over unnecessary redundancies and inefficiencies.
By outsourcing your firm’s financial operation management and accounting, you let your fund admins focus on improving investment strategies, reports, and client dashboards – tasks that have a direct impact on the business.
Furthermore, your team will all be able to leverage accurate data, the bedrock of effective and proactive investment strategies.
Preserve Your Reputation to Attract Investors
As private equity firms grow, it gets more difficult to maintain a high growth rate. But a high growth rate is exactly what attracts investors.
In response, private equity firms are eager to find efficiencies and cost savings that don’t impact core business functions.
Outsourcing your financial and accounting processes is an excellent way for firms to reduce overhead costs while maintaining transparency and accuracy. Plus, private equity firms can still maintain management fees this way.
Additionally, you can retain a penalty-free track record by relying on your financial partner to monitor regulatory changes and how they impact your business. Plus, your financial partner can make sure your firm is always financial audit-ready.
Broaden Your Proficiency
The very best outsourced accounting firms are the ones that can explain the meaning behind the numbers.
At Lavoie, we go a step further by also identifying:
Future cash-flow projects to help you plan your next steps
Think of a company like Lavoie as an extension of your team that you can tap when, for example, you don’t understand why cash flow is low when the business is performing. Your financial partner has both the time and experience to investigate the problem and deliver a list of actionable next steps.
Finally, there is a degree of credibility you can achieve with investors when they know that a professional team is overseeing all the nitty-gritty details of their investment. This also reassures investors that your team’s focus is on their funds.
Free Up Cash Flow to Reinvest in Teams & Tools
There is a multitude of ways to enhance the investor experience at your firm, but very few of them are free.
An important benefit of partnering with an outsourced financial operations management and accounting firm is that it can free up more cash flow. This allows you to reinvest in other things such as team training, hiring new team members, or purchasing industry-leading tools.
When private equity firms experience rapid growth, they are suddenly inundated with heavy cash flow. A partner like Lavoie ensures that you can manage those funds efficiently.
Your financial partner can also manage your accounts receivable, allowing your company to collect payments faster or identify clients who are behind with payments.
They also have the time to carefully review invoices before they’re paid to check for any inaccuracies that can cost you.
The biggest cost savings come from not having to staff an in-house accounting team. With a financial partner, you only pay for additional financial support when you need it.
Meet Expectations of Digital-Savvy Investors & Regulators
Today’s most successful firms leverage the speed and accuracy of financial software to deliver superior client experiences and abide by current regulations.
All client investors expect financial transparency and accuracy and – with the emergence of technology – they expect them at a moment’s notice.
The Securities and Exchange Commission (SEC) also expects greater transparency and accuracy. The surge in private investments, plus the fact that private companies aren’t required to file information with local regulators, drew enough attention for the SEC to tighten regulations.
Today, regulators are more likely to request a report on performance or economic activity. All signs point to more regulations, re-emphasizing the importance of accessing financial information at a moment’s notice.
Financial software could easily alleviate these issues — but the software can’t do all the work by itself. Someone from your firm has to research and select the right product, learn the tool, and train other employees.
Realistically, private investors do not have enough time to do this, but the good news is that they don’t have to. Not when they partner with a financial operations management and accounting firm.
At Lavoie, for example, we make software recommendations to our clients based on the functionalities they need. We are proficient with several programs that satisfy a range of accounting needs.
We also:
Set up the software for you
Create custom dashboards for your clients
Show you how to maximize the tool in ways that add value to your strategy
In Summary
Private equity firms of all sizes can glean deeper insights at a faster pace and with greater accuracy when they have the support of a financial operations management and an outsourced accounting firm.
Firms like Lavoie can reduce operational costs, streamline inefficiencies, and introduce your team to the right software. The resulting improvements in accuracy, communication, and transparency will only enhance the client experience at your firm.
If you’re a private equity firm looking for financial support, contact Lavoie today!
