The 3 Financial Strategies You Want To Remember in 2021

The 3 Financial Strategies You Want To Remember in 2021

An organization’s financial strategy is critical to the health and success of the business. A well-crafted financial strategy enables an organization to optimize operations and can present additional opportunities for growth. In contrast, a poor financial plan can hinder an organization’s operations and drive even a profitable company out of business.

Despite the importance of financial planning, the process of building a robust financial plan does not have to be complicated. By following a few simple strategies, an organization can avoid many of the common pitfalls that result in a flawed financial plan and hamper the growth of the business.

Three Important Financial Strategies for 2021

1. Remember That Cash Is Still King

It is vital to remember that a company’s money (revenue) is not the same as the money that a company has been paid (cash inflow).  While an organization may be profitable on paper, it could be broke in reality based upon the ratio of revenue to expenses.

Bills can only be paid with the money that a company actually has on-hand, making cash management an essential component of an organization’s financial strategy. 

This includes setting the terms of contracts to ensure that they are paid promptly and taking advantage of opportunities to minimize expenses, such as the use of automation to reduce payroll expenses.

2.Keep It Simple

Overcomplicating its financial strategy is a common mistake that businesses make.  To optimize its operations, an organization may break expenses into many buckets and independently monitor and analyze each.

While this is intended to increase visibility and optimize expenditures, it can end up costing an organization more money in the long term.  Additional complexity and analysis require additional headcount to complete.  Since payroll is typically one of a company’s largest expenses, up to 70% of the total, the potential gains made due to increased visibility and optimization are likely to be overwhelmed by the corresponding analysis cost.

A better approach to expense management is to apply the Pareto Principle: 80% of consequences come from 20% of causes.  Identify those few things that make up 80% of your expenses (likely payroll, marketing, and rent) and focus optimization efforts on those for maximum impact.

Financial analysis can also be simplified and optimized by the use of automation.  By transitioning manual accounting processes to automated ones, an organization can achieve the same level of analysis while minimizing the associated costs.

3. Bring Management Together & Make It Meaningful

One of the most common mistakes made by founders and entrepreneurs is maintaining too tight of control over a business’s operations.  By trying to do everything themselves, these leaders end up spending more time working “in” their company (day-to-day tasks, putting out fires, etc.) rather than working on their company (strategic planning, long-term goals, etc.).  As a result, the company can stagnate and fail because it lacks a clear path forward.

This also applies to an organization’s financial planning.  A crucial part of building a successful business is hiring competent people and handing over control of the tasks they are more fit to manage.

When developing a financial strategy, an organization’s management likely has a better view of the current state of the parts of the company under its direct control than the CEO.  Asking them about their departments’ current state, their needs, and potential opportunities to decrease expenses without sacrificing revenue can provide invaluable data for crafting an organization’s financial strategy.

 

Preparing Your Financial Strategy for 2021

The most effective financial strategies are based upon experience.  Optimizing cash flow requires knowledge of how to manage contracts best.  Simplifying financial analysis requires an understanding of what is and isn’t important.  Reducing expenses via automation requires the ability to select platforms that provide a tangible benefit and return on investment.  Crafting a strong financial strategy requires knowing the right questions to ask subordinates and take the right actions based on their answers. 

A good starting point for acquiring some of this knowledge is reading Lavoie’s Guide to Strategic Financial Planning. 

This ebook provides best practices and tips for developing an effective financial strategy.

However, in many cases, there is no substitute for experience.  Lavoie has over 25 years of financial planning experience and can manage your accounting for you, allowing you to focus on running and building your business.

The Most Common Financial Mistakes CEOs Make

The Most Common Financial Mistakes CEOs Make

Many CEOs don’t have a background in financial planning yet are expected to develop strategies and make decisions that dramatically impact an organization’s financial health. As a result, CEOs make several common mistakes that can dramatically impact their company’s financial health and success.

 Where CEOs Go Wrong

Getting too comfortable with “how you do things.”

Past performance is not indicative of future results.  While an organization’s strategies may have worked in the past, situations can evolve, forcing changes to “how you do things.”  CEOs must be ready and willing to adapt, not stuck in a rut.

Denying that every decision a business makes has some financial implication

Every decision that a business makes impacts its finances.  Everything that a company does affects its ability to operate in terms of additional or lost revenue, productivity, expenses, etc.  If nothing else, making the decision to do one thing means that the organization likely lacks the resources to do something else.  All business decisions should take into account the associated financial implications.

Making every decision in a vacuum

As the CEO, you will be called to the carpet for every choice you make, financial or otherwise, so it is vital that you justify the decisions you make.  Decisions should be made based upon the best data available and incorporate the input of all stakeholders and subject matter experts.  Making decisions in a vacuum increases the probability that a poor decision will be made based upon incorrect data or assumptions.

Forecasting based on what is in the bank account at that time

An organization’s current bank balance is a snapshot in time.  It can change rapidly and in unexpected ways.  For example, something as simple as a vendor depositing a check earlier or later than usual can result in a significant discrepancy between what an organization’s current bank balance is and what it “should” be.

For this reason, an organization’s financial strategies should not be based on projections based on a current bank balance.  A range of different factors could affect this and render any projections based on it erroneous and unusable.

No visibility into what you are owed and what you have to payout

Visibility into an organization’s liabilities and receivables is essential for a CEO.  For example, do you have more liabilities than what you are expecting in your receivables? You could have 600k in receivables but 800k in liability.

If this is the case, then a CEO needs to develop a strategy to decrease expenses and liability relative to receivables.  However, without visibility into the current state of liabilities and receivables, a CEO is unaware of the need to change.

Ignoring investments that don’t show up on the P&L

An organization’s profit and loss (P&L) statement summarizes its revenue, costs, and expenses during a specific period.  However, it is not necessarily comprehensive and should not be treated as such.

Investments that do not show up on an organization’s P&L statement should still be incorporated into its financial strategy.  While they may not impact long-term revenue and expenses, they will show up in cash flow.  Failing to account for them could leave an organization looking financially healthy on paper but broke in reality.

Not considering seasonality

Many businesses have seasonal ebbs and flows. Such as an increase in work for construction workers in summer and increased e-commerce sales in the months approaching Christmas.

For others, the reasons may be less obvious (such as having more sales in summer because customers have more money), but these cyclic changes will still occur and should be incorporated into a CEO’s financial strategy.  For example, building up cash reserves going into a dry season may be necessary to cover expenses while waiting for sales to trend upward again.

Planning once and refusing to iterate as things change

A business’s profitability is determined by a number of internal and external factors.  While the COVID-19 pandemic and its economic impacts are a high-visibility example, businesses experience smaller changes much more frequently.

Adaptability is a critical component of an organization’s financial strategy.  While the company may have certain goals and plans in place, if internal or external factors demand a change, it is essential to adapt rather than insisting on continuing with a course that isn’t working.

 

Avoiding Common Financial Mistakes

 Understanding how financial planning can go wrong doesn’t tell you how to develop a financial strategy correctly.  To learn more about this, check out Lavoie’s CEO’s Guide to Strategic Financial Planning.

Strategic Financial Planning In 2 Questions

Strategic Financial Planning In 2 Questions

Developing a strategic financial plan can seem daunting; however, it can be boiled down into two questions: what are you doing now and where do you want to be? This article walks you through the process of answering these two questions, providing a foundation for developing a financial strategy for your organization.

Question 1: What Are You Doing Now?

Every journey has a starting point and an ending point. Before you can implement a plan to achieve your financial goals, it is important to consider where you are now.

Current State of the Numbers

The current state of your organization’s numbers are a good starting point when determining your organization’s capability to meet its financial goals.  Some important questions to ask include:

  • Are you in a position of stability? Financial stability is vital to reaching “stretch” goals.  If the organization is not currently financially stable, it is important to identify this fact and develop a strategy for achieving stability as a first step in the planning process.
  • What is actually coming in/out the door? Knowing the size of the company’s cash reserves is not enough for financial planning.  How much revenue is coming into the organization and how much is going out again as expenses?
  • What is fueling the majority of your expenses? While increasing sales is one way of improving the organization’s financial footing, the ability to do so depends on the market and potential customers.  Identifying and minimizing expenses increases profits as well but is less impacted by external factors.

Culture

Achieving financial goals requires the support of the entire organization.  Take a moment to consider your organization’s culture and if the company has the maturity and ability to meet its goals.

  • Do your decisions match your vision and mission? An organization’s goals and procedures are important, but actions are even more so.  Are your decisions, both recent and historical, helping to move the organization towards its goals?
  • Would your employees agree? Employees throughout the organization can have different perspectives, insights, and recommendations.  Ask those “down in the weeds” how well the company is following its vision and mission and how they believe things could do better.

Question 2: Where Do You Want To Be?

The effectiveness of a strategic plan can only be effectively measured if there are usable metrics.  Before starting to build a plan to improve the organization’s financial position, it is necessary to define success and failure.

Targets

The first step in defining “success” for a financial strategy is defining concrete targets.  From there, the next question to ask is what do you need to achieve your targets?

  • Human Capital.  Does your organization have the human capital necessary to achieve its goals?  This not only includes headcount but access to the specific skill sets required now and in the future.
  • Acquisitions. Does your organization have the capabilities that it requires?  Are there areas of your business where things could be done more effectively or efficiently?
  • IT Investments. The IT landscape is evolving rapidly, and new solutions have the potential to dramatically improve operational efficiency and effectiveness.  Are there any IT investments that the organization should make that would help in reaching its targets?

Expenses

A failure to properly monitor and manage expenses is one of the most common ways that businesses fail to achieve their financial goals.  Gaining visibility into past, present, and future expenditures is an essential part of financial planning.

  • How can you gain more visibility into your expenditures? Visibility into expenditures is essential to identifying opportunities for optimizations and cost cutting.  How can you achieve a higher level of visibility into business operations?
  • Do you have an idea of your cash flow on a daily, weekly, and monthly basis? What level of visibility do you currently have into your organization’s cash flows?  Examining cash flows at the daily, weekly, and monthly level can help to identify potential inefficiencies and opportunities.

Beginning Your Strategic Financial Plan

Answering the questions that were asked in this article enables you to lay the groundwork for developing your organization’s financial strategy.  To learn about the next steps in your financial planning process, download the CEO’s Guide to Strategic Financial Planning.

Lavoie Secures Kelley Michalski as Partner and Vice President of Operations

Lavoie Secures Kelley Michalski as Partner and Vice President of Operations

Lavoie secured Kelley Michalski as Partner and Vice President of Operations. Lavoie is excited to welcome Kelley Michalski to our team as our new Partner and Vice President of Operations in Charlotte, NC. In this role, Michalski will be responsible for managing client operations, maintaining internal control structures, and providing strategic support to our clients and organizations. As Lavoie continues to grow exponentially year over year, Michalski’s leadership will be an invaluable asset in reaching our goals.

“I am truly looking forward to being a part of an established market leader in the finance field,” said Michalski. “I’m excited to become a contributor to the growth of Lavoie.” 

Michalski brings with her over 20 years of experience leading strategic financial planning and implementation. Her wide breadth of practice includes everything from overseeing financial performance and organizational governance to managing risk and compliance. She has excelled in creating sustainable, data-driven financial strategies by developing a foundation of analytics to fuel tactical and long-term business decisions. Michalski’s leadership and expertise will be valuable additions to the Lavoie team.

“We are delighted to have Kelley become a Partner with the company. Through Kelley’s involvement with our team over the years, she has shown herself to be an exceptional leader in the industry,” said Sharai Lavoie, Lavoie’s CEO/Managing Member.

Prior to joining Lavoie, Michalski was the Chief Financial Officer for a subsidiary of a Fortune 15 organization and the owner of a small business located in Charlotte. A graduate of Iowa State University, Michalski brings with her an entrepreneurial mindset to support organizations of all sizes.

More information about Kelley Michalski is available at Lavoie’s Executive Team page

About Lavoie: Founded in 2009, Lavoie has served as a reliable Charlotte CPA firm that specializes in strategic financial and operational planning for businesses of all sizes. By delivering state-of-the-art strategic support, Lavoie’s clients can focus on growing their business and soar to the next level of greatness. In addition to providing customized solutions for clients, Lavoie prioritizes social justice issues and is extremely involved in the local Charlotte community.

Our CPA Day of Service

Our CPA Day of Service

For the last six years, the North Carolina Association of Certified Public Accountants (NCACPA) have challenged its members to give back to the community by participating in the CPA Day of Service. The idea came originally from one of NCACPA’s Board of Directors to allow members to “take to their communities and give back in some way”.

As a member of the NCACPA and the Charlotte community, we have made it a priority to participate in this event every year by volunteering with Habitat for Humanity, one of the global nonprofit housing organizations in the US. The organization works toward helping people in the community to build or improve a home and they rely on volunteers to be able to do so.

“Everyone deserves to have a place to call their own regardless of their income level.  Affordable housing is pivotal to reducing poverty in Charlotte and beyond.  Habitat for Humanity Charlotte provides the hand-up needed by thousands of local and global families.   We always look forward to spending the day with the wonderful people at Habitat ReStore and doing our part towards being a part of the solution. Shopping afterwards is always an added perk!  I always find something there!”

– Sharai Lavoie, CEO and Managing Member at Lavoie CPA.

Habitat for Humanity ReStore

On Friday, September 22, all our employees met up at one of the two Habitat ReStores, which functions as the fundraising division of Habitat for Humanity of Charlotte. The ReStores accept donations of new or used items and resells them to the public at a reduced cost. Consequently, Habitat can use the proceeds to build Habitat homes with their local affiliates. There are currently two locations in Charlotte, NC, which allows Habitat to build approximately 10-12 new homes every year.

Volunteers are necessary for Habitat’s success and when it comes to the ReStores they are mostly in need to people to help them with unloading donated items, organizing and cleaning donations, placing the items on the sales floor, and aiding customers with carry-outs of purchased items.

“We had a very rewarding time helping the community and bonding with our Lavoie CPA Team. Habitat is a great organization that helps struggling family’s get on their feet through volunteers and the family working together”

– Doug Burkhart, Senior Financial Consultant at Lavoie CPA

Thank you to Habitat for Humanity for letting us be a part of your mission and giving back. If you are interested in volunteering please visit the Charlotte ReStore website or email the Volunteer Coordinator of Retail Operations at volunteer@charlotterestore.org.

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Re-branding: New Look for Lavoie

Re-branding: New Look for Lavoie

As you may have noticed, we recently launched a new website in addition to a new brand look in the form of an updated logo, colors and tagline. We embarked on this re-branding journey a few months ago because we wanted our brand to better represent our unique position in the market as a nontraditional accounting firm that also focuses on cloud-based software solutions. We believe that our new brand better displays our role as a strategic and innovative partner to our clients.

Updated Website

The website has been entirely re-designed to aid visitors in navigating through our offering. First of all, the design is simpler and thus easier to navigate. Additionally, we have focused on improving content to better educate visitors on our offering and company information. Our solutions are now listed in our main three categories: software, outsourced accounting and projects. Additionally, visitors can also navigate through the industries we work with (software companies, business services, private equity and venture capital, and healthcare).

Re-designed logo

Since 2009, our main focus has been to help our clients in accounting and technology solutions; however, our old logo did not tell this story. Therefore, we are very excited with our new logo that has specifically incorporated design elements from accounting and technology. The “o” in Lavoie is interestingly based on the design of an abacus; a counting frame that was used as a calculating tool before the Hindu-Arabic numeral system was adopted.

New Tagline – “Efficiency Reimagined”

“We are very excited to reveal our new and fresh look and tagline, which speaks toward our innovation and ability to help clients reimagine new ways to accomplish their goals,” said Sharai Lavoie, CEO and Managing Member.

Needless to say, we are excited for our new look and hope you enjoy browsing our new site!

The 3 Financial Strategies You Want To Remember in 2021

An organization’s financial strategy is critical to the health and success of the business. A well-crafted financial strategy enables an organization to optimize operations and can present additional opportunities for growth. In contrast, a poor financial plan can...

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Many CEOs don’t have a background in financial planning yet are expected to develop strategies and make decisions that dramatically impact an organization’s financial health. As a result, CEOs make several common mistakes that can dramatically impact their company’s...

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