What Is Driver-Based Planning and How Can It Give Your Company a Competitive Edge?

What Is Driver-Based Planning and How Can It Give Your Company a Competitive Edge?

Budgeting often leaves business professionals drifting aimlessly in a sea of details.

With so much information available, they struggle to determine which factors will propel their company forward and which will sink it altogether.

Fortunately, driver-based planning can serve as a beacon.

Intuitive and flexible, this budgeting technique allows companies to identify which factors have the greatest impact on financial performance. The budget is then built around these factors, also known as key drivers.

The result? A nimble and responsive budget that eliminates white noise by focusing on variables that actually move the needle.

Keep reading for more insight into this innovative budgeting technique.

What Is Driver-Based Planning?

Traditional budgeting methods focus heavily on details that have little impact on the bottom line. Comparatively, driver-based planning focuses on key drivers that are vital to a business’s financial performance and future success. 

Though key drivers vary from industry to industry, common examples include:

  • Call volume 
  • Quantity Produced
  • Product price

With driver-based planning, organizations can create models that explore the causal relationships between key drivers and financial outcomes. These models can then be used to make operational decisions. 

Driver-Based Planning in Action

At its simplest, driver-based planning helps businesses bridge the gap between budgeting and everyday operations. 

Your company can implement this forecasting technique in four steps.

Step 1: Identify Qualitative Goals

Much like in traditional budgeting, a driver-based model begins with an understanding of what your company hopes to accomplish. 

This goal doesn’t need to be overly complicated or even very specific. It can be as simple as “drive revenue growth” or “increase profitability.”

Step 2: Establish Quantitative KPIs  

After determining your high-level qualitative goal, map out how you will measure success. For most companies, this involves establishing key performance indicators (KPIs). 

Common examples of KPIs include net profit, operational cash flow, and inventory turnover.  

Step 3: Isolate Key Drivers

Now, your company must determine which factors – or key drivers – have the greatest impact on those KPIs. 

Hundreds of variables may affect a company’s bottom line. The objective is to isolate those that matter the most. 

Step 4: Develop the Model

The last step is to create a quantitative model based on your company’s key drivers. But a successful driver-based model can take days, if not weeks, to develop in a spreadsheet. 

Fortunately, financial planning and analysis (FP&A) software can minimize legwork while delivering a more precise and accurate forecasting system.  

Selecting Key Drivers With Momentum

Driver-based planning is grounded in the Pareto Principle. 

Also known as the 80/20 Rule, the Pareto Principle states that 80% of outcomes come from 20% of causes. In layman’s terms that means your company’s financial performance hinges on a handful of inputs.  

Determining which inputs – or key drivers – are worth your attention can be challenging. However, key drivers should be easy to manipulate. In other words, your company should be able to control key drivers with a high level of accuracy. 

For example, the number of sales representatives can easily be increased or decreased. However, the sales representative attrition rate is less predictable and harder to change.

Why Businesses Are Adopting a Driver-Based Approach

An increasing number of companies are moving away from traditional models and toward the driver-based approach. 

Why? Because this innovative methodology has clear advantages over the budgeting techniques of yesteryear. 

1. Driver-based planning puts the focus on key metrics that impact organizational success.  

Traditional models adopt a bottom-up approach, forcing the C-suite to wade through irrelevant information. But with a driver-based model, businesses can drill down on the metrics that actually matter. 

2. Driver-based models allow teams to quickly assess the impact of internal or external changes. 

In a rapidly shifting economy, the ability to pivot on a dime is invaluable. Luckily, driver-based plans allow companies to manipulate variables, run different scenarios, and determine how imminent changes could impact the bottom line. 

3. Driver-based approach nurtures operational alignment. 

Driver-based models link financials to the everyday activities of your company. This encourages finance professionals to collaborate with department heads to truly understand which inputs are linked to improved performance. 

4. Driver-based models ensure data integrity. 

The sheer volume of information associated with traditional models contributes to inaccuracies. But with driver-based planning, companies can focus on collecting a small amount of accurate, valid data. 

5. Driver-based planning helps stakeholders see the big picture.   

The chief advantage of driver-based planning is simplicity. This budgeting approach allows your company to explain – in plain language – the causal relationships between key inputs and profitability to stakeholders.

How Driver-Based Financial Planning Tools Maximize Precision

Driver-based models can give companies a competitive edge by illuminating key drivers that affect the bottom line. 

However, building one of these models in a spreadsheet can be tedious, requiring days of work from even the savviest of finance professionals. Worse yet, most spreadsheets get bogged down by the macros and equations needed for these models. 

Luckily, there’s a better solution. Driver-based FP&A software can offer cutting-edge precision and customizable forecasting solutions with a single click.   

Lavoie CPA and Jirav Software Solutions

At Lavoie CPA, we are dedicated to delivering strategic support so that businesses can focus on what matters most: catalyzing growth. With this in mind, we have partnered with Jirav, a driver-based financial planning tool, to help clients soar to greatness. 

“Jirav gives business professionals the clarity needed to make their next big move.”

— Sharai Lavoie, CEO of Lavoie CPA

As our preferred FP&A software, Jirav gives you a real-time look at financial projections. Rather than build budgets from last year’s stale data, you can rely on Jirav to help you visualize the future and test out different scenarios based on key drivers. 

Contact Lavoie’s financial experts to see if Jirav is the right software solution for your business. 

Lavoie CPA & Jirav Launch Strategic Partnership

Lavoie CPA & Jirav Launch Strategic Partnership

Lavoie CPA & Jirav Launch Strategic Partnership

Lavoie CPA has added Jirav, an all-in-one business planning software for small and medium companies, to its lineup of preferred cloud solutions for the accounting profession.

At Lavoie CPA, we leverage accounting as a service and cloud-based accounting technology to streamline clients’ accounting, payroll, and analytical processes. Implementing software solutions is critical for improving financial reporting and making businesses scalable over the long term. We work closely with clients to identify the right software solution that supports strategic objectives while making operations more efficient and effective.

Through this partnership, Lavoie CPA and Jirav aim to give clients a competitive edge in their accounting and administrative processes.

Jirav is an all-in-one financial planning and analysis solution that maximizes the collaborative value of forecasting, budgeting, reporting, and analytics so leaders can drive their businesses forward with confidence and speed.

Jirav integrates natively with leading accounting or ERP platforms such as Xero, Quickbooks, NetSuite, and Sage Intacct. With Jirav, you are up and running your forecasts using templates in minutes.

This powerful business planning software helps companies:

  • Maximize Growth: Model the outcomes of investing in sales, marketing, or other areas. Scenario test to optimize your growth strategy and track results to plan.
  • Operate With Financial Excellence: A key to growth is having a plan and measuring against it. Manage detailed KPIs and collaborate with owners to keep the business on track.
  • Focus on Strategy: Finance teams at growth companies lose too much time to spreadsheets and generating reports. Automate the tasks and focus on being strategic.

Contact slavoie@lavoiepllc.com to request a demo today. To learn more about the platform, please visit https://www.jirav.com/.

About Lavoie CPA

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.

About Jirav

Jirav is a comprehensive business planning solution for small and medium companies that maximizes the collaborative value of forecasting, budgeting, reporting, and analytics so leaders can drive their businesses forward with confidence and speed. The all-in-one financial planning and analysis software offers faster implementation and a more intuitive interface, allowing finance leaders to build financial models in hours (not days) and generate financial reports in minutes (not hours). Jirav is headquartered in San Francisco with offices and teams across the world including Seattle, Austin, and Poland. Learn more at www.jirav.com.

How Outsourced Accounting Can Benefit Small Businesses

How Outsourced Accounting Can Benefit Small Businesses

When you start a small business, you’re driven by passion and grit. But as your business grows, so do its demands. 

Many entrepreneurs make the mistake of wearing too many hats, seeking to cut expenses by handling their own bookkeeping and financial needs. These activities are necessary, but they can extinguish your drive and steal attention from the revenue-generating activities at which you excel.

Outsourcing your financial needs to an accounting firm lets you get your head back in the game and brings a wide array of other benefits as well. 

In this article, we’ll explain some of the ways that outsourced accounting can benefit small businesses.

1. Outsourced Accounting Helps Small Businesses Access Expert Advice

Staff accountants tend to be generalists, not specialists. This deficiency can make it difficult for business owners to hire a financial staff capable of keeping up with business regulations and providing expert guidance for the company’s financial future.

At an outsourced accounting firm, you’ll find entire teams of financial professionals who live, eat, and breathe their profession. 

These financial gurus have often spent considerable time taking additional classes and seminars to stay current on business regulations, new technologies, and other economic developments that impact the small business community. 

When you outsource your financial needs to a panel of experts, you can have the confidence that you’re receiving the most knowledgeable, objective financial services the industry has to offer.

2. Outsourced Accounting Helps Small Businesses Adhere to Compliance Requirements

Every entrepreneur understands the frustration that comes from navigating the ever-changing sea of business regulations. 

Violating these regulations can leave you facing penalties and fines and slow your momentum as you bring your company into compliance.

Partnering with an outsourced accounting team can help you avoid these penalties and stay up-to-date with the regulations and requirements that govern your business. 

These accounting experts make it their duty to stay “in the know” on the latest industry requirements and monitor evolving laws so that they can provide comprehensive guidance for every small business. 

This persistence helps you adhere to existing compliance requirements and provides peace of mind that you can adapt to any future changes that come your way.

3. Outsourced Accounting Helps Small Businesses Lower the Cost of Accounting

Hiring an in-house accountant can take a significant bite out of your business. According to the U.S. Bureau of Labor Statistics, the typical rate for a CPA is $40 per hour. 

These rates can increase based on the accountant’s experience, area of expertise, and the work you ask them to perform. 

Even a basic bookkeeper can run $20 per hour, and on top of these fees, you may have to provide benefits, a workspace, and that’s to say nothing of the time you spend in the interview and onboarding process.

Admittedly, outsourced accounting costs will vary by the needs of your business, but these rates are typically much, much lower than adding an accountant to your staff. 

Plus, by relying on the expert-level guidance of an accounting firm, you may be able to optimize your cash flow and improve the profitability of your business.

4. Outsourced Accounting Helps Small Businesses Leverage the Right Accounting Software

The right tools make all of the difference. Outsourced accounting firms rely on the latest accounting technology and software platforms to serve their clients. The very best companies give their clients total access to this financial data. 

With Lavoie, for example, our software gives you real-time visibility into the performance of your business, and this information can help you manage your cash flow and optimize your business strategy accordingly.

Using the right accounting software naturally demands airtight security. Outsourced accounting can protect you from data loss or privacy breaches without compromising your sense of ownership over your business data.

Best of all, the integrated software platforms used by today’s firms allow you to better share data between functional departments, which can streamline otherwise disconnected processes as your business grows.

5. Outsourced Accounting Helps Small Businesses Spend Less Time on Accounting Processes

No business owner should be spending their time clicking around in QuickBooks. For that matter, neither should your valued employees. 

One of the greatest benefits of outsourcing your accounting processes is that you and your team members can spend time where it belongs: growing your core business and attending to your customers’ needs.

Outsourced accounting is, therefore, an investment. The return on this investment comes from the revenue-generating activity you and your staff can focus on while a team of professionals handles your finances.

One of the reasons entrepreneurs sink their own time into their books is because they want better control of their company’s finances. 

But as we noted above, the advanced software offered by accounting firms like Lavoie give business owners real-time access to their company data. 

This service means that you’ll be getting more control over your company by partnering with an accounting firm, not less.

6. Outsourced Accounting Helps Small Businesses Tackle Employee Fraud

According to the U.S. Chamber of Commerce, 75% of employees have stolen from their companies, and nearly 1 out of 3 businesses fail because of employee fraud. 

Forensic accountants have special training to ferret out bookkeeping irregularities and other financial crimes, which can protect your business from being victimized by unscrupulous employees.

An outsourced accounting firm can help tackle various forms of employee fraud, and their presence may even act as a deterrent to prevent employees from attempting fraud in the first place. 

If a fraud investigation should result in litigation, it often helps to have the impartial reporting of a third-party financial professional to strengthen your case.

7. Outsourced Accounting Helps Small Businesses Avoid Delays in Accounting and Payroll

Staff accountants can introduce delays in their parent company’s accounting and payroll processes. 

Some of these delays are simply a matter of an accountant taking a vacation or a sick day. In other cases, a staff accountant can merely get behind in paperwork, causing delays in financial reporting or even causing paychecks to be delayed.

Outsourced accounting can keep the wheels of your business running in sync and prevent these sorts of delays. By relying on a team of financial professionals, you’ll have the confidence that your financial needs are consistently and accurately met.

8. Outsourced Accounting Helps Small Businesses Keep Up with Growing Finances

One of the more unusual challenges for any business owner is how to handle their success. As your business grows, it’s important to learn how to manage your cash flow to sustain your business and provide manageable growth. 

An accounting firm can help you strategize and plan, offering financial forecasting and reporting that can help you refine your approach and optimize for the future. 

This advice means that the best accounting firms grow with you. At Lavoie, for example, we aim to build long-term relationships to serve our clients’ needs over the long haul.


At Lavoie, we believe that today’s small business owners can become tomorrow’s industry leaders, and we’re committed to you every step of the way. 

We’d love to discuss how our customized financial solutions can optimize your business and provide innovative solutions to give you an edge in today’s competitive marketplace.

Contact us today. We’d be glad to hear about your current needs and tell you how our team might meet them. 

Women’s Enterprise USA Magazine Salutes Top WBE CEOs of 2021

Women’s Enterprise USA Magazine Salutes Top WBE CEOs of 2021

DALLAS — Women’s Enterprise USA has released its list of Top Women-owned Business Enterprise CEOs of 2021 — a group of visionary women business leaders who demonstrate the best and brightest of women-owned business enterprises. Women’s Enterprise is an award-winning print and digital publication focused on the development and accomplishments of women-owned businesses.

“These CEOs are leading the way for other female entrepreneurs to bring competitive, collaborative and innovation solutions to a marketplace in motion,” said Kristin Schneider, publisher of Women’s Enterprise. “Our Top WBE CEOs of 2021 have not only built successful companies, they are changing the way the world does business.”

To determine the top CEOs, WE USA’s team of advisors and editors reached out to the regional partner organizations of the Women’s Business Enterprise National Council and business leaders throughout the country to identify women business owners who have achieved measurable success, advanced innovation in their industries, become role models and contributed substantial time and effort to helping other WBEs. The following are the WBE CEOs ― in alphabetical order ― who most strongly exemplify these characteristics.

 Juuhi Ahuja, Founder, CEO and President, Wise Men Consultants, Houston, Texas
Imelda Alejandrino, CEO/Creative Director, AP42 Marketing and Technology, San Ramon, California
Dana C. Arnett, CEO, Wicked Bionic LLC, Los Angeles, California
Camille Austin, Owner, Elite Roofing Services Inc., Tampa, Florida
Michelle Aristeo Barton, President, Aristeo Construction Co., Livonia, Michigan
Debra Berry, CEO, Berry Industrial Group Inc., Nyack, New York
Donna Brin, Founder & CEO, bFIVE40, Little River, South Carolina
Gabrielle Christman, President and CEO, Hunter International Inc., Avon, Ohio
Donna Cole, President/CEO, Cole Chemical & Distributing Inc., Houston, Texas
Jacqueline Darna, CEO, Darna & Co. LLC dba NoMo Bands, Tampa, Florida
Iyabo Dedmon, President, ThriveOn Concepts, North Kansas City, Missouri
Dana Donofree, Founder and CEO, AnaOno LLC, Philadelphia, Pennsylvania
Nathalie Doobin, Owner, President and CEO, Harvard Services Group Inc., Miami, Florida
Leanne Duong-Ma, President/Owner, Direct Source Procurement, Las Vegas, Nevada
Pamela Feld, Founder and CEO, Triumph Technology Group, Tustin, California
Jill Frey, President and CEO, Cummins Facility Services LLC, Prospect, Ohio
Nenette Gray, Founder and CEO, Lemonade Creative Marketing LLC, Baton Rouge, Louisiana
Lili Hall, Founder, CEO and President, KNOCK Inc., Minneapolis, Minnesota
Linda Hamilton, CPA, CEPA, SYSTEMologist®, Linda A Hamilton CPA PLLC, New York, New York
Kyra Hardwick, MBA, Managing Consultant, The Kyra Co. LLC, Houston, Texas
Jodi Cannon Hohman, CEO, Lagarda Security, Burton, Michigan
Kate Holby, Co-Founder, Ajiri Tea Co., Upper Black Eddy, Pennsylvania
Porcha Johnson, Founder and Publisher, Black Girl Health, Harrisburg, Pennsylvania
Hannah Kain, President and CEO, ALOM Technologies Corp., Fremont, California
Sharai Lavoie, CEO/Managing Member, Lavoie CPA PLLC, Charlotte, North Carolina
Mary Lawrence, President, Richards Graphic Communications Inc., Bellwood, Illinois
Elizabeth Ledoux, Founder and Head Strategist, The Transition Strategists, Ft. Collins, Colorado
Sandy Lish, Principal & Co-Founder, The Castle Group Inc., Boston, Massachusetts
Betty Manetta, President and CEO, Argent Associates, Plano, Texas
Michelle Manire, CMM, Founder and President, Coast to Coast Conferences & Events, Long Beach, California
Dee C. Marshall, CEO, Diverse & Engaged LLC, Newark, New Jersey
Carol Muszynski, President, Eighth Day Design Inc., Falls Church, Virginia
Carmen Nazario, President/CEO, ELYON International Inc., Vancouver, Washington
Mary Parker, CEO, ALL N ONE Security Enterprise, Atlanta, GA
Lauren Rakolta, President & CEO, DFM Solutions Inc., Detroit, Michigan
Ann Ramakumaran – will send responses, CEO and Founder, Ampcus Inc., Chantilly, Virginia
Angelica Rivera, President and CEO, Colmex Construction LLC, New Orleans, Louisiana
Silvana Rosero, President & CEO, Laguna Media Group, Grand Prairie, Texas
Jenell Ross, President, Bob Ross Auto Group, Bobrossauto.com
Molly Sandlin, Founder and President, CAET Project Management Consultants LLC, Keller, Texas
Rosa Santana, Founder and CEO, Santana Group, San Antonio, Texas
Billie Bryant Schultz, CEO, CESCO Inc., Dallas, Texas
Wendy Spivak, Principal & Co-Founder, The Castle Group Inc., Boston, Massachusetts
Debra Stevens, Principal, The Stevens Group/International Tenant Representative Alliance Global, Boston, Massachusetts
Liora Stone, President, Precision Engineering Inc., Uxbridge, Massachusetts
Amy Tiller, CEO and Co-Founder, Inspired Results Inc., Portland, Oregon
Andrea Tsakanikas, President, CrewFacilities.com LLC, Austin, Texas
Nina Vaca, CEO, Pinnacle Group, Dallas, Texas
Biddie Webb, Partner, Limb Design LLC, Houston, Texas
Liz Whitehead, CEO, 12PointFive LLC, Silver Spring, Maryland


For questions, please contact:

Kristin Schneider, Publisher



About WE USA magazine

Now close to celebrating its 30th anniversary, WE USA magazine is America’s award-winning resource for information on women’s business enterprise and diversity. Reaching an audience of women business owners, corporate procurement managers and executives, education professionals and government representatives, WE USA focuses on value for the readers, advertisers and communities it serves. For more information, visit weusa.biz.

    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.