Every company, in the long run, strives to have a higher value than the previous year, also very important is the performance of the employees, de facto excellent performing employees will result in a more efficient and effective company. In order for those variables to be fulfilled there has to be the qualitative implementation of managerial strategies.
So what are financial strategies?
Strategic financial management describes the process of managing the finances of a company to meet its strategic goals. A management approach uses different techniques and financial tools to devise a strategic plan. Strategic financial management ensures that the strategy chosen is implemented to achieve the desired goals.
Some of the characteristics of financial strategies:
It focuses on long-term fund management, taking into account the strategic perspective.
It helps the financial managers to make decisions related to investments in the assets and the financing of such assets.
It promotes profitability, growth, and presence of the firm over the long term and strives to maximize the shareholders’ wealth.
It can be flexible and structured, as well.
It is a continuously evolving process, adapting and revising strategies to achieve the organization’s financial goals.
It includes a multidimensional and innovative approach to solving business problems.
It analyzes factual information using analytical financial methods with quantitative and qualitative reasoning.
Strategic Financial Management helps in taking two broad financial decisions taken by financial managers:
1. Decisions regarding investments in the assets of the company
2. Decisions regarding how such investments should be financed
What drives the value of a company?
Acknowledging and understanding how to increase the value. A few factors that are of interest:
- Profits and cash flow
- Longstanding and diverse customer base
- Experienced and capable management team
- Technology and systems
- Asset management
The importance of goal setting!
Goals are powerful, they can focus attention on a task that is desired to be achieved in the future. When the predicted goal is realized it is de facto profit for the business. An employee will work more productive when the management assigned them with a direction to complete a task. A great way to set goals Is they should be: specific, measurable, achievable, realistic, and time-bound. This is also known as the SMART acronym which is easy to remember!
''How not set a goal?''
For instance, setting a goal that “company A will be profitable by the next fiscal year” is not a good goals setting, because it is not very specific. Company A could easily lower its expenses and they could be profitable which not a good strategy is for the long term. How much profitable, are there enough customers, when will company A be profitable, competitors and etc. It is better to set a goal like this: company A will have a profit margin of 10 percent by the end of the next fiscal year, based on what? Based on the planned sales of X amount of units for e.g. 50,000.
COUPLE OF KEY THINGS TO REMEMBER
Without planning the specific goal that a company is trying to reach everything else will be waste of time. That’s why the business should plan the goals, the expenses, the production, the sales and etc.
Very important to track the progression of the planned goal, if the planned target is off in another direction the management can make short terms tactics to overcome them.
The management has to decide how long will that target be reached, so the teams involved could be maximized effectively and efficiently.