Why Every Business Needs a Financial Strategy

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Every business needs goals. It is these goals that form the roadmap for the company’s future. A financial strategy is very important because it lets a company formulate a plan for the steps it needs to take to reach its financial goals, as well as know what its financial future might look like if the right roadmap is followed.

Strategic Financial Management

When planning a company’s future, the most important things to focus on include:

— Business goals and objectives

— Revenues and expenses

— Budgeting and cash management, as well as

— Investment decisions.

At the very least, every company should assess their resources and plan on using them to meet their goals and objectives. Having a clear plan ensures that a company knows exactly what to do and when so that it is not caught trying to catch up when its plans do not go as planned.

Strategic financial management, therefore, can be summed up as:

— Studying a company’s market

— Collecting, analysing and making sense of data

— Using the data to forecast revenues and expenses

— Coming up with, and implementing, a financial strategy that would be beneficial to the company and that helps the company reach its financial goals and objectives

To Outsource Or to Do it Inhouse?

Most entrepreneurs do not feel comfortable leaving the financial futures of their companies in the hands of outsiders. That is why most of them choose to plan their own financial futures. While entrepreneurs are usually excellent decision-makers, they might not be the most financially savvy people in a company. That is why they need outside help.

Entrepreneurs can hire business managers or take a course to become one themselves. Aston University has an amazing Business and Management course here: https://studyonline.aston.ac.uk/programmes/msc-business-management-online that could come in very handy if you are not looking to hire a business manager.

A business manager will be in charge of your financial department and can help you make decisions on where and what to outsource. Some common areas that you may not need a whole department for include:

— Payroll

— Taxes

— Cash management

— Invoices

— Inventory management

The business or financial manager will look through your business and find investment opportunities, financial inefficiencies and help you maximise revenues and minimise losses.

Entrepreneurs who want to go through it all by themselves should start by researching their niche. They need to understand their competitors and market to identify investment opportunities. They can also look to see how other similar companies or businesses plan their futures and try to customise this for their businesses.

Why You Need a Financial Strategy

An unfortunate misconception is that small businesses do not need a financial strategy. This is wrong; every business needs one. Optimising for return on investment should be at the top of the mind of anyone who starts a business and a financial strategy can help with that. A financial strategy helps you make the right decisions if you follow your roadmap, and in this way helps maximise return on investment.

A good financial strategy can also help you:

— Set attainable goals

— Identify any pitfalls

— Come up with a roadmap for your business.

Elements of a Good Financial Strategy

— A good financial strategy should be detailed – Every single aspect of your business, its operations and systems should be investigated to find out if they are a net positive or a net negative for your business.

— It should also be highly personalised – No two businesses operate the same even if they are in the same niche. Get a financial or business manager to look through your business and come up with a highly customised strategy.

— It should be actionable – There is no need for a financial strategy that does not give clear guidance and steps on what needs to be done to have a good financial future. Every single recommendation in it should be actionable, meaning you should be able to implement every step in there.

— It should take into account resources and opportunities – Resources and opportunities disappear just as fast as they appear. A good financial strategy should detail what resources you have and which ones you can obtain to better achieve your goals and objectives. It should also identify both short-term and long-term opportunities so you are better placed to take advantage of them.

— It should involve everyone – A company’s finances are usually in the hands of a lot of people. Ensure that you get input from all these people if you are looking to craft the best financial strategy possible.

Conclusion

It is not just big businesses that need a financial strategy; small ones do too. If you decide to craft one, you should hire a professional to do it for you. If not, you could take an online course that will give you the skills to do so yourself.