Leaders must always be looking ahead, planning for innovation and developing proactive strategies to successfully navigate through the inevitability of change. The following article will outline strategic financial planning and offer some considerations to implement within your business.
What is Strategic Financial Planning?
Strategic financial planning involves the management of a companies finances in order to meet their strategic goals. Unlike strategic planning alone, this method implements financial tools and techniques to devise a strategy. This approach ensures that the chosen strategy effectively achieves the firms desired goals. So, what is the difference between strategic planning and financial planning?
Strategic vs. Financial Planning
Strategic Planning provides purpose and direction, sets priorities, focuses resources and assesses organisational direction in an ever-changing environment. Stakeholders need to work towards common goals and possess a fundamental understanding of business objectives. After all, how are you going to make progress if you don’t know where you are headed?
Without strategic planning, businesses will be unable to keep up and will be easily susceptible to day-to-day pressures. Moreover, firms which do not plan and implement effectively have much greater rates of failure than those who do. Just think of companies such as Nokia, Blockbuster and Yahoo; they all failed to implement a robust and innovative strategic plan and as a result, were unable to survive.
Effective strategic planning does not simply consider where an organisation is going and the associated actions required to achieve this. It also considers how to know if these measures will be successful, and this is where financial planning comes in.
While strategic planning outlines what a firm should do, financial planning considers how to use a firms financial resources to effectively achieve these goals. Increasing revenue, decreasing costs and improving margins, decreasing working capital is the ultimate financial goal. With an effective financial plan in place, a business is able to easily quantify goals for the near and far future.
Note: It is important to keep in mind that re-evaluation and adaptation may be required as particular circumstances present themselves. If your business is not meeting the specific goals set, then you need to ask yourself whether the business has been operating effectively and whether these goals were measured accurately.
Strategic financial planning drives decision making, while managing financial resources to achieve long term business objectives. Here are some of the features and benefits…
Strategic financial planning:
- Focuses on long-term management of finances, considering the strategic goals.
- Promotes profitability and growth of the business long term.
- Contains both elements of flexibility and structure.
- Is an ever-changing process, therefore, the adaption and re-evaluation of strategies is required in order to achieve the firms financial goals.
- Involves multidimensional and innovative approaches to improving a business
- Utilises economic and financial resources while considering the outcomes of business goals and strategies.
- Prepares a business to deal with unforeseen circumstances and react accordingly.
- Influences better decision making through both strategy and financial goals
- Create increased focus and therefore improve competitive advantage as the company has clear and effective goals in place.
- Greatly enhances a firms chance of success overall
Interested in implementing strategic financial planning for your business? Here at BUSINESSNAV our financial analysts are experts in developing and prioritising actions which matter to your companies future financial success. Enquire now and get on top of your financial strategy today.