Strategic financial management is important for your company’s long-term financial success. Using it has multiple benefits in business.
What is strategic financial management?
Strategic financial management is a process of intentionally managing money and other resources to help achieve business goals and increase a company’s value. You make deliberate decisions around risk, investment and operations to hit long-term financial targets.
What is the purpose of strategic financial management?
Strategic financial management aims to achieve future growth, stability and profitability for your business. It helps you establish a plan and create processes based on careful analysis to guide you towards your business goals.
Why is strategic financial management important?
Strategic financial management is important because it helps you define the best strategies for increasing business profit margins.
It keeps your decision-making focused on long-term goals, managing short-term risks or opportunities as they arise.
Key principles of strategic financial management
The key principles of strategic management planning include:
Planning
Planning is a crucial first step in implementing strategic financial management. By setting up a financial plan, you can decide how best to use your resources to ensure future success. This plan allows you to set specific targets, outline a risk management plan and outline strategies for your business growth.
Goal setting
Goal setting helps keep you consistent and focused with your financial management strategy and decision-making. Your business goals should be clearly defined, measurable and achievable.
Budgeting
Proper budgeting helps you stay on track and work towards increasing your profit margins. Assessing your balance sheet and financial statements can help identify areas where you could be overspending and ensure you have enough revenue to cover operating expenses.
It can also help identify any investment opportunities to help reach your targets.
Identify and manage risks
Identifying and managing risks lets you implement strategies to reduce their impact on your long-term success. It’s also important to analyse how severe they could be and how likely they are to happen
Build systems and processes to aid ongoing management
You can consistently work towards your future business goals by building systems and processes to aid ongoing management. Consistent financial statement analysis can ensure that you’re staying on target. Comparing budgeted and actual results lets you identify problems and correct them.
Tip: With MYOB financial reporting software, you can customise reports to suit your business needs. Compare your financial position against previous periods, create budgets, track your expenses and set spending limits so you have the financial control and insights you need.
Benefits of strategic financial management
Benefits of strategic financial management include:
Improved profitability
Improving profitability in the long term is the main goal of strategic financial management. When you focus on future growth, short-term challenges are less likely to send you off course.
Staying on track with business financial goals
Staying on track with business financial goals is more manageable because your strategies have been determined based on what’ll help your business succeed in the long term.
Improve cash flow
Improved cash flow is a key benefit of strategic financial management. When you track and forecast cash flow you can make sure there’s enough to cover expenses and repay business loans.
Tip: MYOB Business allows you to manage your cash flow effectively. From your customised dashboard, you can track income, expenses and your financial performance for the year. What’s more, if you have a shortfall, you can easily apply for business finance from 80+ lenders from the platform.
Better risk management
Better risk management will give you peace of mind when things go wrong. You’ll have clear strategies in place to manage risk and help keep your business stable.
Better financial decision-making
Better financial decision-making comes from a deliberate focus on your company’s longevity and stability. By strategically managing your resources to improve profitability, you’re less likely to make reactionary short-term decisions.
Difference between tactical and strategic financial management
The difference between tactical and strategic financial management is that tactical financial management focuses on short-term success, whereas strategic is based on long-term goals.
Strategic financial management FAQs
What are the different types of financial management?
There are a few different types of financial management. Capital budgeting focuses on how you use your capital to finance major projects and investments. Capital structure looks at how you use debt and equity to finance operations and growth. Working capital management ensures you have enough money coming in to cover operating expenses and debt.
What does good financial management look like?
Good financial management means planning, predicting and managing risks. It also means having long-term goals and procedures in place to help your business grow.
How do you identify business financial risks?
Identifying business financial risks involves searching for anything that could threaten your sales revenue. This can be anything from how you operate internally to the market trends in your industry.
Identifying and assessing these risks can involve brainstorming, researching your industry and the market and performing financial analysis to identify risk trends.
Strategic financial management ... Check
Strategic financial management is vital to helping your business reach its long-term targets. By setting goals, evaluating risks, budgeting and managing finances well, you can plan for the future and handle any short-term losses.
Strategic financial management doesn’t need to be complicated. With MYOB Business you can get your financial statements in great shape, so you have the financial information you need to achieve your goals. Try it today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.