What’s Included in Strategic Financial Planning?
Below, we’ll explain what’s involved in strategic financial planning.
Understanding Strategic Financial Planning
Before a company can undertake strategic financial planning, it needs to define its objective — including identifying and quantifying its available and potential resources — so a specific plan can be devised to use its finances and other capital resources.
In addition, strategic management also involves understanding and properly controlling and allocating a company’s assets and liabilities. These include monitoring operational financing like expenditures, revenues, accounts receivable and payable, profitability, and cash flow.
Furthermore, strategic financial management involves continuous planning, evaluating, and adjusting to keep the company or organization focused and on track toward long-term goals.
How Can a Small Business Benefit from a Business Strategy Consultant?
However, there are some common elements of strategic financial management that can be applied across companies. These include the following:
- Helping the company function with economic efficiency and reduce waste
- Identify areas that incur the most operating costs or exceed the budgeted cost
- Uncover areas where a company may invest earnings to achieve goals more quickly and effectively
- Ensure sufficient liquidity to cover operating expenses without tapping external resources
Assessing and Managing Financial Risk
As you enter the third phase of strategic financial planning, you will want to identify, analyze, and mitigate uncertainty in any of your investment decisions. You will also want to work to evaluate the potential for financial exposure. This could include examining capital expenditures and workplace policies. You may also want to employ risk metrics such as degree of operating leverage calculations, standard deviation, and value-at-risk (VaR) strategies.
Establish Ongoing Procedures
- Collecting and analyzing data
- Identifying any problems and taking corrective approaches
- Making consistent financial decisions
- Track and analyze the differences between budgeted and actual results (variance)
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