Strategic Financial Planning is the process in which the company makes sure to manage its finances in such a way that it will increase the company’s success. The process helps the company will achieve its goals and objectives for both the long term and short term. Still, strategic financial planning primarily focuses on long-term achievements.
Put more in-depth? You need to understand your business goals and how to achieve them. Strategic financial planning benefits your business in such a manner that it outlines the steps to earn your business goals. The financial planning process helps you allot your resources over a specific period to achieve its goals according to your business’s financial planning management.
What Elements does Strategic Financial Planning involve?
Strategic financial management involves everything that deals with your business financial management, such as evaluation, planning, and adjusting to keep your company working towards long-term goals:
- Budget growth, cost systems, and management reports
- Determining resources to achieve goals such as costs, and amount
- Management of working capital such as payables, receivables, inventory, and cash
- Workers’ structure, payroll, and benefits.
- Corporate tax planning
- Managing and Assessing risk
- Establish ongoing procedure
The financial planning process involves a continuous action plan for the company to stay focused on its financial goals.
Objectives of Strategic Financial Planning
Strategic Financial Planning means determining “how much and what” to spend according to your resources. Planning is essential for your up-and-coming business; but it’s critical, all while a series of objectives can help you meet your goals. Financial objectives serve as the fundamentals for acing your business. Below are some financial objectives:
1. Make sure required funds availability
First, the main objective of Strategic financial planning is to ensure that the company has all means of funds that will serve different purposes, from day-to-day expenses to long-term assets. Simply, it ensures the availability of finance for business operations. Moreover, the availability of funds also helps specify finance resources for a business plan.
2. Increased in growth and earning as a result
This is a crucial objective a company should have that it must provide an increasing yearly sales with a margin of 20% rise from the first five years to boost the pull-off success and create a projected profit from the years afterward.
3. Ensure that business does not increase unnecessary resources
Taking care of your fund is extremely necessary; you must avoid both excess funding and shortage of funding. If you have an extra amount of money, you must invest it correctly so the organization can flourish and cash flow easily. You should plan thoroughly when and where to invest, as entirely not investing can create a significant loss.
There are primarily two types of financial planning; short-term, known as budgets, and long-term, which focuses on capital expenditure plans.
Importance of Strategic Financial Planning
The financial planning process is a business plan that is crucial to scaling your business. It assists your business in setting goals to achieving them entirely. Reasons you should consider strategic financial planning are given below:
1. Foundation for financial control
Financial planning provides a basis to check the business operations by comparing actual revenue to estimated revenue and actual cost to estimated cost.
2. Proper utilization of funds
Financial planning is part and parcel of business planning. The strategic financial plan provides an overview of the required cash amount, which avoids waste and overcapitalization situations.
3. Help in Investing in suitable Projects
Financial planning processes also assist in allocating funds for various purposes by comparing different investment bids.
4. Helps in Business Operational Activities
Your strategic financial planning also consists of all the financial decisions that ensure the smooth cash flow and the success of the production and distribution function.
5. Create the Most Appropriate Capital Structure
Funds can be organized from various sources and utilized for multiple purposes such as long-term, medium-term, and short-term. Long-term funds are mainly provided by shareholders and debenture holders, while financial institutions supply medium-term funds, and commercial banks give short-term funds. Strategic financial planning helps choose the proper capital structure according to your business plan.
6. Reduce the chances of business shocks and surprises
Planning the business helps avoid business shocks and surprises that a person might face in uncertain environments.
7. The relationship between Investment and Financing Decisions
Strategic financial planning helps decide the debt/equity ratio and where to invest the fund. It creates the relation between two decisions.
Conclusion
Developing a strategic financial plan is the key to acing your business. While in strategic financial planning, a financial planner must take note of all the above components according to their business needs. In addition, the financial advisor’s vision should align with the concept of the business owner’s vision. I hope the above knowledge will be beneficial for your business.
