“In theory, there is no difference between theory and practice. But in practice, there is”
Jan L.A. van de Snepscheut
Finance is the foundation, a core element and an enabler for every business. Those at the starting gate will find a solid financial strategy is key to ensuring the company can and will operate efficiently and will continue to aspire to a professional reputation within the business ecosystem in which it operates
.In the short-term, for the first one to two years of operation, finance is focused around the resources required to operate the company. Taking cues from its Sales and Operations departments, a cash flow analysis enables a transparent enterprise; one which can easily identify any financial shortfalls, the time in which these must be met, and the total financial output required to operate the business. Newspaper vendor strategy states it simply: Cash from sales flows into the right pocket; cash for resources outflows from the left pocket and success is what’s left in the middle from which tomorrow’s newspapers can be bought.
However, living from hand to mouth is not the financial strategy one sets up for a successful future!
A medium-term financial development strategy for business begins in the second, third and fourth year of doing business. The medium-term strategy provides the financial foundation for the business operation as it expresses both short, medium- and long-term expectations of all its stakeholders.
With an eye for a profitable future, the long-term financial strategy provides a benchmark against which a business can measure success around the 5th year of business operations. It defines the anticipated value of the enterprise and will provide the answer to the question: Is our company a success? A mediocre organisation? A failure in terms of our expectations?
As can be seen from the above, financial structuring is the holistic, all-encompassing glue for the various business functions and operations within the organisation. The financial strategy ensures the funding of the business aspirations can be met; identifies the financial instruments with which to do so and frees up cashflow to defend against impending business emergencies or opportunities. Essentially, a financial strategy is the ultimate test for a company’s success or failure.
From Ground Zero to Success
Is imperative to develop a financial strategy when first starting up or when preparing for an upcoming venture such as a new product launch. A financial strategy is particularly important when market changes bring about new laws, regulations or changes applicable to your industry’s business practices that must be adapted to as quickly and seamlessly within the shortest time frame possible.
Optimally, a financial strategy should be carried out at least once a year, so as to review any current market shifts and refocus financial strategy on changing business goals as the company expands or streamlines and becomes more agile within the marketplace.
Optimal Components of a Solid Financial Strategy
A streamlined financial strategy should encompass specific details regarding your business strategies and sales tactics and should run according to an agreed action plan of time, resources, activities and goals.
Backed by a solid budget over its operational blueprint, it will include precise monitoring techniques and evaluation processes which manages funding of the cash flow statement, tax planning and balance sheet, which matches to the company’s future business growth.
Ideally, the aim of a financial strategy is to reduce the cost of funds, identify the best sources of capital and implement the right financial structuring within which to operate your company in today’s modern business environment, while still strategising ahead for the next two to five years.
How will a Solid Financial Strategy Benefit You?
The objective of a financial planning strategy supports your business within the following specific areas of finance operation:
Goal Prioritisation & Maintenance: Financial strategy provides specific actions, in order of priority with which to review, monitor and prompt you to stay focused on your business goals and in line with business running costs.
Planning for Opportunities & Threats: A solid financial strategy keeps a business agile when it comes to embracing opportunities and mitigating threats. Both scenarios call for swift decision making to either protect the business or take advantage of unexpected business opportunities.
Maintaining Policies & Corporate Regulations: Financial efficiency relates to the maintenance of policies linked to regulation, supervision, and maintenance of a company’s financial and payment systems, client assets and consumer protection laws; including insurance against theft, damage and longevity of equipment.
Consensus in Contractual Agreements: Financial strategy builds a blueprint of consensus between owners, key players and staff members which supports each member in their roles and responsibilities aligned to the business principles most pertinent to your type of business.
Forecasting for the Future: A solid financial plan does not have to be restrictive, rather it looks to develop projections into the future by planning expected incomes based on current sales forecasts and anticipated expenses required for staff, supplies, monthly overheads; as well as assisting with flexible routes for raising equity.
Maximising Profits: Most importantly, an agile financial strategy means your business is maximising profits at all times while staying legal and relevant in an ever-changing business landscape; one which arms you with solid future investment plan for success.
Every business needs a financial solution to match its business profile for agile and adept financial processing, business planning and efficient client operations.