Your Companies Financial Strategy
Defining and driving your companies financial strategy is an essential part of business success. Business owners need a sound financial strategy to help their businesses achieve their vision and goals, without a strategy the chances of success are dramatically reduced. There are several features that a good financial strategy should incorporate:
Make Sure It is achievable
The financial strategy needs to stretch the organisation but also needs to ensure that the goals can be delivered. The important thing is not to be too bullish otherwise it will lose credibility, if people don’t believe in it then the strategy becomes a marginal consideration at best. To make sure that your strategy is stretching but achievable socialise the draft amongst senior members of the business and ask for feedback and potentially seek independent advice from a commercial accountant or part time finance director who can give an impartial view.
Have a working document
If you ask many business owners whether they have a financial strategy in place many will say ‘yes; but in reality most strategies are set up with the best intentions but then confined to a filing cabinet. For the strategy to be successful it needs to be embedded in the business review process and treated and as a live working document which is referred to and refined over time by the senior team.
Know where you are now, where you have been and where you want to get to
There is no point in establishing a financial strategy without the ability to monitor how you are performing against the strategy. You need a means of tracking your financial performance which shows what you have achieved and also gives a forward looking view of your financials. This forward looking view is normally in the form of a forecast and/or budget. The latter must be linked to the goals laid down in the financial strategy so you can track where you are at any given time.
Link It to an Execution Plan
The strategy must clearly demonstrate how the financial goals will be achieved with clear milestones and an execution plan. I have seen some very good financial strategies which also assign clear responsibilities to individuals at the outset so accountabilities are known and clear.
Make sure it focuses on the things that matter.
There is a risk that you try and cover too many financial Key Performance Indicators (KPIs) in your financial strategy. You need to restrict this to the most important (probably no more than 5). Think about what is important to the success of your business. Examples could include: Top line revenue growth (linked to sales volumes), profit/earnings, cashflow, working capital and controllable costs.
If your company needs help establishing or revamping a business strategy then please get in touch. The people at Your Finance Team are experienced and highly qualified and will be able to build you a realistic financial strategy to guide your business.