A financial strategy refers to a business’s approach to managing and using financial resources to achieve goals. It involves planning and decision-making related to investment, budgeting, fundraising, cost management, forecasting future financial scenarios, and managing financial risks . The main objectives of a financial strategy are typically to increase shareholder value, secure the company’s financial stability, and ensure the availability of funds for future growth or to deal with unpredicted situations .
Creating a financial strategy is a multi-step process involving a deep understanding of the company’s financial situation and business goals. Here are some steps to creating a financial strategy :
1. Set clear goals: Identify what the organization wants to achieve financially. These goals should align with the broader business strategy.
2. Develop financial projections: Create monthly financial projections by recording anticipated income based on sales forecasts and anticipated expenses for labor, supplies, overhead, etc.
3. Arrange financing: Determine how to raise the capital needed for investment, whether through equity (like selling company shares), debt (like loans or bonds), or internally generated cash flow.
4. Plan for contingencies: Identify potential risks and develop contingency plans to mitigate them.
5. Monitor: Regularly monitor the company’s finances and adjust the strategy as needed.
6. Get help: Consider seeking professional advice from accountants, lawyers, or other experts.
It is important to note that a well-designed financial strategy should align with the company’s broader business goals and strategies, considering internal factors (like financial health, risk tolerance, and operational needs) and external factors (like market conditions, industry trends, and regulatory environment) .