Strategic financial planning is the key to a successful business and will ensure that your business not only makes the most money possible but also avoids losses and bankruptcy as well. As income is coming in, and revenue is being generated, there must be a plan for that money to be used in a strategic manner to get the best results. There are many aspects to financial planning, and it involves each aspect of the finances of a business, addressing all areas and needs.
What is Financial Planning?
Financial planning is the process in which all of the income is accounted for, revenue amounts are calculated and recorded, expenses are addressed, and a plan is created for what to do with the income that will best benefit the business. It spans many other reports and procedures including balance sheets, income statements, assets, expenses, upcoming repairs or replacements, planning for tax time and other planned and expected occurrences, and many other aspects.
A financial plan will have an intended use for each dollar of revenue that is created, and it will be designed for saving, expansion, new development, growth, paying employees, and other expenses that arise in every business. This plan will determine when moves will be made, when new people will be hired if areas need to be closed down, and other key decisions for the business.
To create a strategic financial plan, it will involve all of the necessary details of the finances, and it will create a strategy for how to move the business forward with the revenue that is generated. It will consider expected expenses as well as unexpected ones, and the strategy will have a goal set that each decision is working towards. Without an intended goal, there is no real plan on how to move forward, or what progress will be made, so a strategic financial plan will also include how long it is expected to meet each goal or each step on the way to the goal.
Who does Strategic Financial Planning?
This is a job often done by the Chief Finance Officer (CFO) and other leadership team members, and they will guide each division on their goals to continue to move towards them. It can be completed by an outsourced consultant, a fractional CFO or financial planner, or through a financial planner that is well-known and trusted in the industry. Knowledge of the industry can drastically change the approach to a plan and how it is created, as that knowledge will ensure that all decisions are in line with the expectations and will stay up to date with industry expectations.
As a task that can easily be outsourced, it is a great tool for all businesses big and small to optimize revenue and profit, and to organize expenses in the most beneficial way. It takes into consideration the financial risk of investment and altering inventory and other considerations, as well as preparing each of the areas of the business to work together towards a shared goal.
