Strategic financial management is a key component of any company’s management plan. It involves setting goals, defining metrics, and implementing specific strategies. It begins with research and analysis of current market conditions and key competitors. Then it develops plans for various future scenarios, including growth, profitability, and risk. Then, it implements specific plans to achieve those goals. In addition, strategic financial planning allows companies to adjust to changing market conditions over time.

Strategic Financial Management Involves A Number Of Key Processes

strategic financial management

Strategic financial management can be more effective than traditional strategic decision-making processes. It helps organizations view capital investment decisions in a more structured and flexible way. For example, asset-light businesses, such as Uber and Airbnb, emerged in the past 15 years. Without strategic financial management, these companies would not have seen the trend and would have invested in these businesses, which may have provided only a suboptimal return. By contrast, asset-heavy firms, such as Amazon, Apple, and Google, would have been able to identify the trend much sooner.

Strategic financial management involves a number of key processes. First, the management team must decide on KPIs to monitor progress. Some financial management KPIs involve working towards specific financial targets. Others may focus on short-term progress, such as the number of new customers signed. Once the goals have been set, the management team must decide on actionable steps based on the timeline and goals. Once the strategy is established, the team must evaluate the performance against these goals to determine whether the strategy is working as desired.

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