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Picture 1.Objectives and effectiveness of the enterprise’s financial strategy.2
Based on the financial strategy, the enterprise builds an appropriate policy that guides itself in future activities. Picture 1 depicts the main priorities of financial policy at each stage of the life cycle of the enterprise and a list of financial indicators ‒ indicators, which are the focus of attention when implementing the selected financial strategy.
It's worth noting that there's a set of financial indicators that determine the enterprise's financial viability and, as a result, are at the forefront of attention at all stages of its life cycle: indicators of solvency and liquidity. These indicators are usually low at the start, but there should be a growing dynamic of their values and fixation at an acceptable size for a specific industry. Sufficient solvency is a prerequisite for achieving creditworthiness and investment attractiveness for the company, which makes it easier to solve the financing problem.
The fact that the company focuses on long-term goals rather than one-time benefits when implementing a strategy is critical. In essence, the goals are the benchmarks for business growth, and the strategy is a strategy for achieving them. It is the availability of a strategic approach capable of sending the enterprise on the right path if there is a dilemma before the leaders of the enterprise, for example, about the directions of investment of funds, allocation of resources, expediency of realization of a certain project or conclusion of an agreement (especially if it requires additional attraction of debt capital). If the decision helps (not hurts) achieve strategic goals, it should be implemented. As a result, the strategy requires clarity.
Good business finance teams are made up of people who are forward thinking, informed about current technology, educated and experienced in long-term planning, analytical, and adaptable.
A finance team's roles and responsibilities may vary slightly, but the overall goal will be consistent – to manage a business's finances in order to keep it financially viable and to help dictate budget and expense decisions in order to shape overall business strategy and departmental decisions.
Finance may not be obvious to every employee in every business, but it is always important and foundational in business decisions. Strategic financial planning assists employees at all levels of business in making good, informed, well-rounded decisions. A well-communicated plan keeps everyone on the same page and can significantly improve a company's bottom line.
Strategic financial strategy refers to the process of managing a company's finances in order to achieve its strategic goals. It is a management strategy that employs various techniques and financial tools to create a strategic plan. Financial management ensures that the chosen strategy is carried out in order to achieve the desired results.
Features of Financial strategy:
It focuses on long-term fund management, taking into account the strategic perspective.
It promotes profitability, growth, and presence of the firm over the long term and strives to maximize the shareholders’ wealth.
It can be flexible and structured, as well.
It is a continuously evolving process, adapting and revising strategies to achieve the organization’s financial goals.
It includes a multidimensional and innovative approach for solving business problems.
It helps develop applicable strategies and supervise the action plans to be consistent with the business objectives.
It analyzes factual information using analytical financial methods with quantitative and qualitative reasoning.
It utilizes economic and financial resources and focuses on the outcomes of the developed strategies.
It offers solutions by analyzing the problems in the business environment.
It helps the financial managers to make decisions related to investments in the assets and the financing of such assets.
The approach of financial strategy is to drive decision making that prioritizes long-term business objectives. Strategic financial management not only helps companies set goals, but it also provides a platform for planning and governing plans to deal with challenges along the way. It also entails laying out steps to guide the company toward its goals.
The goal of financial strategy is to identify potential strategies for increasing the organization's market value. It also ensures that the organization is following the plan efficiently in order to achieve the desired short-term and long-term goals and maximize shareholder value. Strategic financial management is the management of an organization's financial resources in order to achieve its business objectives.
There are numerous approaches to setting and managing financial strategy goals. However, regardless of the method, goal-setting is essential for facilitating conversations, ensuring the involvement of key stakeholders, and identifying achievable and striving strategies.
The first two directions are critical for increasing the enterprise's value. The strategic goal of financial management is the maximization of value rather than the maximization of profit. A well-founded financing strategy reduces the value of capital by selecting the most effective sources of funding, and rational investment contributes to the future growth of business profitability.
The financial strategy integrates a list of the main characteristics, the specific manifestation of which varies in individual enterprises in a rather large range, depending on the scale and characteristics of the activity, the internal financial structure, and the volume of financial potential, external environment, and others.
With the transition to a post-industrial economy, strategic management becomes a guarantee of the normal functioning and development of business entities, and the presence of strategic thinking in company management transforms into a factor of long-term competitiveness. The complexity and insecurity of external conditions actualize the flexibility of enterprise strategy, its multivariateness, and the availability of a systematic approach to problem solving.
The growing importance of financial relationships in conjunction with the concept of strategic management necessitates special attention to the development and implementation of the enterprise's financial strategy. It is a financial strategy in the context of diversifying financial relationships, the emergence of new hybrid forms of financing, and the strengthening of the financial system.
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