Financial management is an integral part of any organisation. It is concerned with planning, organising, staffing, directing, controlling and coordinating different financial activities to ensure profitability and better ROI. Financial management can either be tactical or strategic. Tactical finance management refers to making decisions that ensure immediate profits or short-term positioning while strategic financial management aims at long-term success.
What is Strategic Financial Management?
Strategic financial management refers to a process wherein a company manages its finances to maximise the value of shareholders and to attain its goals as well as its objectives. In order to execute strategic financial management, an organisation must be familiar with the market trends, inflow and outflow of its cash and its business goals. In the process, a company must identify its objectives, quantify available resources and then formulate a plan to optimally utilise the finances. The philosophy aims at creating maximum profits for the business in order to ensure impressive ROI. It engages all the monetary aspects such as investment, returns, expenses, currency management as well as budgeting.
It is the philosophy of most individuals that financial strategy is only applicable and required in case of a large and established business. However, it is pivotal for all types of business as even small businesses and entrepreneurs require a clear-cut plan to ensure maximum ROI.
The element of Strategic Financial Management
Strategic financial management allows organisations to spot potential risks and mitigate them. It also allows businesses to set healthy goals. There are several elements of strategic financial management that together lead to the success of the organisation.
Planning: It involves defining objectives of an organisation; identifying available resources and creating a financial plan.
Budgeting: It involves identification of areas that exceed budgeted cost; ensuring liquidity to account for operating expenses; discovering areas that are good for investment and reducing waste of finances.
Risk assessment and management: It involves identification, analysis and mitigation of uncertainties in decisions. It is followed by the evaluation of financial exposures, workplace policies and application of risk metrics.
Establishing procedures: It involves collection and analysis of data to make well-informed financial decisions. It also involves the identification of problems and adoption of corrective measures. The difference between the budgeted cost and actual expenditure is also tracked.
Conclusion
Strategic Finance Management is the need of the hour as that ensures that an organisation manages its finances to make huge profits and garner impressive ROI. Every organisation seeks finance professionals who can explore financial requirements as well as assets of the company and adopt suitable strategies. A finance manager is pivotal for an organisation as he/she applies several strategies for effective management of finances. Hence, a finance manager enjoys a decent career with a handsome salary package. However, before entering the field, aspirants need to equip themselves with requisite finance management skills. For this, you can join MBA-equivalent courses in Finance Management offered by MIT School of Distance Education (MIT-SDE). The institute offers 18-month PGDM and 24-month PGDBA courses that train the professionals to get absorbed in the industry. So, shape your career by enrolling at MIT-SDE’s job-oriented courses.
