Financial management is like the seed that sprouts growth for an organization. Without it, a company would never have the opportunity to blossom into fruition.
When devising a comprehensive business strategy, senior management must pay careful attention to detail when laying their financial planning foundation. A complete financial plan should not just highlight future goals. It should be a living entity that can adapt and evolve as the company develops. In other words, a financial management strategy isn’t just a means to support your bottom line. It aligns departments, supports progression, and ultimately allows an organization to stay agile at all times.
As a CFO or financial leader of an organization, it is your responsibility to ensure that your company’s roadmap is crafted with precision. By analyzing historical data, streamlining processes with FP&A software, and creating a scalable plan, your finance team will be able to stay ahead of the game and support the company like never before. In this article, we will provide a brief overview of what financial management is and how to implement your own strategies to support organizational growth.
The foundation of strategic financial management
So what is strategic financial management, and why is it important for an organization? According to Investopedia, “Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment (ROI). Financial management is accomplished through business financial plans, setting up financial controls, and financial decision-making.”
Strategic finance management goes far beyond managing a company’s financials. It is the act of planning, managing, and controlling an organization’s financial health to better support decision-making among senior management and stakeholders. By having a clear vision of long-term goals and future opportunities, an organization can strategically plan for the future and excel within its industry.
A strategic financial management plan can only be created once the finance team has an in-depth understanding of the organization’s current assets and liabilities. By taking a hard look at the past, financial professionals can then collaborate on moving forward. This continuous process of evaluating, forecasting, and adjusting allows the finance team to shift to a more strategic partnership role within an organization.
Is your strategic financial management fundamentally sound? By studying historical data, reviewing the latest FP&A trends, and creating agile financial forecasts, your team will be able to have laser-focus precision on the steps that need to be taken to achieve success.
Top financial management strategies for your scaling business
No matter which financial management strategy you choose, it’s essential that you first outline your company’s overall financial goals and initiatives. What does your finance team want to achieve? How can your organization improve its current financial planning and analysis process? Having a solid foundation and understanding of what you want to accomplish before implementing a strategic plan is essential for all companies.
Below, we will be taking a closer look at some of the top strategies businesses can follow to support growth and better decision-making.
Use historical data as a blueprint
Metrics are like the DNA of an organization. Use these findings to study past problems, learn how to adjust, and create tailored plans that support positive change. Don’t let past mistakes repeat themselves. To learn from initial setbacks, analyze historical data, and keep track of organizational metrics. By reflecting on past performance, your company can learn and adjust moving forward. Once you have a solid grasp of your data, you can then set new financial benchmarks, goals, and initiatives.
Construct your Profit & Loss (P&L)
Every financier knows that the P&L makes up a massive portion of a company’s financial statements. As a result, many finance teams use the P&L statement as a comprehensive summary to identify overall performance.
Components outlined in a P&L statement include:
- Cost of goods sold
- Gross profit
- Net profit
By clearly understanding these key metrics, finance teams can then shift their focus towards improvement.
Budgeting & forecasting
You’ve gathered historical data, you’ve harnessed the power of your P&L statements, and now it's time to transform that data into insights. However, tracking historical data is only a small part of the equation when covering financial management strategies. Strategic FP&A initiatives must be followed in order to experience real change.
An agile budget can help you:
- Set spending parameters
- Uncover shortcomings and new opportunities within the organization’s funding
- Align all departments on key metrics
- Assist in the decision-making process
Ultimately, the finance function creates financial reports to help senior management make strategic decisions on their overall business strategy. One of the key ways finance teams save critical time when building their forecasting is through financial automation. By incorporating FP&A software into their financial planning practices, finance professionals can significantly reduce manual data processing and focus on more value-added strategic analysis.
Teams that want to see a difference with their strategic planning must know that forecasting is not an annual project. Instead, it is an ongoing process that must be adapted and revised. In order to hit long-term goals, the finance function has to keep an eye on how the organization is performing continuously.
Track real-time data
When following the latest financial management practices, teams must continuously review real-time data to create more robust forecasting. By taking advantage of finance automation tools, finance teams can instantly collect, clean, and compute data to paint a clear picture of their organization's financial health. Once teams see how they perform, they can course-correct to ensure they are headed in the right direction.
Between business intelligence tools, human resource platforms, and ERP systems, it can be a real headache for finance teams to manage all of their data. By incorporating FP&A software into a financial management strategy, finance teams can remove the risk of human error common with manual data entry while improving data accuracy across all their data integration systems.
Not only can a financial planning platform help consolidate data into a single solution, but it will also help teams manage cash flow, refresh financial objectives, and make better strategic decisions for the organization as a whole.
Don’t know how to choose the perfect solution for your tech stack? Check out our FP&A Software Buyer’s Guide to get started!
Modernizing your financial management strategy with Abacum
Whether you are the CFO or a finance manager, having a solid financial strategy in place should be your number one priority. By analyzing historical data, creating agile forecasts, and pulling valuable insights, finance leaders will be able to meet strategic goals and better support senior management across the organization.
Is it time for your team to rethink its business strategy? Stay one foot ahead by switching to FP&A software for all your financial forecasting initiatives. As a leading financial planning platform, Abacum helps drive strategic decision-making and aligns all stakeholders on valuable metrics and insight. With our intuitive software, your team will be able to update business plans and conduct what-if analyses within minutes.
As a finance leader, it is your job to equip your team with the very best technology to scale and thrive. Abacum is the perfect solution to help your organization get to where it needs to be. To see how our FP&A tool can level up your financial management strategy, contact our team and request a demo today.