Strategic Finance

Strategic Finance is the management of a company’s finances over the long term so it can achieve its corporate financial goals. It is the practice of turning operational data across a business into actionable insights to help the management team make better and faster financial decisions.

This approach requires a different mindset than traditional accounting practices, one that moves beyond simply measuring performance and focuses on how a company can grow and prosper over time.

Why is Strategic Finance important?

The key goal of Strategic Finance is to make sure that you know where you stand financially and what your next steps should be to achieve the company’s long-term goals. By taking advantage of modern technologies and automation tools, finance professionals today can move from old, backward-looking financial management to modern, forward-thinking strategic planning and proactive analysis.

Business partners who truly understand their operations can make smarter decisions on how to allocate capital and resources to maximize their business growth potential.

What are the benefits of this practice for growing businesses?

The Strategic Finance function is one way to ensure that you are making the right decisions to enable your organization to grow into tomorrow. As a leader, you want to empower your people to make intelligent decisions. You want them to understand the impact of their actions and make the best possible choices based on the information they have.

Yet there is another reason why Strategic Finance is essential: it helps you avoid common mistakes that slow down the growth rate, like overspending, underinvesting, and missing important market signals. Many finance teams spend most of their time doing financial reporting, managing cash flows, and forecasting revenue. These are relevant functions, but they are just a part of the bigger picture. With a financial strategy and action plan in place, the C-suite of your organization will be ready to make strategic decisions to respond quickly to changes in the economy during times of uncertainty.

What are the key elements of Strategic Financial Management?

To enhance the Strategic Finance function, companies often implement strategic financial management practices to maximize their overall operational efficiency. Although there is no one-size-fits-all approach to strategic financial management, below we have identified some of the most common elements that define this practice.

  1. Definition of strategic goals and key metrics to track business performance
  2. Identification of available and potential resources within the company
  3. Creation of financial plans to achieve strategic goals
  4. Identification of improvement areas in terms of financial efficiency and waste reduction
  5. Business monitoring to ensure operations stay within the annual budgets
  6. Safeguard enough money to cover operating expenses
  7. Identification of problems and uncertain scenarios impacting investment decisions
  8. Evaluation of financial exposure to managing risk
  9. Analysis of the variance between budget and actuals
  10. Collection and analysis of quantitative and qualitative data on a regular basis

Further reading

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