So what is Strategic Financial Management? And why are companies today exploring new ways and new software to achieve it?
Strategic financial management focuses on long-term goals and drives long-term decision-making. It helps companies set up firm goals and a solid foundation for formulating and implementing strategies to deal with obstacles encountered along the way.
Strategic financial management aims to find the best possible strategy that can maximize the company’s market value.
All this is made possible through financial management software that is equipped to help the company plan, analyze, and report on the company’s financial performance with greater precision and accuracy.
Here’s a look at how companies can get started with strategic financial management.
Create a profit and loss statement (P&L)
The P&L, or income statement, is integral to your financial statements. These statements summarize your company’s financial success by aggregating your company’s historical sales and cost data.
As a summary of your earnings and expenditures for the month, these reports show whether or not your business was in the black or broke during that period. P&L statements often include the following:
- The income generated by a company (sales)
- The selling price of a product (COGS)
- Profitability (revenue minus COGS)
- Profit after taxes (gross profit minus expenses)
These figures will show you how much it costs to run a business and what you need to do to make it more successful and better. You’ll learn a lot about your business as a whole as you go through the process of recording past revenue and expenses and converting them to a profit and loss statement.
Establish and adhere to a spending plan
It’s not enough to keep track of previous budgets. Developing a proactive budget and making accurate forecasts are two of the most critical aspects of financial management.
Having a budget will help stop overspending. Understand where you have critical financial dependencies and estimate how much money you’ll need to run your operations. To achieve your business objectives, make prudent financial decisions. Your bottom line will be better off if you stay focused.
As a finance manager, it is imperative that you know your company’s current and future gross profits and operating expenses. Responsible planning allows them to keep as much of the top line as possible, increasing their net profit margins.
Asking the following questions with your group might help you establish a clear budget:
How much money do you expect to make during this period?
What are the direct costs of selling? Materials and implementations are the focus of this section. Overhead costs, as well as other operating costs, are included in these figures. Including commissions; marketing and travel expenses; meals & lodging; rent; and utility costs
Budgeting is more accessible when you have the prior year’s sales and expenses on hand, guiding estimating current sales and costs.
Preparation for a new fiscal period usually necessitates the bulk of budgeting work. Budgeting, on the other hand, may and should be ongoing. Every month or quarter, the finance team should do a budget-to-actuals review to determine what adjustments may be made to improve the company’s financial performance.
Keep a close eye on your spending
Having complete visibility into every transaction and having the ability to reconcile your books in a matter of seconds is essential in today’s corporate environment.
With the help of financial management software, it’s easier to set budgets for individual employees or departments and has an easy-to-use platform that automates the process. The following are some of the advantages
- Streamlined access to expenditure data — Know precisely where, when, and how much your employees are spending.
- Managers can keep an eye on the spending habits of their teams by using the tools provided. To know where you are financially, compare these numbers to those on your budget and your P&L statements.
- Intuitive integration with popular accounting and financial management programs makes it easy to keep track of your spending.
- Take a look at how much you’ve already spent before the end of the quarter. Your company’s spending can be seen at a high level or broken down by each user or transaction with the help of powerful tools.
Strategic Financial Management with Performace Canvas
Effective financial management and planning are critical components of a successful business strategy. It’s crucial to have a well-thought-out plan that you follow through and evaluate and change over time to increase your profits. Additionally, you should make full use of all of the available valuation tools to save as much money as possible while also reducing waste.
Whether you’re a large or small business, Performance Canvas is adaptable, with a wide range of configurations available that can be easily customized to suit your business’s needs. Performance Canvas has native integration with SAP Business One and Dynamics 365 ERP systems.
Get in touch with our team today for a free demo of our reporting, budgeting, and consolidation solution.