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Whether you’re a wizened pro or a fresh-faced newcomer to business, your success will only be as good as your financial strategy.
This vital piece of the business plan needs to be constantly reviewed if improvements are to be made that will have a real influence over your success for the coming one, three or even ten years.
A good financial strategy takes risk management into account, bringing in cash flow, pricing, financial controls and holding reserves, and maximisation of returns from their assets. The strategy should also hold financial and governance controls to help other concerned parties to understand it and what they need to do to make it work.
Here are five fundamental elements that all business owners need to take into consideration when putting together or amending this essential component of enterprise.
A great first step towards formulating a more robust financial strategy is to stop number crunching and get a change of scene. Take yourself into an entirely new environment completely unrelated to work and consider your overall objective.
Think about each activity your organisation carries out, and consider the financial aim of that activity, whether that’s to make a profit, break even or to subsidise. This will help bring risk concept into focus so that a pricing policy and appropriate investment can be formulated.
Whether you’re trying to achieve new revenue targets, boost sales or acquire new clients, try to work towards targets that are Specific, Measurable, Achievable, Realistic goals that conform to a Timeframe. This SMART plan will go a long way to helping you achieve your overall objective.
In turn, you will be better equipped to determine attitudes towards risk, a pricing policy and the level of investment that is appropriate for the various activities.
Measuring your performance is especially important, as it will grant insights that will inform how your methods are adapted over the coming months or years.
Using tools like IndustriusCFO, you can compare your own performance against industry peers – forensic insight that will enable you to apply focus where it’s needed most.
The global financial crash in 2007/08 has taught enterprise that nothing is safe, so risk assessments should always be front of mind when finance planning. Small businesses, especially, need to take every care to manage cash flow in a way that accommodates the potential for market turbulence.
Beyond this, all companies should stay alert to the potential for taking on new activities, each of which will need a separate business plan to illustrate profitability for the first few years, as well as projected cash flow.
If possible, plan a range of different income streams, with a span of financial aims and priorities which will help to offset risk. Many businesses fail due to cash flow problems brought on by overtrading, so it is vital to temper ambition with SMART goals to ensure your growth is paced and funded healthily.
Increasingly, businesses are taking advantage of the low-cost benefits of cloud technology. Managing bills and finances can be a complicated and stressful occupation, and cloud-based financial software exists which can help, enabling businesses to make clearer, more effective decisions.
Moving into 2017, cloud security has never been stronger as many service providers have made huge efforts to meet and even exceed industry needs and regulations. Meanwhile data is backed up to multiple servers that can span geographic regions, minimalising risk.
By migrating to the cloud, firms can reduce the amount of on-site infrastructure which in turn helps to bring down costs, as multiple hard servers are no longer required. This elimination of hardware introduces a valuable element of agility as financial applications and information can be accessed from virtually any net-ready device.
An engaged and inspired team is essential to your business’ productivity, which, in turn, is a driver to financial strategy.
Keep your team stimulated in their work environment and work hard at employee retention – give the best talent reasons to want to help your firm reach its goals. A clear vision will be at the heart of the organisation, and those that look most attractive in the modern market place have an agile approach.
Playing it safe might work in the long-term, but fresh dynamic talented workers want to strive for a bold future that embraces innovation. To leverage this, exploring untapped markets and implementing off-centre strategies will not only grant your business an ambitious lustre, it will increase your chances of discovering sustainable growth.
The best financial strategies are realised through easy actionable steps that hold the present in one hand and the future in the other.
The most important thing for business owners to remember is that you are responsible for your own success. Recognising this is the first step to accepting the daily duties that are necessary for the building of a bright financial future.