The Importance of Financial Strategy

by Chris Newton; Updated September 26, 2017
A financial strategy helps manage money and increase profits.

A financial strategy is an important aspect of any business. Financial strategies should be discussed and shared with company shareholders, executives and employees, so everyone is on the same page financially. Many companies hire a certified public accountant (CPA) or other finance executive to help create and implement a financial strategy.

Establish Operating Costs

A financial strategy is often part of a larger business plan. The financial strategy helps to establish and communicate operating costs to company executives and investors. These include the cost of office space, data centers, employee salaries, expenses to vendors and suppliers, office supplies and any other necessary expense to keep the company in operation. This gives your audience a good idea about how much money it costs to run the business. The financial strategy should then discuss how the company revenue needs to surpass the operating expenses to become profitable.

Set Financial Goals

Another aspect of the financial strategy is to set financial goals for the company. Goals are important because they establish objectives for the company to strive for. The goals for a start-up company might be to break even or come in slightly negative for the first few years, and then become profitable after a few years once the company has had enough time to mature and grow its revenue. Older companies might have financial goals to increase revenue by a certain percentage each year, or even to reach a point where the company can be sold for a larger profit. Whatever the financial goals are, the financial strategy should clearly communicate them so everyone is working towards the same result.

Financial Projections

A financial strategy should also make projections and financial forecasts. These numbers should be carefully calculated based on previous financial history, industry trends and any new initiatives the company is launching, such as a new product. Financial forecasts give accountants and financial executives something to measure actual financial data against. A financial forecast should be realistic; if it is too conservative or aggressive, it does not give an accurate idea of what the company can expect financially.

Manage Collections

Collections are an important part of a company's financial strategy. Goals and projections are great, but if the collections department is not working properly, then the company can be missing out on revenue. The financial strategy needs to lay out the plan for how collections and accounts receivable departments will operate. The details include invoicing, following up on past due payments, late fees if applicable and other methods the company will implement to ensure it is paid every penny owed.

About the Author

Chris Newton has worked as a professional writer since 2001. He spent two years writing software specifications then spent three years as a technical writer for Microsoft before turning to copywriting for software and e-commerce companies. He holds a Bachelor of Arts in English and creative writing from the University of Colorado.

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