Financial Management

Strategic financial management means not only managing a company’s finances but managing them with the intention to succeed—that is, to attain the company’s goals and objectives and maximize shareholder value over time. However, before a company can manage itself strategically, it first needs to define its objectives precisely, identify and quantify its available and potential resources, and devise a specific plan to use its finances and other capital resources toward achieving its goals.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.[Important: “Strategic” management focuses on long-term success and “tactical” management relates to short-term positioning.]Understanding Strategic Financial ManagementThe Operative Word: StrategicFinancial management itself involves understanding and properly controlling, allocating, and obtaining a company’s assets and liabilities, including monitoring operational financing items like expenditures, revenues, accounts receivable and payable, cash flow, and profitability.Strategic financial management encompasses all of the above plus continuous evaluating, planning, and adjusting to keep the company focused and on track toward long-term goals. When a company is managing strategically, it deals with short-term issues on an ad hoc basis in ways that do not derail its long-term vision. Strategic financial management includes assessing and managing a company’s capital structure, the mix of debt and equity finance employed, to ensure a company’s long-term solvency.