Why it’s important to set up a financial strategy in 2020
Behind every stable business is the knowledge of their own finances, but without a financial strategy, this can be difficult to achieve as knowledge of business finances is limited to just the finance team. However, implementing a financial strategy is just a small step that can be taken to ensure financial success and ensure that everyone is aware of the current financial status of the business. In this article, we will be looking into some of the main reasons why it is important to implement a financial strategy in 2020, regardless of the size of the business that you are running.
Understanding Cash Flow
As we head into the new financial year, there is no better time to implement a financial strategy as it helps to acknowledge where your money is being spent. By implementing a financial strategy, you are then able to understand cashflow and direct it to what you need as a business. This will ensure that all money is being spent on items that you need rather than items that are no longer being utilised. This comes as the average expenditure on research and development performed by businesses in the UK expanded by 5.8% in 2018 as businesses become more conscious of their spending and incoming finances.
Understanding Financial Investments
In addition to understanding the companies cashflow, a financial strategy can also help to monitor a number of financial investments that your company is making. This is particularly important if your company is making financial investments on the Forex market as these investments can then be accounted for and adjusted accordingly. Though this will need to be monitored closely, including these within your investment plan and calculating their value to the business will the aid you in determining whether or not these investments will be worth more in the future. This can then be adapted throughout the course of the financial year, depending on the market that you have been investing in to ensure financial success at all times.
Effectively Managing Income
If you have an e-commerce business that relies heavily on sales both in-store and online, as well as a number of international investments a financial strategy can be used to effectively manage finances over the course of the financial year. As part of this strategy, you can set goals and maintain a healthy level of spending whilst ensuring that all other expenses are paid for. Though this will take time, a strategy such as this can be adapted and can work with metrics to suit you and ensure a year of financial success as a result.
Provides Economic Stability
By making a financial strategy at the beginning of every financial year, you are then able to securely monitor the economic stability of your company and manage the spending accordingly regardless of the number of investments that you are making. By conducting a meeting with all the heads of the department, you can begin to monitor spending and overall costs to ensure that your business is stable in the modern-day economy. If you are struggling to make ends meet when it comes to paying bills and paying staff, this can be dealt with by implementing a financial strategy as spending can be cut from unnecessary locations and spent on elements that will benefit the business. This can then be adapted accordingly to ensure that the company is running as efficiently as possible without overspending at any point during the year.
Helps To Fund Parts Of The Business Accordingly
A financial strategy is also highly beneficial for an emerging business as it can be used to determine which department funding should go to. This financial strategy can then be taken into the relevant finance meetings and funding can be discussed. This is great for those higher up in the business, particularly in a smaller company as funding can then be distributed fairly to ensure that the business is operating in the most efficient way possible, regardless of the task at hand. This can be stored either on a computer or in a paper format and should be referred to every 6 months to ensure that it is still working efficiently.
Though a financial strategy may take time to put together and implement, this will benefit your business in countless ways and ensure that you are working at a profit rather than a loss. Whether you decide to calculate the overall spending of your business or by each separate department, this can then be added together to ensure that your business is working efficiently without overspending as a whole, this is important for a business of any size and will help to aid growth in the long term. Where will you start with implementing your brand-new financial strategy?
