Strategic corporate financial planning for growth and profitability demands access to real-time data and cross-functional collaboration, so companies can more accurately anticipate future results while mitigating risks using integrated business intelligence solutions like Mosaic.
Corporate financial management refers to the practice of planning, directing, monitoring and controlling an organization’s monetary resources in accordance with strategic goals and setting financial goals that align with them.
Establishing accurate financial projections can help your company set benchmarks to measure its success. By using them to assess whether your business is on track or needs to alter its strategies; for instance if sales fall below expectations you could use them to evaluate the impact of either cutting costs or raising prices on sales volumes.
Financial projections typically involve three core statements – income statement, cash flow statement and balance sheet. The income statement illustrates the company’s expected revenues and expenses while cash flow shows cash influxes and outflows projected over time. Finally, a balance sheet displays assets (like inventory or accounts receivable), liabilities and shareholder equity of the entity in question.
Keep your forecasts realistic and within reason to avoid investors questioning their validity. To do this, compare estimates with industry ratios so as not to overestimate costs or growth goals of the company.
Budgeting is a financial plan used by businesses to track how they spend and earn their funds over a specified time. Budgets help companies set goals and measure success. A budget is an indispensable tool that can be used to prevent overspending while meeting financial goals.
An effective budget requires forecasting, planning, sensitivity analysis and contingency planning in addition to allocating resources across departments and teams. By doing so, management can control resource allocation while assuring core resources are in place to support company goals.
Budgeting can be done in various ways, with bottom-up budgeting being most accurate. This approach allows managers to communicate their goals, plans and initiatives clearly across departments while helping employees focus on meeting company financial goals – leading to improved performance, an in-depth knowledge of finances as well as increased accountability within an organization.
Before undertaking any major project or essential business objective, risk analysis is an essential process that should be carried out. It allows companies to identify any adverse consequences associated with said projects and devise measures to counter them – thus protecting both financial integrity and improving bottom lines simultaneously.
An effective risk analysis should consider all internal and external threats to a business’s bottom line, from property damage and financial loss to legal ramifications or defective product effects that damage brand image. Management can then prioritize which risks they must avoid in their decision making processes.
Liquidity plans are also vitally important subplans, identifying future capital requirements and where these financial resources will come from. Businesses should carefully assess current assets to ensure enough cash reserves are set aside to cover unexpected losses; using sensitivity tables that compare expected impacts of changes to random variables or assumptions is one way of doing this.
Contingency planning can be an invaluable resource when unexpected financial events strike a business, helping organizations identify and prepare for even the most serious threats while fulfilling strategic objectives. Unfortunately, many companies fail to use this powerful tool effectively.
Contingency planning relies on clearly identified trigger points to enable quick action when needed and ensure your plan is in place when required. For instance, how much of your workforce must be affected before an incident will trigger it; or, in terms of hurricane preparations, when is a plan brought into force? By setting clearly defined triggers in advance, contingency plans will always be in place and ready for implementation when they’re needed.
Contingency plans must be shared and updated regularly among all stakeholders, tested through simulations, mock exercises and real world situations, in order to increase effectiveness and help organizations prepare for real events. Businesses may additionally utilize capital requirements planning which identifies how much financial support may be required during an emergency situation. Strategic corporate finance and treasurers can work with business owners to design low-cost financial solutions that prevent short-term financial collapses.