The Importance Of Financial Strategy In Business

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By - 30 June 2009

Having a financial strategy during a recession is an absolute necessity. If you don’t have one you need to get one. Fast. You wouldn’t go out in the sun without suncream, and you wouldn’t get into a car without doing up your safety belt. So take care of your small business with. a good financial strategy. When dealing with finance and small business you want to make sure you have a particularly strategic strategy.

 

Strategic Strategy.

 

With the financial world close to meltdown this year hasn’t kicked off to the best start for business. For small business finance is particularly important. You need to make sure every asset, every penny is working for you. Recession means that every company has to streamline and improve. Yours is no different. A financial strategy looks at every aspect of your business and points you towards the best money making options. Should your money be flexible in cash, or tied up in safe bonds? Should you be chancing the stock market? Perhaps you should be investing capital directly into your business. Should you be selling poorly performing assets to fund the ones performing well, or should you take out a loan from the bank? There are so many different directions your business can go in and there are no hard and fast rules as to the best way to run a business. The situation of your business in its market, its assets and its potential are all unique. So your strategic strategy needs to be individual to you.

 

Finance and Small Business.

 

Small business finance depends on clear objectives. Your financial strategy needs to be clear on two basic points: what is your business worth at the moment, and what do you want to achieve with your business. To understand your potential, your future, you need to know the present. An accurate understanding of your business’ financial situation is a necessity. Think long and hard about the problems that face your business. How will it affect you? Think about the unique needs you have personally. Are you a newly wed, do you have young children to provide for? Do you have university fees coming up, or do you have elderly relatives that need to be cared for? Do you personally want to retire in the next few years? All of this influences the trajectory of your business and your financial strategy.

 

Creating Your Strategy.

 

With a good understanding of where you are at present you can now move on to where you want to be. You have to main options available to you, investing or saving. If you are close to retirement and are looking to wind down you business you may find yourself with few debts, few responsibilities, and as such with some cash you can go about investing in the stock market, or perhaps in your super. If on the other hand you have a new business coupled with an oppressive mortgage and a brood that is set to start school soon with all their contingent fees you might want to think twice about investing. Instead, it would make much more sense for you to get your expenditure streamlined and sorted.  

 

These are general examples, but you can see the point. Financial strategies are essential in business because they rely on a sound understanding of where the company is at present along with an ambition of where the company can be in a few years time. The strategy will help you get there. How can you  go about getting a financial strategy? You can work it for yourself, using the internet as a guide to small business finance and by using your own common sense. Or you can hire in a professional to do it for you. In either case remember that it is your money, your business, and your life. If you don’t understand the ins and outs of your financial strategy then do not implement it. You are in control. So, what are you waiting for?

About the Author

George Butler
Raj Aryan has varied interest in the field of business. In particular, he has a keen interest in SME's and the challenges these businesses face. He has written numerous articles about small business.