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The financial strategy establishes the budgets for all organizational departments, and as such directly influences the performances and resources of the respective departments. The financial strategy ascertains whether the company would be able to adequately research the market, identify customer needs and properly address and serve the target market. The financial strategy also defines the levels of product development and specialization, which directly influences the levels of customer satisfaction and adjacently the organizational sales.
All in all, the financial strategy is one key factor in attaining organizational success and it is an integrant party of the overall business model. In other words, it has to be factored in when making any business decision and in turn, the financial strategy has to be created in such a manner that it supports the company in attaining its objectives.
In such a context then, the economic agents have to place a greater emphasis on the development of the adequate financial strategy. The specialized literature presents the reader with a wide array of models and advices on how to develop and implement the proper financial strategy.
Tony Graham (2007) for instance argues that the first step in developing the financial strategy is represented by the identification of the organizational goals, which is then followed by the identification of the interrelationships between the factors of the investment and financial decisions. Then, the third step would be represented by the analysis of the external factors which would impact the financial strategy.
As these three stages are completed, Graham recommends the evaluation of the current performances of the organization, before a new financial strategy is developed. Finally, he argues that it is necessary to create not just a single proposition of financial strategy, but a multitude of strategies, so that the deciding parties can make the best informed decision (Graham, 2007).
Economic editor Janet Shapiro at Civicus, the World Alliance for Citizen Participation, argues that the financial strategy is developed through the gradual completion of five stages. At the first level, the economic agent would complete the planning process, level at which great emphasis would be placed on prioritizing the goals, resources and other factors of importance to the company.
At the second level of strategy development, the economic agent would complete the budgeting operations. Particularly, at this stage, emphasis would be placed on the development of several alternative solutions for funding. These would be created and assessed in light of company specific requirements and features.
Third, the economic agent would observe and, if necessary, even create the financial systems. This stage would center on the identification of the policies surrounding the financial strategy. Some relevant examples refer to the ethics of financing the organizational operations, the norms and principles regarding the company's interactions with its various stakeholder categories and other such features.
Finally, at the fourth and fifth stages of developing the financial strategy, the economic agent would pay attention to the means in which the strategy impacts the company's public image, as well as the clarity of its value proposition (Shapiro).
In a nutshell, the financial strategy is one of the most important tools in the attainment of the organizational goals. It might be improper to argue that it is the single, most important element, but it is safe to argue that it is essential to achieving the goals established by the economic agent. And the importance of the financial strategy is pegged to the fact that it shapes all operations within the entity and all relationships with its stakeholders.
The specialized literature presents the reader with a multitude of data on the development of a financial strategy, but the business agent has to remember that each company is different. It operates in a specific sector, it possesses specific resources and it follows specific goals. This virtually raises the need for the financial strategy to be developed individually by the economic agent, in full relationship with the company specific features.
Burk, J.E., Lehman, R.P., 2004, Financing your small business, Sphinx Pub.
Graham, T., 2007, CIMA exam practice kit management accounting financial strategy, 3rd edition, Butterworth-Heinemann
Shapiro, J., Developing a financing strategy, Civicus, http://www.civicus.org/new/media/Developing%20a%20Financing%20Strategy.pdf last accessed on October 20, 2011
Financial strategy, ADVFN, http://www.advfn.com/money-words_term_7104_Financial_strategy.html last accessed on October 20, 2011[continue]
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