Kavan Choksi Briefly Provides an Introduction to Strategic Financial Management
Strategic financial management is a term widely used to describe the process of managing the finances of a firm with the aim of meeting its strategic goals. It is a management approach that makes use of varied financial tools and techniques to devise a strategic plan. Kavan Choksi mentions that strategic financial management ensures that the strategy to be implemented by a business is able to effectively achieve the desired goals. Kavan is a successful business management consultant and wealth advisor. He works strategically with companies across FMCG, retail, and luxury markets, and leverages his vast experience to help clients turn around and revitalize their businesses.
Kavan Choksi provides an overview of strategic financial management
Strategic financial management is largely about creating profit for businesses and making sure to enjoy an acceptable ROI or return on investment. Financial management is largely accomplished with the help of a smart set up of financial controls, proactive financial decision-making, and systematic business financial plans. Before a company can manage itself in a strategic manner, it has to precisely define its objectives, as well as identify and quantify its available and potential resources. The business must orderly devise a specific plan to use its finances and other capital resources toward achieving its goals.
Strategic management also tends to involve orderly controlling, allocating, and obtaining the assets and liabilities of a company. This includes monitoring various operational financing items like profitability, cash flow, expenditures, revenues, as well as accounts receivable and payable. Strategic financial management majorly encompasses continuous evaluation, planning, and adjusting to keep a business focused on the long term goals. As a business manages its financials in a strategic manner, it is in a better position to deal with short-term issues on an ad hoc basis, and see to it that its long-term vision does not get derailed in any manner.
The term “strategic” implies to financial management practices that put emphasis on long-term success. This approach is in contrast to “tactical” management decisions that are associated with short-term positioning. In case a company is being more strategic rather than tactical, it makes financial decisions on the basis of what it thinks shall provide it results.
Kavan Choksi mentions that a part of an effective financial management strategy hence can involve readjusting or sacrificing short term goals with the aim of attaining the long term objectives of a business in a competent manner. For instance, a firm suffers a net loss in the previous year, and hence it may choose to reduce its asset base by closing facilities and decreasing its operating expenses. These steps may lead to restricting expenses or other one-time items that can get negatively affected by the finances of the business further in the short term, but positions the firm to succeed in the long term. Such short-term versus long-term tradeoffs are often done with distinctive stakeholders in mind.
Businesses ideally apply strategic financial management throughout their organizational operations. Its long term focus helps the firm to maintain its goals, even as opportunities or short-term rough patches come and go.
