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How to Set Goals for Strategic Financial Management at Your Company

insightsoftware -
November 8, 2019

insightsoftware is a global provider of reporting, analytics, and performance management solutions, empowering organizations to unlock business data and transform the way finance and data teams operate.

How To Set Goals For Strategic Financial Management At Your Company

Enterprise organizations already know the importance of effective financial management and oversight of a company’s spending, assets, and other data points. But that doesn’t mean those companies have embraced strategic financial management as a means of supporting long-term business goals.

If you’ve never been involved in setting the goals of strategic financial management, you might not understand the crucial roles that planning and goal-setting play in this process. Though it’s easy to throw out goals for your business at large, creating a plan to reach those goals is a much different matter, and sometimes it requires taking a step backward in the short term, with the goal of reaching greater business heights down the road.

The Importance of Strategic Financial Management

Progress and business growth don’t always happen in a straight line. Realizing gains in operating efficiency, including improvements that reduce your expenses over time, sometimes requires short-term investments that cut into profit margins and appear, at first glance, to be a step in the wrong direction.

Strategic financial management is designed to encourage decision making that prioritizes your long-term objectives. A strategic approach to goal setting doesn’t just set a target for the company to reach; it builds a platform for planning and oversight that accounts for different challenges you might face along the way and lays out actionable steps that will move your business closer to its goals.

There are multiple ways to establish goals for strategic financial management, but regardless of the approach you choose, it’s important to use the goal-setting process to facilitate conversations, involve key stakeholders, and identify strategies that are both ambitious and achievable.

SMART Goals vs FAST Goals

In general, there are two conventional approaches to goal setting. A traditional approach to goal setting, called SMART, emphasizes the following criteria for any business goal:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-bound

FAST, by contrast, is a more modern goal-setting framework that features more of the iterative goal-setting strategy made popular in Silicon Valley. It also encourages business leaders to maintain an agile approach that accepts that circumstances or goals may change over time:

  • Frequent
  • Ambitious
  • Specific
  • Transparent

Although the FAST framework is becoming more commonplace for its agile approach, and its success in helping unify large organizations around a common goal, your leadership will need to decide which approach is a better fit for your company and its strategic financial management needs.

What Do Strategic Financial Management Goals Look Like?

Strategic financial management goals can be created for a wide range of business objectives, from product growth to customer service to internal operations and office culture. From a financial perspective, though, this goal-setting process tends to focus on financial benchmarks that can be reached within a specific time frame.

Specific goal setting is easier for strategic financial management because the numbers make it easy to conceptualize goals and track progress. Examples of strategic financial goals could include:

  • Increase net profit by 10% in FY 2020.
  • Reduce operating costs by $300,000 by the start of Q3 2020.
  • Grow revenue by at least 2% over the next three fiscal quarters.
  • Increase reserve working capital by 50% within the next 12 months.

Once you have your goal identified, you can work backward to create a template for how the organization can achieve the desired result.

Steps to Consider When Setting Strategic Goals

A strategic financial goal is the starting point for other conversations and decisions that need to take place. As you set your goals, you’ll need to address the following factors:

  • KPIs tied to the goal: You will need to know which KPIs you can use to track progress toward your goal. Again, financial management is easier than other types of strategic decision making because you’re always working toward a concrete number. But other KPIs can help you track your success in the short term and make sure you’re progressing toward that goal.
  • Teams involved: At the enterprise level, strategic financial management often involves other departments, such as marketing, sales, and IT. As you plan to roll out your strategy, you’ll need those departments to be supportive of the initiative.
  • Plans to reach your goal: Your plans should include the actionable steps you will take to drive results that bring you closer to your goal. They could include new sales initiatives, marketing campaigns, business technologies, or other steps seen as critical to reaching your goal.
  • Timelines/milestones: How long will it take you to reach this goal? What steps along the way can you take to gauge your success and adjust your strategy when needed?
  • Challenges and threats to success: Every goal faces the threat of failure due to internal and external factors. It’s helpful to identify those risks beforehand and make sure you understand—and account for—the potential barriers.

Conclusion

When it comes to strategic financial management, it’s well worth the time investment to lay out a plan that fully addresses the financial risks, opportunities, and steps required to reach new business goals. At the enterprise level, this approach to strategy makes it possible to organize large departments and teams around a common goal—while providing a framework to hold everyone accountable for the results.