What is a financial strategy: concept, types, examples, and steps

Managing a company’s finances requires planning to achieve its objectives and profitability. Simply put, a financial strategy helps optimize the financial value of an organization.

 Keep reading to find out what the basis of this resource is and how you can use it in your company.

What is a financial strategy?

A financial strategy is an administrative resource that allows you to manage and optimize a company’s capital to achieve its long-term objectives. This considers both current resources, costs, and budgets, as well as factors external to the organization to make decisions that ensure funds and growth in the future.

Importance of a financial strategy

All businesses require resources that guarantee their sustainability and development. Likewise, a financial strategy is crucial to respond to the confidence of investors and credit institutions, as well as to ensure a continuous flow of money, since this type of plan foresees possible market fluctuations and other elements that can affect operations.

In addition to establishing objectives and how to achieve them, a financial strategy will help you make the right decisions at the right time and have a reference that you can consult again and again, in order to act in the best way to achieve the desired goals.

Read More:    What is a DBA certificate: Doctorate in Business Administration’s Full Guide

The 5 characteristics of a financial strategy

For a financial strategy to meet the objective of ensuring the financial stability of a company, it must contain at least these elements:

  1. It has objectives 

Knowing where to direct your efforts and defining what you want to achieve with your capital is the basis of a solid financial strategy. Investors, IT and marketing departments, as well as anyone else involved in decision-making, should be involved here.

To define their objectives, they can rely on the SMART approach, which is very popular and useful for managing goals, creating clear guidelines to avoid confusion, tracing routes, as well as evaluating the success of your actions. 

  1. You have a budget

A good financial strategy considers expected income and expenses within a specific period to avoid resorting to external sources. This ensures that you have enough resources to meet the needs of the business and invest in new opportunities when they arise. Your budget also considers which areas are the most expensive and which tend to exceed estimates.

  1. Review current procedures

To stay on budget, it is necessary to gather all the relevant and current information available on resource management. This way, your company will be able to make better financial decisions that are consistent with its strategy.

In addition, we recommend that you review it constantly: compare your budget with your results so that discrepancies can be identified and corrected. 

Contact with IBAS

  1. Has a financial risk assessment

Although it is difficult to anticipate all scenarios and other external conditions, the risks that may represent uncertainty to the company’s finances must also be considered and analyzed.

Interest rates, exchange rates, asset prices, or credit risk are some common challenges that you can prepare for. Derivatives—financial instruments that hedge fluctuations in variables and adjustments in operations—are common ways to mitigate variations. 

  1. Consider financial control

Financial control refers to the practices that guarantee the solvency and liquidity of a company, the fulfillment of objectives, and the efficient use of resources. Thanks to it, you guarantee that your finances are healthy and avoid falling into default on payments and debt. Another of its functions is to guarantee that resources are used according to established practices and within the interests of investors.

Read More:   Leadership vs Management: Understanding The Key Difference

The 4 types of financial strategy

Now we share with you some types of financial strategies that companies use. Although there are various options, these vary depending on the moment and objectives.  


  • Investment strategy

This type of strategy seeks to invest in options that generate profits for the company. This is usually achieved through financial instruments such as investment funds, stocks, government bonds or raw materials that generally involve a long-term period and will mean a return of capital greater than the initial investment. 


  • Working capital

Working capital refers to the resources that a business has to cover its fundamental expenses. This strategy aims to consolidate the financial situation by increasing a company’s assets (properties, cash, inventory) and reducing liabilities (debts and obligations). 


  • Cost strategy

A cost strategy is characterized by reducing operating costs and making a business more profitable. To achieve this, it reviews the current structure of procedures and budgets or the automation of some processes to maintain the quality of products and services, at a lower cost. 


  • Risk management

Another common strategy is risk, which focuses on identifying, managing, and minimizing those internal and external factors that affect the management and organization of the company. Thus, the fulfillment of objectives will not be at stake. Although it is possible to prevent most of the risks, this strategy also offers ways to mitigate and even find opportunities in them.

Contact with IBAS

Basic steps for a financial strategy

  • Analyze your current situation.
  • Make predictions.
  • Measure your progress.
  • Monitor your progress.
  1. Analyze your current situation

Before you begin, you need to know where you stand. Analyze your financial statements, your income, costs, assets, liabilities, and all those indicators that give you an overview of your company’s finances. It’s also a good idea to know your processes to adjust or change them completely. 


  1. Make predictions

Once you gather that information, create possible scenarios that respond to the risks you detected. Historical data and market trends can provide clues about your costs and income. This way, you can anticipate the challenges and what your company will need in the future. 


  1. Measure your progress

KPIs, key performance indicators, are your allies in measuring your progress towards the objectives you set. Additionally, they allow you to adjust staff performance. KPIs differ depending on the business, although, when it comes to finance, profits, revenues, and costs are some of the most common.


Remember that if you need to optimize your company’s activities, you can use a CRM platform for the financial sector, as it is perfect for automating processes and facilitating the work of your teams. 


  1. Monitor your progress

This is a crucial step of a financial strategy, as continuous reviews of your planning performance are key to ensuring you are on the right path. Remember that the flexibility to adjust according to the demands of the environment and the appearance of new variables is a fundamental part of planning. 

Read More: MBA in Operations Management – A Complete Guide for 2024

Examples of financial strategy objectives

Now we present 3 examples of financial strategy objectives that can serve to inspire you and define yours.

  • Income

This is the most common objective in financial strategies and is linked to the liquidity and performance of a business. This focuses on revenue growth, sales optimization, or market share that comes directly from established KPIs. These benchmarks give the organization an idea of how to make changes by identifying areas of growth.

  • Costs

Operational costs are another common objective of financial strategies, as they seek to minimize them without affecting the quality of your product or service. Some of the most common costs are raw materials, deliveries, research or development of new products, and manufacturing expenses. 

  • Retirement

Financial strategies can also be applied to something as important as your retirement. Where do you see yourself at 65 years old? To get a comfortable retirement, you may have an idea of how much you’ll need monthly.

In this way, you will begin to look for options that give you good returns; You will analyze your current expenses and set monthly savings; You will buy medical insurance that can reduce your finances and many other things to achieve financial security in your old age.

 Contact with IBAS


In short, mastering the financial management of your company is a fundamental component of its success and long-term growth. The seven practical tips presented in this article give you a solid starting point to improve the financial health of your business and make more informed financial decisions.

  • By setting clear financial goals, conducting a thorough financial analysis, and developing an effective budget, you will be laying a solid foundation for successful financial management.
  • Additionally, properly managing cash flow, controlling and reducing operating costs, diversifying funding sources, and maintaining a culture of monitoring and adjusting will allow you to face financial challenges with confidence and adaptability.
  • Remember that financial management is not a static process, but requires constant attention and continuous commitment. Being aware of the latest trends and best practices in the field of financial management will help you stay up-to-date and make sound decisions in a constantly evolving business environment.
  • As you implement these tips in your company, it is important to remember that each organization is unique and may require approaches tailored to its specific context. Don’t hesitate to seek professional advice or consider hiring a financial management expert if you consider it necessary.
  • Ultimately, by mastering your company’s financial management, you will have the control necessary to face financial challenges, seize opportunities, and maintain long-term financial health.
  • Don’t underestimate the power of solid financial management and turn your business into a financial success!

Leave A Comment

Your email address will not be published. Required fields are marked *