What Is Strategic Financial Planning? Definition And Overview

For some business owners, planning is not given immediate attention because it is not seen as an important part of the business. Therefore, it is put aside to be considered later. This situation usually occurs when a business is experiencing a rapid growth phase with stretched resources. However, this ought not to be so.

In this article, we have put together all you need to know about strategic financial planning, what it entails, its relevance, and so on. Let’s go!

What is Strategic Financial Planning?

The term ‘strategic financial planning’ does not just connote planning for a company’s finances but making plans to succeed. Finance is a broad concept and planning is not just achieved overnight. This is why you must strategically look into the topic to be able to get a definite picture of what it is all about. 

Strategic financial planning is the practice of defining how a business oversees its finances to make sure it meets its goals and objectives, both in the long- and short-terms. If the business has sound financial planning, it will carry along, every aspect of the business’ operations. It will also consider the interlaced bearing each of the processes has on the average financial situation of the business.

However, all these can only be carried out by one professional – the financial planner.

Why Do I Need The Services of A Financial Planner in An Organisation?

A financial planner helps an individual or organization have an in-depth understanding of what your financial goals are and also helps you chart a course to meet the goals. The financial goals could be to save for a new home, set up a retirement plan, set some funds aside for your children’s education, and so on. 

In addition, financial planners help to analyze every aspect of your financial position and use their skills and expertise to help you chart the best strategy for meeting your goals. The strategies may be for paying off your debt, allocating the best asset for your retirement account, taking up the right insurance cover, guiding you on the right financial product to purchase to enable you to maximize your profit.

Financial planners are of various types. They include fiduciary financial planners, certified financial planners, investment advisers, Robo-advisors, and wealth managers.

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What Are The Objectives of Financial Planning?

Every financial planning must have objectives that spell out the goals and what it is set to achieve. The objectives are explained below:

1. To determine capital requirements

The capital requirements of every business depend on certain factors like the cost of current and fixed assets, promotional expenses, and long-term planning. You must view the capital requirements from both the long-term and short-term perspectives.

2. To determine capital structure

Every organization or business has a structure that defines the capital needed to run the business smoothly and efficiently. It sets the proportion of capital that is required to run the business. Decisions of debt-equity ratio, in both long-term and short-term are also put into consideration. 

3. To frame capital structure

This has to do with cash control, lending and borrowing, and so on.

4. To maximise scarce resources

This is the job of a financial manager. They must ensure that the organization’s scarce resources are maximized to yield profit. At least, the returns on investment must produce maximum returns.

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What does Strategic Financial Planning Entail?

Strategic financial planning entails the total image of appraisal of the business operations to enable the owners to create an all-inclusive plan. Below is a comprehensive representation of strategic planning:

  • It focuses on long-term funds and takes into consideration, the strategic perspective.
  • It enhances the cost-effectiveness, growth, and presence of the firm over the long term. Again, it attempts to increase the shareholder’s wealth. 
  • It is flexible and can be structured to suit the moment.
  • It is an evolving process that reviews and adjusts strategies to help the business achieve its financial goals. 
  • It adopts a multifaceted and advanced methodology employed in solving organizational problems.
  • It helps the financial managers make strategic decisions that are related to investments in assets and real estate and their financing. 

Why is Strategic Financial Planning A Key Component Of Business Plan?

Financial planning ensures the organization has effective and sufficient financial and investment policies. Here are some reasons every business must have operative financial planning:

  • Financial planning ensures that adequate funds are provided to run the day-to-day activities of the organization.
  • It helps to make sure that a reasonable balance is struck between inflow and outflow of funds to help the organization maintain stability.
  • It also ensures that the suppliers of funds are constantly and effortlessly investing in companies that exercise financial plans. 
  • Financial planning enables growth and expansion programs to become a success. In addition, this helps in the long-run survival of the company. 
  • With financial planning, uncertainties that are associated with changing market trends can be handled effectively with sufficient funds. 
  • It also contributes to reducing uncertainties that can hinder the growth and progress of the firm. This is one of the sure ways to uphold stability.

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Types of Strategic Financial Plans

Financial planning is of various categories and you must understand them clearly to be able to know how they can be of help to your business growth. Nevertheless, below are the types of financial plans that exist:

1. Cash flow planning

This is one of the major elements of financial planning. You need to estimate your business’s short-term and long-term expenses against the projected cash flow. At times, emergency expenses happen, adversely affecting your financial plans. This is one reason you should plan your cash flow appropriately. If you ignore this aspect of your business, you might be heading to bankruptcy. 

2. Insurance planning

Every business must make room for long-term insurance coverage. Unforeseen occurrences always happen. But with insurance cover, the effect of any eventuality will be mitigated or taken care of by the insurance company. However, before buying insurance cover, you must analyze your business carefully to understand the best insurance plan to buy. 

For instance, if your business is in a fire-prone area, you might need fire insurance to cover against fire. You may also buy insurance cover for your business or home against theft, domestic accident, and many more.

3. Retirement planning

Everyone who gets to their old age experiences retirement. It is inevitable. That is why you must include your retirement in your planning. To successfully plan for your retirement, you must start early to set up a retirement fund or investment plan that will yield during your retirement. With that, you do not have to compromise your standard of living or become dependent in your old age. 

4. Investment planning

Your investment plan must achieve a goal. It could be short-term or long-term. To set up an effective investment plan, you must consider your income and savings. However, you will need the help of a financial advisor or planner to identify the best investment plan for you and invest accordingly. Some investment opportunities include fixed income, investment in stocks, gold, bonds, forex market, mutual funds, etc. 

5. Tax planning

You must plan your tax properly to maximize your financial savings. Each country has benefits and exemptions for taxpayers. You can draft a plan on that and understand what is best for you.

6. Real estate planning

Asset creation is significant in financial planning. Real estate planning lets you achieve your investment and retirement plans and wealth creation. Considerably, real estate is a low risk and has a high return on investment in the shortest of time.

Why You Must Define Your Long-Term and Short-Term Financial Plans

When you draw the plan for your finances, looking at it from the long-term and short-term points is good. You should have both long-term and short-term financial budgets. Short term financial plan is between 0 and 5 years. Anything that exceeds five years is a long-term financial plan.

For instance, buying a car within the next two years is a short-term financial goal. However, investing in your children and having a retirement plan is part of your long-term financial goals.

What are the Steps to Strategic Financial Planning?

We all make decisions every day, for ourselves, our businesses, and even for others. Most of the decisions are quite simple, while some are complex and have long-term effects. That is why you need to be careful in making your financial decisions. Below are the steps you need to take to make your decisions:

Step 1: Determine your current financial position

You need to know the position of your finances to take the right steps in planning. Without knowing how much you have and how much you are expecting, you cannot plan adequately to capture the dynamics.

Step 2: Develop Financial Goals

Developing financial goals is very necessary. You must periodically analyze your financial values and goals. To achieve that, identify how you feel about money and why you feel that way. The aim is to help you differentiate between your needs and wants. Let your financial goals be specific and decide which to pursue first. An example of a good financial goal is to decide to take up an investment plan and which investment is ideal for you.

Step 3: Identify alternative courses of action

It is necessary to develop alternatives as this helps you in times of emergencies. You may choose to continue with the current course of action, adjust it or take a different route. Consider all the alternatives available to you and take strategic decisions to follow them up in case your options A and B fail you. This is possible if you identify them ab initio. 

Step 4: Assess the alternatives

After identifying the possible routes you can switch to if the current one does not favor you, it is important to evaluate them. While doing so, take into consideration your organizational goals, personal values, and current economic condition. Evaluate the consequences of each of the choices before you. Also, consider the opportunity cost of the alternative you are letting go of.

Considering the options and deciding helps you in the long run. Another thing you must do here is to assess the risk involved. Assessing the risk will enable you to decide which course of action to pursue and which to let off or keep on hold. Whatever the case, make sure you are on the right track.

Step 5: Create and implement a financial action plan

Here, you must develop the right financial planning process to help you pursue the right course of action. You may need the help of a financial planner in this regard to enable you to make the right decision.

Step 6: Reevaluate and revise your financial plan

Take another critical look at your financial plan and decide whether you are indeed on the right track. Financial planning is dynamic and requires you to visit it occasionally to assess your financial decisions. If your business encounters any life-challenging circumstances, you will easily understand how to adjust to the current situation. A financial planner is needed here too so that you can always make the right decision.


Strategic financial planning is good for your personal and professional life. Do not take it lightly because for you to move ahead in life, you need finances; without proper planning, you may not manage it well.

Before a company can handle itself strategically, it needs to define its objectives precisely, identify and quantify its available and potential resources, and devise a specific plan to use, its finances and other capital resources toward achieving its goals.

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