Work Out Strategic Financial Management

Strategic financial management means not only managing a company's finances but managing them with the intention to succeed—that is, to attain the company's goals and objectives and maximize shareholder value over time. However, before a company can manage itself strategically, it first 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.

Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment (ROI). Financial management is accomplished through business financial plans, setting up financial controls, and financial decisionmaking.
 Understanding Strategic Financial Management
The Operative Word: Strategic

Financial management itself involves understanding and properly controlling, allocating, and obtaining a company's assets and liabilities, including monitoring operational financing items like expenditures, revenues, accounts receivable and payable, cash flow, and profitability.

Strategic financial management encompasses all of the above plus continuous evaluating, planning, and adjusting to keep the company focused and on track toward long-term goals. When a company is managing strategically, it deals with short-term issues on an ad hoc basis in ways that do not derail its long-term vision.
Strategic Versus Tactical Financial Management

The term "strategic" refers to financial management practices that are focused on long-term success, as opposed to "tactical" management decisions, which relate to short-term positioning. If a company is being strategic instead of tactical, then it makes financial decisions based on what it thinks would achieve results ultimately—that is, in the future; which implies that to realize those results, a firm sometimes must tolerate losses in the present.
When Strategic Management Is Effective

Part of effective strategic financial management thus may involve sacrificing or readjusting short-term goals in order to attain the company's long-term objectives more efficiently. For example, if a company suffered a net loss for the previous year, then it may choose to reduce its asset base through closing facilities or reducing staff, thereby decreasing its operating expenses. Taking such steps may result in restructuring costs or other one-time items that negatively affect the company's finances further in the short term, but which position the company better to succeed in the long term.

These short-term versus long-term tradeoffs often need to be made with various stakeholders in mind. For instance, shareholders of public companies may discipline management for decisions that negatively affect a company's share price in the short term, even though the long-term health of the company becomes more solid by the same decisions.