12 May 2021 Ankit Chadha

Developing a Financial Strategy for Your Business: A Necessity, No More a Choice

Financial Strategy| TRC Corporate Consulting

Many businesses are probably aware of the fact that financial planning is critical to creating a profitable enterprise. Developing a business and financial strategy specifies how you want to do business in the coming month, quarter, year, or longer and forming of a strategic financial management plan.

Finance and strategic management involves assessing the business environment, the priorities, the resources required to achieve these goals, team and capital budgets, and the risks you might encounter. Although you cannot promise that everything will go as expected, however, this exercise will brace you for what is to come.

The financial plan for your business deals with the financial part of the overall business plan. It uses actual financial data and estimates to contextualize the balance of your business strategy.

Most importantly, strategic financial management is a forward-looking process. Although it involves the use of actual accounting numbers (if available) and practices to build a financial strategy, nonetheless, it doesn't mean a simple copy/paste of your accounting results. Instead, you examine your corporate objectives to determine how much investment you are able to make to accomplish any of them.

With the changing trends and requirements, the government and concerned authorities make amendments in the legal acts from time to time. Similarly, certain amendments were made to the Finance Act 2020 and were incorporated in the Finance Act 2021. Find below the highlights of the amendments:

  1. Tax levied on the transfer of property or money by a BOP/AOI/firm to its partners or members
  2. The goodwill that is a part of existing assets to be excluded from WDV
  3. Under Section 44ADA, HUF will not be eligible for presumptive taxation scheme
  4. Tax Audit- any transaction to be settled by way of draft/non-account payee cheque will be considered as a cash transaction
  5. No tax will be levied on the income of 'DFI' and 'Institution', if established for financing developments and infrastructure, subject to certain exemptions
  6. Changes to Indian Stamp Act
  7. Extension of Scope of Investment under Section 10(23FE)

The external business environment is dynamic as it includes a number of uncontrollable factors, such as political and legal, social, global, etc. Therefore, it is important to consider them while preparing a strategic financial strategy. Otherwise, the finance and strategic management might fail, leading to incompetent strategies and non-achievement of targets. For coherent strategic financial planning, leveraging services from a consultancy like TRC Corporate Consulting can prove to be valuable. We have professionals with expertise in different domains who work throughout the year and conduct intense discussions to break through suitable financial strategy for their clients.

Importance of Building a Smart Financial Strategy 

  1. Sensible Cash Flow Management 

Strategic financial planning establishes reasonable targets for cash flow - the amount of money flowing in and out of the company. By default, at first, you might pay more than you earn. So,  to figure out what is a reasonable amount of spending and how can you stay on track, it is important for businesses to efficiently calculate cash flow as part of their strategy.

However, it can be challenging to reliably and effectively keep track of where your money is heading if you don't have the support of experienced finance professionals. By planning ahead of time, foreseeing problems of collecting and investing money and finding opportunities becomes easy and can be done efficiently.

  1. Risk Mitigation 

A critical part is to assist businesses in avoiding and navigating risk, which can range from financial crime to global recession. And, while certain threats are difficult to foresee or even prevent, there are many that you can see coming.

Therefore, a contemplative financial strategy usually provides for some company insurance costs, risks due to risky inefficiencies, and perhaps set aside funds for unforeseen expenditures. In turn, businesses can produce many financial predictions that indicate various outcomes for the company, especially during turbulent periods: one where revenue is easy to come by, and one or two others where times are harder.

The point is to have contingency plans in place and try to figure out how your roadmap shifts if, for instance, you just expand 15% next quarter instead of 30%. There's no need to go overboard, but it is important to identify risky areas inside the company and plan the best solutions if anything goes wrong.

     3. Crisis Management

Whenever any financial crisis occurs, the initial move by businesses is to review and rebuild their plans, meaning, it is important to stay prepared with a well-defined business and financial strategy in advance. Otherwise, the only option in such a situation would be to improvise.

As any financial crisis unfolds, the main refrain from finance professionals has been the need to forecast continuously. This is because no one knows when the crisis will be over or how it will affect the business. As a result, businesses are developing financial plans on a monthly or quarterly basis, at the very least. And most businesses are able to manage the development of financial plans at such short intervals with the help of consultants, such that the efficiency of other tasks remains unaffected.

     4. Growth Roadmap 

A financial strategy assists you in analyzing the present condition and projecting where you expect your company to be in the future. The financial section augments these targets with details and incorporates your level of spending along the way. For example, if you want to add 50 new people this year, your financial strategy could include recruiters and a budget for finding new talent.

If you leverage such services from a consultancy company, they spend time to outline your expectations for the company's size, your costs for a bigger company, and the amount of money flowing in to compensate. This reduces the chances of inefficient finance and strategic management.

       5. Transparency with Staff and Investors 

Business executives are supposed to be transparent with their employees. Any startups go so far as to make their salaries available for the interested audience to see.

At the very least, new stakeholders deserve to know that the business is in safe hands and heading in the right direction. And when executives are able to share the financial plan in all-hands sessions, they add real results to what would otherwise be a vague strategic plan.

Also, the employees like to see and know the main numbers such as sales, expenses, and where the business is, in terms of profitability.

Why leverage TRC Corporate Consulting's Services to Devise Sound Strategies for Your Business? 

Devising a strategic financial plan necessitates projection as businesses can't just depend on the figures. This projection is not similar to guesswork; therefore, it is inevitable to follow best practices and weigh all possible consequences.

At TRC Corporate Consulting, our professionals become a part of your business's planning department. With their deep domain knowledge, they enable effective use of resources and means before devising a financial strategy for your business. This helps in resolving and coping with the growth-related problems that might come your way during the course of your business. By availing of our exceptional services, businesses can have a straightforward path to corporate growth in the near future.