Financial vs. Strategic Management
Any organization needs to identify its direction to succeed in its field. Here is where financial and strategic management comes in handy. Strategic management entails recognizing where stakeholders want a business to be in the future and then implementing strategies to reach there. However, it is hard to achieve this objective without sufficient financial resources. On the other hand, financial management involves linking its financial operations with its strategic plan. Merely put, strategic management shapes vision, while financial management shapes how to use financial resources to accomplish these goals.
An Overview of Financial Management
According to Alexander Djerassi, financial management is managing funds; it shows the cash inflows and outflows within a particular period. Businesses incorporate financial management into their operations to accomplish the much-needed financial goals.
Most companies have a separate financial department that plans for financial activities. This department is mainly responsible for handling various financial statements like cash flow statements, balance sheets, and income statements at the end of a given period. It is worth noting that organizations refer to these statements when preparing budgets.
Any financial management plan in a company should include budgeting, which is a predefined estimate for the future. A business can prepare several types of budgets like production, sales, cash, and more. Usually, a budget is prepared with regard to the previous year’s business performance. Regardless of a company’s size, budgeting is beneficial for future planning.
An Overview of Strategic Management
Due to the competitive nature of the present businesses, organizations need to have strategic management plans at their disposal to survive. Alexander Djerassi says that the main objective of strategic management is to outline the vision or direction of a business. The crucial thing about any business is that it needs to align resources with goals.
Strategic management offers the following:
- A game plan for satisfying consumers
- A road map for the organization to have a competitive advantage over its rivals
- A formula for achieving long-term incredible marketplace performances
- A prescription for carrying out business
Strategic management is seen as a step-by-step process. The first step involves creating a strategic vision that defines the company’s ultimate goal. The vision explains how the business sets its financial and strategic goals. The second step is to develop a strategy that allows the company to attain the stated vision and goals and then implement it. Next, monitoring is put in place to assess the performance and enact the essential alterations. The final stage is to revise the process, if need be, according to the prevailing conditions.
Overall, strategic management is simply a company management activity used to outline priorities, get the anticipated results, strengthen the operations, ensure that stakeholders and employees work towards a common objective, and allow the company to focus on resources and energy.
Differences Between Financial and Strategic Management
- Strategic management offers the direction towards attaining strategic goals while financial management outlines how to attain financial goals
- Strategic management is needed to align a company’s resources with its ultimate goals, while a financial management is needed to handle the company’s cash flows