The financial policy of a company is the process by which the company determines how to invest its finances. It also determines how it will acquire funds for purchasing their assets, and what it will do with the net income. Financial policy begins with a decision on investment whereby if it cannot identify profitable investments it has no obligation to raise any funds. In order to decide whether to invest in a certain asset, the company will estimate the amount of income that the asset would earn (Freedman, 2007).
On the other hand, strategic planning of a company is the process by which it determines the direction the company should follow. The inherent difference between the two is that financial policy fully deals with the company’s finances while strategic plans deals with various plans on how the corporation will be operated and these plans require funds in order to them to be fully implemented.
Purpose of the strategic plan:
When an organization goes wrong, it means that their strategic plans are outset. They often wonder without having conclusive decisions on how to have key focus on the strategic plans of the company. The fundamental purpose of strategic planning is to align the company’s vision and mission by laying down all the necessary plans that will foresee the accomplishment of the company’s vision and mission (Ndaba, 2007).
Scope and objectives of the strategic plan:
The scopes of an organization’s strategic plan are to improve the operating performance of the company. It also involves implementing various turnarounds, finding solutions to complex issues of the company and collaborating with the company’s financial and operational amendment processes. The primary objectives are to ensure that a client is always provided with better services, ensure that all business transactions are conducted with sincerity and reliability, and to ensure business solutions are always there in case a problem arises (Peterson, 2004).
The operating plans of a company lays down the daily operations of how the company will be run, the location of the company, its assets, its clients and suppliers, processes to be followed and the environment which surrounds it. With all the necessary operating plans being put in place by the company, it will be easy to follow the financial policies and other strategic plans of the company.
Steps of the financial planning process:
There are six financial planning processes. The first step entails establishing and defining a customer planner relationship. This is where the planner should explain to the clients all the services in services in the organizations which will be provided to them, and define both his and the client’s responsibilities. Second step is the gathering of the entire client’s data including all their goals. Here, the financial planner should ask the client about their financial conditions and at the same time define their personal and financial goals. The third step is evaluating and analyzing their financial status to determine their present status. Fourth step is developing and developing financial planning recommendations whereby all the recommendations given should address the client’s goals. The fifth step is implementing all the fiscal planning recommendations, and finally, looking at the recommendations of financial planning (Shim, 2000).
Most businesses’ growth is measured by sales; therefore, sales forecast is where various standards for the company’s profits, expenses and growth are set. Sales forecast in most cases is the backbone of any business plan.
Here, businesses look to plan on their investments, decide when to withdraw or close their products, and launch all the new business products (Woodhall, 2009).
In conclusion, to the above essay, it is pertinent to note that in order for a company to meet its goals and objectives, it has to lay down strategic plans and have financial policies that will drive the company to its success.
Freedman, E. (2007). Financial management. Mechanicsburg, Pa.: Pennsylvania Bar Institute.
Ndaba, T., & Volkwyn, J. (2007). Financial management. Cape Town, South Africa: Juta.
Peterson, P. P., Fabozzi, F. J., & Habegger, W. D. (2004). Financial management and analysis workbook step-by-step exercises and tests to help you master financial management and analysis. New York: Wiley.
Shim, J. K., & Siegel, J. G. (2000). Financial management (2nd ed.). Hauppauge, N.Y.: Barron's.
Woodhall, G., & Stuttard, A. (1999). Financial management. Houndmills, Basingstoke, Hampshire: Macmillan.