Throughout history, companies have faced liquidity shortages when dealing with situations of need that jeopardize the survival of their businesses. Most of them relied on bank financing, but not all had access to it.
Because of this, different alternative financing methods began to emerge, enabling a diversified financial strategy that offers greater security and the ability to overcome situations, enhancing the business’s financing conditions.
However, developing a financing strategy tailored to the company is by no means simple. Certain studies show that designing this strategy is one of the entrepreneurs’ biggest headaches, as they feel the pressure to secure what is needed to carry out desired projects.
Having a professional to assist us at this stage can make the difference between a successful business and an unsuccessful one. One of the most reliable options is CPA Houston: Evans Sternau, a global network of committed CPAs and accountants that focuses on providing customer service strategies and resolving industry challenges.
A company’s financing strategy is a set of actions taken by the entrepreneur to obtain economic resources or funds to enable the development of various business projects.
It should be chosen by the master strategy decided upon through the organization’s strategic planning process and should carry the distinctive hallmark that enables it to support the fulfillment of the overall strategy, mission, and strategic objectives.
However, regardless of the company’s overall strategy, from a functional perspective, it should cover a set of key aspects. Generally, the following are highlighted:
- Analysis of investment profitability and profit level.
- Analysis of current assets: liquidity and solvency.
- Working capital, economic-financial balance analysis.
- Financial structure and overall debt level.
- Financial costs.
- Analysis of the risk of credit granted to customers.
In this regard, working closely with a consultancy that advises companies on how to structure this strategy will be crucial for its success. Some of them, like Evans Accounting, offer comprehensive services that allow you to develop the best financial plan while minimizing possible risks.
3 Key Points for Developing a Sound Financing Strategy:
Define the project’s needs
Thoroughly understanding your project and defining its financing needs as accurately as possible will help you determine the amount of money you can request. This step is crucial to avoid over-financing, which can lead to extra costs.
Analyze the environment and assess different financial sources
Once you’ve defined the needs, analyze the environment. Explore the various financial avenues available and try to incorporate the most suitable one. A thorough analysis is necessary to develop the most effective strategy and cover the financing needs you require.
Choose the most appropriate sources
Building a robust and secure financial strategy involves combining both traditional and modern sources. Diversifying sources mitigates numerous risks from the environment that could threaten your project’s favorable evolution.
Diverse funding sources
Having diverse funding sources makes crisis avoidance more feasible. Diversification allows you to access funds at any time, giving you the freedom to choose based on the economic context in which your company operates, seeking the most advantageous option.
Increased financing possibilities
The development of financial alternatives and their incorporation into company financing strategies expanded the range of both short and long-term financing options. For instance, when interest rates are low, short-term financing might be more favorable. Conversely, in a rising rate context, long-term debt might be more suitable. In such cases, methods like crowdlending can be beneficial.
Enhanced negotiation capacity with suppliers
Each financing source comes with specific requirements and conditions that compose your financial portfolio. Constructing it from various avenues allows you to secure much more favorable general financial terms, as your negotiation power with financial providers will be greater than if you relied on a single source.
You’ll be able to observe and evaluate the different “prices” of financing, enjoying the luxury of comparison.
Benefits of a Good Financial Strategy
Designing corporate financial strategies in a structured manner will bring the following benefits:
- Increased liquidity
- Focusing on profitability objectives
- Having defined objectives by timeframe (quarterly, semi-annually, annually)
- Controlled growth aligned with your goals
- Enhanced control of your company, providing you with peace of mind
Once you have aligned your finance strategy with the overall company strategy, it is essential to gather the numerical information of the company, including purchases, sales, payments, collections, inventory, etc. This is done to understand real-time data and measure the effectiveness of the strategy.
Obtaining this information is crucial, and it should be acquired in real-time to take action as promptly as possible and avoid losses in the natural course of business processes.
Having technology that aids in streamlining your business processes and continually optimizing each action leading to the success of your financial strategy is necessary.
In this way, when economic planning aligns with the company’s overarching strategy and is complemented by related disciplines, the results will be more successful and balanced for all stakeholders involved, such as companies, collaborators, the government, and society.
An effective financial strategy builds valuable companies focused on the country’s transformation and future projection.