Financial strategy is an important functional strategy of enterprise development strategy. Its establishment and implementation are vital to the orderliness of the overall resource allocation of the enterprise and the high efficiency of operation. It directly determines whether the goal of “maximizing enterprise value” is achieved. With the acceleration of the marketization and internationalization of enterprises, the internal and external environments are becoming increasingly complex, and the research and application of corporate financial strategies should reach a new stage.
Enterprise development strategy is the overall idea, basic direction and operation track that an enterprise must follow to seek competitive advantage and achieve the goal of maximizing overall value. Under the conditions of a complete market economy, market competition has reached a sufficient level, the establishment of a modern enterprise system has become inevitable, and strategic management has become the basis for enterprises to win and survive in competition.
As a supporting strategy for corporate development strategy, financial system is for the company to seek long-term development, by its development strategy requirements and the law of capital movement, and based on analyzing the changing trends of internal and external environmental factors and their impact on financial activities, the future economic activities The overall, long-term, systematic and decisive planning of the development direction, goals, and basic ways and strategies to achieve the goals. The choice of financial plan determines the orientation and mode of corporate financial resource allocation, and affects the behaviour and efficiency of corporate economic activities. Therefore, it plays a central role in a series of functional strategies of corporate development strategy.
About financial strategy
(1) The essence of financial strategy
Financial strategy is the overall decision-making of a company’s financial activities. Its focus is not on the current but the future. It is a judgment based on the long-term needs of developingthe company’s financial activities. Financial strategy is the application and extension of corporate development strategy in financial management. It not only has the commonality of general functional strategy, but also has its characteristics. To scientifically define the essence of economicl strategy, we must not only reflect the commonality of its “strategy,” but also reveal its “financial” personality.
1. The “strategic” commonality of financial strategy
(1) Overall. The financial strategy is based on the overall work of the entire enterprise’s financing, investment and income distribution. It is formulated by the long-term development needs of the enterprise.
(2) Long-term. The financial strategy is not to solve the immediate problems of the enterprise, but to seek the long-term development of the enterprise in the future.
(3) Orientation. The financial strategy stipulates the development direction and goals of the economic activities of the enterprise in the future for a long period of time, as well as the basic ways and strategies to achieve the goal. It is the guide for all financial tactics of the enterprise.
(4) Risk. The financial environment is always changing, so any company’s financial strategy is accompanied by risks.
(5) Adaptability. Financial strategy integrates the enterprise with the external environment, paying attention to observing and analyzing the changes in the external environment and the opportunities and threats they may bring to the financial management of the enterprise. It is a manifestation of the adaptability of the enterprise to the external environment.
(6) Dynamic. Strategy is the result of environmental analysis, and changes in the environment will inevitably lead to changes in strategy.
2. The “financial” personality of financial strategy
(1) The relative independence of financial strategy in the corporate strategy system.
As one of the corporate functional strategies, the relative independence of financial strategy mainly depends on the following two basic facts: ①Under the conditions of market economy, financial management no longer only exists as a subsidiary function of the enterprise’s production and operation process, but has its specific characteristics. Content-the independent existence of currency, the finiteness of funds, and the company’s attention to cash flow conditions, etc. Financial management has also changed from past data collection, sorting and recording to a supporter, influencer, and an active promoter and main force of company’s change; ②Financial management is not just a “partial” part of the company or a certain stage Activities, but to become an indispensable strategic executor and supervisor at all stages and levels of enterprise development.
(2) The subordination of strategic position. Financial strategy, as a functional system in the corporate development strategy system, although it has its characteristics and relative independence, it must obey and reflect the overall requirements of the corporate strategy, and should be in harmony with the corporate strategy. The formulation and execution of financial system is the embodiment of the strategic demands of corporate development in financial management. It is also the inevitable choice for financial management to cooperate with corporate development strategy to be realized.
(3) The particularity of the strategic planning object. Financial strategy is a plan for corporate economic activities, and its goal is to seek the optimization of corporate capital movement. The economic strategy must resolve the contradiction between risk and return, the contradiction between profitability and growth, the contradiction between solvency and profitability, and paradox between production and operation and capital management. These rejections are the particularities of the objects planned by the financial strategy. Caused.
(4) All-member nature of the main body of strategy implementation. From a vertical point of view, the formulation and implementation of financial strategy should be a three-in-one management process for business operators such as chief financial officer, financial department manager, and grassroots financial department; from a horizontal point of view, financial strategy must be coordinated with other corporate systems and penetrate all parts of the enterprise Departments, various aspects. Ultimately the operator is responsible for coordination. Therefore, financial strategic management is a full-staff management led by the business strategy, the strategic management of the financial functional department as the core, and the coordination of other departments as the support.
(2) The division and selection trend of financial strategy
1. The division of financial strategy
In the traditional sense, financial strategies are mainly divided from the perspective of fundraising and use characteristics, which are generally divided into three types:
(1) Expansion financial strategy is a financial strategy aimed at realizing the rapid expansion of the scale of corporate assets. To implement this kind of financial strategy, companies often need to make a large amount of external financing while retaining most or even all of their profits, and make more use of liabilities to make up for the lack of internal accumulation relative to the needs of business expansion. Expansionary financial strategies generally show the characteristics of “high debt, high returns, and low distribution.”
(2) Steady financial strategy is a financial strategy with the purpose of achieving stable growth of corporate financial performance and steady expansion of asset scale. Companies that implement a prudent financial strategy generally regard optimizing the allocation of existing resources as much as possible and improving the efficiency and effectiveness of the use of existing resources as their primary tasks, and the accumulation of profits as the primary source of funds for the expansion of corporate assets. The financial characteristics of a sound financial strategy are shown as “moderate debt, medium income, and moderate distribution.”
(3) Defensive shrinking financial strategy is a financial strategy aimed at preventing financial crises and seeking survival and new development. The implementation of a defensive shrinking financial strategy generally regards reducing cash outflows as much as possible and increasing cash inflows as the primary task. Measures such as lowering branches and streamlining organizations are adopted to revitalize existing assets, save costs and expenditures, and concentrate all the workforce that can be focused for use. The leading business of the enterprise to enhance the market competitiveness of the top company of the enterprise. “Low debt, low income, high distribution” are the basic financial characteristics of enterprises implementing this financial strategy.
2. Trends in financial strategy selection
The financial strategy must focus on the long-term sustainable development of the enterprise in the future, and be aware of preventing future risks. Therefore, its choice must be adjusted according to the changes in the internal and external environment of the enterprise. Enterprises should fully consider the influence of the following factors in the choice of financial strategy:
(1) The choice of financial strategy must be adapted to the economic cycle.
The cyclical fluctuation of the economy is an inevitable phenomenon in the overall economic development process, and is a manifestation of the existence and development of the economic system. From a financial point of view, the cyclical fluctuations of the economy require companies to adapt to the process and stages of the economic cycle, and by formulating and choosing flexible financial strategies, to withstand the ups and downs of economic shocks, especially to reduce the downward trend in the business cycle that inhibits financial activities. Negative effect. The choice and implementation of financial strategies must be coordinated with the economic operating process.
(2) The choice of financial strategy must be adapted to the stage of enterprise development.
The development of each enterprise has to go through a certain development process, which is generally manifested in four stages: the start-up period, the expansion period, the stable period and the recession period. Different development stages should have additional financial strategies to adapt to them. Enterprises should analyze their development stage and adopt corresponding financial strategy.
(3) The choice of financial strategy must be compatible with the economic growth model of the enterprise.
For a long time, economic growth with low-level redundant construction and simple quantitative expansion has been the main mode of economic growth for Chinese enterprises. Because this growth mode is easy to take effect in the short term, it shows the characteristics of short-term rapid growth. However, due to the lack of the corresponding technical level and the ability to allocate resources, the production capacity and true long-term growth of the enterprise are restricted. Therefore, the model of economic growth of enterprises objectively requires the realization of a fundamental change from extensive growth to intensive growth, and financial strategies need to be adjusted accordingly to adapt to this change.
(4) The choice of financial strategy must be scientific.
① The advancement and feasibility are unified. Only when the financial strategy goal is advanced can it stimulate the morale of the employees and mobilize their enthusiasm and creativity . However, the financial strategic plans must be established on a feasible basis, so that all departments and employees can achieve the goals through subjective efforts. ② Pay attention to the convergence of long-term, medium-term and short-term goals, ensure the continuity and succession of the three goals, and avoid the disconnection of the goal chain.
The selection trend of the company’s financial strategy
1. The embodiment of financial function in strategic decision-making
Strategy refers to the most basic long-term goal of an enterprise. Strategic decision-making has the following important characteristics:
① Strategic decision-making involves the concepts and ideas of corporate executives on the direction of corporate development;
② Strategic decision-making should help companies deal with the relationship with the external environment, making it consistent with the expected changes in the external environment as much as possible;
③ Strategic decisions must take into account the resources of the enterprise itself, and coordinate the relationship between business activities and resources;
④ Strategic decision-making involves major changes in the way the company operates;
⑤ Strategic decision-making is extremely complex and highly uncertain, requiring companies to make predictions about future events based on incompletely reliable information;
⑥ Strategic decision-making requires an integrated approach to the management of the enterprise;
⑦ Strategic decision-making focuses on long-term development, involving a large scope and long-term influence;
⑧ Strategic decision-making involves the values and expectations of the company’s main stakeholders;
⑨ Strategic decision-making involves the resources and operation of the enterprise, which will affect the resource base of the enterprise and bring about a large number of low-level management decisions.
These characteristics determine that the financial department must provide a variety of important financial information to evaluate and select specific strategic plans, and to measure the benefits of these plans in the future implementation process. Although strategic management is closely related to annual budgets and forecasts, they are quite different. The differences are:
① Time frame: budgets and forecasts are usually one year, while the strategic management period is generally three to ten years.
② Emphasize scope: budgets and forecasts often involve the completion of short-term specific tasks, while strategic management focuses on the implementation of long-term corporate goals.
③ Financial details: Budgets and forecasts contain a large number of financial information, so that the financial results can be compared between months, and the strategic plan involves much fewer information than the budget.
④ Environmental impact: budgets and forecasts often involve the internal operations of enterprises, providing necessary information for the formulation of strategic plans; strategic management involves changes in long-term trends in the external environment, and how enterprises respond to them.
Practice proved. The financial function is embodied in the corporate strategic management as:
① The financial part provides advanced background information for the strategic plan;
② Assist business executives in evaluatingthe financial feasibility of various strategic alternatives and action plans;
③ Provide costs related to the execution of various plans. A detailed statement of profit and financial status as the basis of the operating budget;
④ Express the results of the original action plan with financial data;
⑤ Help the company executives to check. Evaluate and revise strategic plans to ensure the reliability of these strategies in the future implementation and control process;
⑥ Establish and implement operational business control, and assist corporate executives in accomplishing established goals.
2. The impact of corporate strategy on financial management
Enterprises are in an environment of constant competition. To do a good job of strategic management, we must first determine the competitive position of the enterprise, and the product life cycle lays the foundation for the study of competitive strategy.
1. The launch phase. At this stage, the company must let customers understand the existence of the new product, and try to market the product, so the promotion expenses are quite high. Companies need a large capital investment to keep up with the fast-growing market and compete with competitors. Therefore, in the financial analysis, the main consideration is the long-term financial benefits of the new product strategy in the future. The main financial work at this stage is forecasting. If the product is very novel, it may be difficult to predict the future sales situation, even if it is not easy to delay the preparation of longer-term cash flow forecast data.
2. Development stage. New products have been recognized by the market, sales will rise sharply, profits will grow rapidly, and product prices will fall. At this stage, an important financial task is to analyze the speed of market development and compare it with the original plan. Companies should adopt a sticking strategy, consider how to take long-term cost reduction measures, and in the process of product market development and expansion, they must not only control costs but not reduce product status.
3. Mature stage. At this stage, the market share of products began to stabilize. Due to the attraction of high profits, competitors began to enter the market. Companies increase investment in promotions to deal with competition, improve product quality, find new markets and sales channels, and reduce product prices to attract customers sensitive to price elasticity. At this stage, the development of the market tends to be slow, and the financial management system should predict changes in product sales. In terms of marketing, the current market share of the product should be maintained. Any marketing expenditure should focus on short-term benefits, and a large amount of marketing expenditure is inappropriate.
The company’s strategy should be to ensure product surplus, to recover product investment as soon as possible and try to improve operating efficiency. Companies should adopt a rapid cost reduction strategy. All short-term measures that can reduce costs must be adopted. At this time, there is no need to take long-term steps to reduce costs. But to maximize the cash return of the company.
- The recession stage. The production capacity of the products is surplus, and the competition is becoming more and more fierce. In the case of a decline in product sales and unit product profits, companies should minimize their investment in products, and maintenance expenditures should also carefully consider whether it is worthwhile from a financial perspective. Since the company will soon decide to stop producing this product, the company must focus on short-term cash flow. When the company’s net cash flow is in deficit and there is a tendency to deteriorate further, the company should decideto suspend production of the product.
The wholesale and retail of pharmaceuticals is undoubtedly an extremely profitable industry, and there is no reason to lose money in this industry. But it is in such an industry. In a short period, the company has completely wiped out the 500,000 invested by the newspaper. In 1999, the gross profit of the financial statement was only 1%, which is incredible for a company that does retail medicine. At that time they spent 100 yuan to hire an accountant. The actual work of accounting is in charge of the general manager’s wife, who also acts as the company’s cashier.
The company is a veritable mom-and-pop shop. There is no outsider, so outsiders don’t know how much or how to sell it. Because there is no mechanism of checks and balances, the company not only failed to bring profits to the parent company that invested the money, but it also made a clean loss for the 500,000 invested by the parent company in a short period of time.
Specific analysis
Ticket management runs through the company’s development. Whether it is the initial difficult start-up stage, the later stage of development, or even the decline period of smashing sands, ticketing management is the lifeblood of the company. When we think about the tragic mall stories one after another, we tend to focus on the wrong decisions made by the bosses at critical moments, but forget the details such as ticket management. For enterprises, we cannot avoid the trivial details of bill management. However, when we set our sights on the above two companies, we will find that their ultimate failure is the failure of the ticketing management system. It can be said that the Causeway of a Thousand Miles is defeated by ticketing.
For the company, the main problems are as follows:
1. The husband and wife, one is the general manager and the other is the chief financial officer. My country now has a clear stipulation that the main person in charge of the company cannot also be the financial officer. Husband and wife are regarded as one in civil law. The two persons responsible for these two tasks at the same time do not conform to the norms of modern enterprise management. If the husband and wife collude, it is easy to mess up the ticket management, and it is easy to be tricky.
2. One person cannot do both accounting and payment. Accounting and cashier cannot be performed by one person. It is extremely easy to commit fraud and violations in bill management, which is illegal even in traditional enterprises.
3. Treasury and sales are undertaken by one person. This is a complete miracle. Normally, the company’s treasury and sales should be strictly separated. Only by doing so can the bill management be standardized. Part-time jobs in a small company can happen, but they cannot be part-time jobs in such highly conflicting positions. When the scale of the company is still relatively small, some parts can be part-time. For example, an accountant can concurrently serve as an office manager, etc. Still is very taboo to work part-time in contradictory positions such as accounting and cashier, treasury and sales. Power requires checks and balances. This is a very clear and simple truth.
For this company, we should improve on the following aspects:
1. A person is specially appointed to be responsible for the business. It is stipulated that the inventory shall be kept within a certain period. Experts are requested to establish a set of corresponding business specifications.
2. Establish a strict management system, especially in the drug storage system. You can’t just take it. You need to see the storage list. There is a set of good formulations, and managers don’t care about people, but use systems to manage people. From the treasury’s point of view, if others don’t pay attention when taking the medication, you are responsible for the inventory. Then no matter who is taking the medicine, the first thing you consider is who is responsible for the consequences.
Third, there must be a power check and balance mechanism that does not contradict or overlap in key positions.
Functions of budget management
1. Comprehensive forecasting function
In the process of budgeting, the company’s budget goals must first be formulated by predicting uncertain factors such as future market demand and enterprise production capacity. The higher the certainty of the forecast result, the simpler the budgeting process and the higher the accuracy of the budget target; the lower the confidence of the forecast result, the more complicated the budgeting process will be, and the accuracy of the budget target will inevitably decrease.
It is not a partial or special forecast, but a forecast through the company’s sales, expenses, production, procurement, salary, investment and other aspects, so it is called “comprehensive forecast.”
2. Strategy implementation function
The budget can refine the strategy to an annual or even shorter period. If an enterprise does not have a design, many strategy-related issues need to be considered at the budget stage, which will easily cause overload of budget information and inadequate consideration of strategic plans, which will affect the quality of business decisions.
The feedback information formed in the budget preparation and execution is an important source of information for continuous revision and adjustment of strategies. The formulation and implementation of design and budget are glued together to ensure timely update of system.
3. Resource allocation function
For a particular company, the status quo of the company (such as scale, profitability, financial structure, etc.) and the external environment of the company (such as economic growth rate, industrial cycle, relevant laws and policies, etc.), under established circumstances, may gain The resources must be relatively limited. This is determined by the initial allocation of resources by the market.
Through budget management, the enterprise realizes the secondary optimal allocation of the resources invested by the enterprise in the market. The process of formulating a budget is a process in which the organization arranges resource requirements according to the priority of each department’s tasks and the importance of various products. Its essence is the process of benefit adjustment and sharing among multiple departments within the organization.
4. Target communication function
The lower-level departments have more information about the internal impact factors of performance than the upper-level departments, such as the workability and work potential of the department. In contrast the upper-level departments have more knowledge about the development of the enterprise, such as what opportunities the enterprise faces and what Such threats and strategic aspects such as their strengths and weaknesses.
Without a good cost system, many problems will arise. Yesterday’s log listed many issues. But not every company feels these problems. “There is no cost system, and we have always come,” but when the competition changes more intensely, the cost system only shows its importance. A certain company has a low-end and large-volume product whose market price is lower than the cost of the product. If it does not make this product, it gives up the market to its competitors, thereby training its competitors; do it. The more you sell, the more you lose. Don’t do it? A certain motorcycle parts company faces a request for downstream vehicle manufacturers to lower prices. Will you fall or not? With fierce competition and more and more varieties, a precise cost system is very critical to the operation of an enterprise.
So how should we look at the cost management system of an enterprise?
Simple understanding: Regard the cost management system as a part of finance, and do cost accounting to complete the financial statements. As for who is using the cost information, it is not important. Cost accounting is just a task.
General application: Regarding the cost management system as a support for business decision-making, a source of information can assist management and marketing departments in making business decisions, but it is not very helpful. It can be known from the number of calls from the sales department to the cost accounting staff of the finance department to inquire about the price discount space.
In-depth application: The cost management system is regarded as a basic platform for the entire operation of the enterprise, and the basic platform for the refined management of the enterprise. Through this platform, you can analyze the value of each product to the company, research the profitability of the product, explore the value of each customer/channel/region to the company, and analyze the value of each business to the company. At the same time, this platform can support the realization of the responsibility accounting system, help determine internal cost control standards, and formulate evaluation criteria. The basic platform for an enterprise’s operation should be a platform that covers all of the company’s business, including procurement, logistics, and sales, rather than just a platform that covers production and operations. It helps managers clarify how to provide customers with products and services that consume costs? Why is the price so high?
When a company found that the logistics cost per ton of finished products in branch A was twice as high as the cost of finished products per ton in branch B, there was no way to do a detailed breakdown, only the general explanation: the state prohibits overloading and the wagons are tight in summer. As to whether these factors are the real factors leading to the high logistics cost, or whether these factors can cause the logistics cost to increase by two times, no further analysis can be done, because the logistics cost has not been calculated in detail, and the only financial knowledge can be A summary of the logistics costs; when a large customer brings huge sales to the company, the company may spend money to buy it. Because large customers are not necessarily the most profitable customers, how to make each customer more prosperous, a good cost needs to be the basis of strategic analysis. If an enterprise wants to manage finely, it must build a good cost management system.
To borrow the words of a company’s boss to illustrate the importance of the cost system: “The profit rate of the industry is very low now, often only 2-3.5 points. If the cost calculation is 2% worse, it may lose 35% of the profit.”
