What Is Strategic Financial Management?

Strategic financial management is essentially another term for financial management. It involves employing a number of strategic financial theories designed to operate in a company's best financial interests. Parts of strategic financial management include creating a budget and managing risks and assets. Each area of strategic financial management is designed to address a different part of company financial operations to reduce financial leaks and make the most of the available financial resources. In general, this practice seeks to understand and control the use of money to get its maximum benefit for a business.

Budgeting is important in strategic financial management. Without budgeting, an company cannot be sure how much money is going into and out of the organization, or whether important parts of the business are getting proper funding. Before a business engages in any other type of strategic financial management, it usually starts by gathering information about the company's financial resources and defining a budget to gain control over the money in the business. Keen budgeting helps a company run at its best, and also helps expose departments or individuals within an organization with unusually high operating costs.

Part of managing assets during strategic financial management is making proper use of the investment potential of an organization's income. Well-designed strategic financial management will make the most of the investment potential of an organization's financial resources, while ensuring that the company has enough liquidity in the form of cash on hand to complete day-to-day operations requiring on-hand cash. This means knowing the cash a business needs to operate so the rest of the money can grown through smart investing.

The practice of managing risks is often referred to as risk management. Risk management includes risk assessment and risk reduction, and generally involves insuring a company against large losses caused by potentially unavoidable risks. This field also involves risk prevention, which can help stop losses due to risk. One example of a possible preventable risk might be repetitive motion injuries like carpel tunnel syndrome, which can be caused by a poorly designed workstation. A risk management professional might assess employee workstations for comfort and ergonomic compatibility and make improvements to reduce the risk of on-the-job repetitive motion injuries.

Strategic financial management is a type of resource management. Resource management is streamlining a company for the most beneficial use of the resources available to it. Other types of resources available to a company include human resources, natural resources, and equipment owned by the company.