Achieving Success: Setting and Meeting Objectives of Business Finance
Business finance is the backbone of any successful organization. It is essential to have a clear understanding of the key financial indicators and objectives to drive the growth and success of a business. Understanding financial issues can be a daunting task, but it’s crucial for aspiring and established entrepreneurs. In this article, we will discuss the importance of setting and meeting objectives of business finance and how to achieve success in the realm of finance.
Why setting financial objectives is crucial for every business?
Setting financial objectives helps companies stay on track and measure their progress. Here are the top reasons to have financial objectives for your business:
1. To Ensure Profitability
Profitability is the fundamental goal of any business. Therefore, setting financial objectives that align with your profit margins is crucial. Financial objectives will help you track and measure progress towards profitability and identify where additional investments need to be made.
2. To Manage Cash Flow
Without cash, your business won’t last long. Business finance objectives help you keep track of cash flow and keep it in check. By setting financial objectives, you can closely monitor your cash flow and adjust as needed.
3. To Secure Funding
If you’re seeking funding from investors or lenders, having proper financial objectives and plans in place is critical. Financial objectives help you demonstrate to investors that you have a clear understanding of your business’s financial needs and priorities.
How to set and meet financial objectives for your business?
Now that you understand why a financial objective is necessary, let’s dive into how to set and meet financial objectives for your business:
1. Establish Clear Financial Goals
The first step in setting financial objectives is to identify the goals of your business. Ask yourself what you want to achieve and what your financial goals will be. Ensure the goals are specific, measurable, achievable, relevant, and time-bound.
2. Develop a Financial Plan
Once you have established clear financial goals, you must create a financial plan that outlines how to achieve them. The financial plan should include budgeting, forecasting, and cash flow management. This plan should help you understand how much funding your business requires to meet your goals.
3. Monitor and Review Performance
It is crucial to track and measure performance regularly to ensure you’re on track to meeting your financial objectives. This means setting specific milestones and measuring your progress towards them. Regularly reviewing your financial objectives will help you understand where your business is headed.
Real-world Case Study: McDonald’s Corporation
McDonald’s Corporation is an excellent example of a company that has set and met its financial objectives. In 2014, McDonald’s sales had been declining for nearly two years. In response, the company set a financial objective of reducing costs by $500 million by the end of 2018. They did this by restructuring the company, including closing underperforming stores and reducing staff.
By 2018, the company achieved its financial objective, saving $586 million. This resulted in a boost in profits and a more streamlined organization.
Conclusion
To conclude, setting and meeting financial objectives is crucial for every business. It enables you to manage your cash flow, measure your progress, and secure funding. By establishing clear financial goals, developing a sound financial plan and monitoring and reviewing performance, you will be on track to achieving your business’s financial objectives. Always remember, consistency is key!
