The main purpose of any business is to develop a lucrative activity that, to be successful, must be based on a good planning of objectives, goals and strategies of various kinds that mark a course to follow. The financial business objectives are essential for the management of any organization, without them you would enter the territory of improvisation, uncertainty and, probably, bankruptcy.
What are the financial objectives of a company?
The financial objectives of a company define the way to act and the decisions that must be taken regarding the management of money. Generally, the lack of financial objectives is related to the problems of greatest impact within any organization.
The financial goals should also serve as a benchmark for the performance of daily activities within the organization. In this sense, we can define them from two perspectives: they represent something that we must achieve and they are also a point of reference to evaluate performance.
We can affirm that, as long as we keep in mind the financial objectives of a company, we will have a purpose and the necessary elements for self-evaluation of the actions we take with respect to money management.
When formulating financial objectives, it is necessary to bear in mind that these must be clear, achievable and measurable.
The overall objective of a company and its financial objectives
The objectives of business finance support the achievement of the general objective of the companywhere the only maximum benefit approach has become obsolete.
Currently the value of a company includes concepts such as the conquest of market shares, competition, cost reduction, customer satisfaction, revenue growth, among others. The general objective should be focused on achieving the maximum value of the company, not the maximum benefit.
If the maximum value of the company is achieved, the share price and the wealth of the shareholders will be maximized. However, it is necessary to bear in mind that financial decisions influence the market value of shares because they have a direct relationship with profits, profitability and degree of risk.
The general objective of a company is of a generic nature, is projected in the long term and usually frames a set of more specific goals that are intended to be achieved, for example, customer satisfaction, the development of new products, expanding a line of business, international expansion, among others. All these elements, regardless of their immediate purpose, seek to generate money and increase the value of the company, therefore they will be related to financial objectives.
In other words, insofar as we can convert each of the company’s goals into financial objectives, we will be guaranteeing good money management within the organization and contributing to the increase in the value of the company.
By meeting the objectives of corporate finance will achieve the good performance of the organization and the satisfaction of those who invest in it.
How to define the objectives of business finance?
If we explain it in a very simple way we can say that to define financial objectives we must answer three basic questions:
- What are we trying to achieve? (Aspirations)
- What do we have to achieve it? (Resources)
- How much do we need to achieve it? (Investment required)
Financial planning of a company
Regardless of its size, financial planning is one of the most important activities that must be carried out in any company since a good management of its economic resources can guarantee its survival over time.
Financial planning must be present from the first stage of any business project and must be one of the main working tools of an executive director, who will be responsible for the success or failure of the organization.
In its preparation, it must respond to the monetary requirements implicit in the achievement of objectives such as opening a new branch, acquiring new equipment, hiring more personnel, increasing sales, among others. In addition, it must establish the capacity of the company to assume these requirements in a self-sufficient manner or through financing.
With proper financial planning, managers will have the ability to establish investment and financing strategies that are closely related to the success of the company.