Question

When setting financial goals, the SMART approach is recommended. Discuss what the SMART approach is and set an intermediate term financial goal based on the SMART approach. 

Answer 1

What are SMART Goals?

Every business set goals to achieve their objectives. SMART is an acronym for the 5 things, that is specific, measurable, achievable or attainable, relevant, and time-based goals. A SMART goal gives direction to achieve the objective in mentioned time.

Financial Goal and SMART

Specific: If our company want to achieve a particular target in 1 year, first we set the target in a measurable form, For example $ 40000 profit as 1 year target.

Measurable: After specifying the target then convert the target into measurable form.

Achievable or attainable: Measuring is a scale to check whether our actual result is enough to achieve the target. Achievability make sure the target is within reasonable reach.

Relevant: Relevance helps to predict the attainment of objective with the achievability of the target. For Example, if our company earn $ 10000 profit in first quarter then we can achieve the target of $40000 profit in one year. Relevance of the goal helps to take corrective measure if deviations occur.

Time-based goals: The time required for attaining the goals must be specified at the time of fixing the goals, it must has a start and finish date. If the goal is not time bound, there will be no sense of urgency and motivation to achieve the goal. For Example; Achieving the Profit of $ 40000 within one year.