Question

For a business in which you work, have access to or for a simulated business you are required to develop a financial strategy. You must obtain a full set of accounts and data in order to complete this assessment task.

A successful financing strategy requires some preliminary work. Before you can develop

and write up your strategy, and before you can implement it, you need:

an organisational strategy and plan;

an organisational budget;

financial systems;

a public image and visibility;

value clarity – a clear understanding of the values of the organisation, values which cannot be compromised by the financing strategy.

Once all the pre-requisites for a successful financing strategy are in place, the next step is to

look at which strategic options for financing are realistic for your organisation. In order to

make that decision, you need to assess each option in terms of:

appropriateness for your organisation;

practicality for your organisation;

your organisational values (values clarity).

These can include:

Donor funding

Earned income (fees, sales, tenders)

Membership fees

The general public (including special events, direct mail appeals, capital campaigns)

Investments

Careful spending.

None of these excludes any of the others. Some, like careful spending, should be linked to all the others.

Requirements for the strategy document

It is the document in which you record your strategy, where you explain why a strategy is necessary, what your strategy is, and why you have chosen that particular strategy.

The strategy document serves both an internal and an external purpose.

Internally:

It helps to consolidate the strategy and to show how the different aspects of the strategy complement one another.

It provides a reference point for people in the organisation.

It shows up any contradictions there may be in the strategy.

It provides a guideline for implementation.

It provides a basis for monitoring and evaluating the effectiveness of the strategy.

Externally:

It shows stakeholders what it is you are aiming to achieve through your financing strategy.

It gives them a basis for seeing where they fit in your financing strategy.

It provides a “bottom line” against which they can assess your progress towards sustainability.

It provides them with a yardstick against which to measure your approach to financing your work, and the seriousness with which you take the need for developing a degree of self-reliance.

What you put into your document will depend on your actual strategy. What follows are

some ideas about the general format.

1 Preamble/Introduction

This should explain why, as an organisation, you think it is necessary to have a financing strategy.

2 Principles

This is a statement of the values and principles on which your financing strategy is based.

3 The strategy

It is a good idea to begin your description of your strategy with an overview which describes how you budget, and summarises your strategies for financing the work of the organisation.

Then take each strategy and explain how you intend to implement it. In each case,

specify where responsibility for implementation will be located.

4 Conclude by explaining how and when the strategy will be monitored and evaluated, and how the organisation will report to stakeholders on the effectiveness of the strategy.

This provides a basic outline for a useful financing strategy document. You must also attach, as an appendix, an implementation or action plan.

Once you have met the prerequisites for a successful financing strategy, critically considered all the strategic options for financing, written up your strategy, and done your action planning, nothing remains but to implement the strategy. The implementation must cover:

record keeping

skills needed to make the strategy work

dealing with staff resistance

monitoring and evaluating your financing strategy.

Answer 1

INTRODUCTION

Any business is started or done with the aim to make profit.Even a not for profit companies also need to earn profit to survive in the long run.And for earning such profit business need resources in the form of capital, land, labour and such need can only be met by finances.No business can survive without a proper financing strategy.Finance is the backbone of any organisation.It is required for day-to-day activities and also for sustaining in the long run.And therefore a proper strategy is needed for it.

PRINCIPLES

All financial strategy should be based on sound business policy and objectives.The financial strategy should aim at meeting the ultimate business objectives and therefore strategy formulation should be made as per the business goals.The financial strategy should be such that, It at the same time meet the daily needs of the organisation and along with the organisation's long term needs and goals.

STRATEGY

The financial strategy should be divided into parts i.e short term financial strategy and long term financial strategy.And both the strategies should be formulated by the top management.

Short term financial strategy-The short term financial strategy should be based on meeting short term goals and finances of the business. Such finances can be met through short term borrowings, sales revenue, or short term loans and advances.Such strategies should be formulated by top level and implemented by middle level management.

Long term financial strategy-The long term financial strategy should aim at meeting long term financial goals and objectives of the business.Long term finances can be met by issue of shares, debentures, long term borrowings etc.Such strategy should be formulated and implemented by the top management only.

CONCLUSION

There should be a proper audit committee and reporting mechanism for reporting about the effectiveness and efficiency of the financial strategy formulated and implemented and also about the people related to it.Such reporting should be done on periodic basis to the top level.And top level should review the report and implement the necessary changes or modification in the strategy and such report along with the necessary changes should be presented to the various stakeholders of the organisation for decision-making purposes.