Setting financial objectives at the beginning of each year is a compulsory step for any entrepreneur looking for medium and long-term business success. Accurate and timely objectives setting can make the difference between success or failure. Established at the right time and in the right way, financial objectives can provide clarity and a very specific direction for a company. If you want to begin 2025 by a big step, you are invited to discover in this article more useful information about financial objectives/goals, about their importance and type and the way in which they can be set for your business.
What are financial objectives/goals and why are they important?
Financial objectives are the basis of any financial planning, the pillars which the entire trade activity of any business must rely on and also the parameters according to which the company financial performance is measured. Therefore, the importance of financial objectives is undeniable if you are looking for long-term success in your business. If you have not already checked this issue, take time with the company’s management team to discuss and set financial objectives for the year 2025.
The most important financial goals for a company
Although businesses operate in different sectors and industries and each have objectives specific to their own activity, there are nevertheless some generally valid financial objectives that any commercial enterprise focused on making a profit should set for itself:
- Increase in turnover
As soon as we have established the desired turnover increasing percentage for the new year, we move on to a goal achieving plan that involves sales strategies, marketing strategies and business innovation, created to bring more customers and generate more revenue..
- Cash flow optimization
An extremely important objective for your business smooth functioning is cash flow optimization, focused on careful and accurate management of cash inflows and outflows so as to ensure constant liquidity and avoid financial blockages. Using cash flow management financial instruments, such as a line of credit or factoring, can provide additional flexibility.
- Expense optimization and debt management
A significant part of a business financial activity involves expenses and debts, which, if carefully monitored and kept under control, can significantly improve operating margin and return on invested capital. At the same time, an optimal debt-to-equity ratio reduces financial risk and financing costs, preventing over-indebtedness and vulnerability to interest rate fluctuations.
- Increased profitability
This is an essential financial objective that must be present on any company’s list, regardless their activity sector. Increasing the profit margin can be achieved by optimizing costs and by increasing operational efficiency and revenue. The above mentioned objectives are also required to achieve an optimal profitability level.
- Diversify income sources
For a greater chance to achieve the desired turnover and an optimal profit margin, expanding the products or services portfolio is an objective as important as all the others mentioned above. In addition, reducing or avoiding a company’s financial risks can be achieved by identifying new potential customers on new markets.
How can you set financial goals for your business
The financial goals setting process can take time and effort, but it is definitely worth it., During the start-of-year meeting, together with your company’s management team dedicate time to set the most important targets for the new year, whether they are financial, commercial, operational or otherwise.
Learn how to set and achieve your business financial goals in the following steps:
- Start by analyzing the financial situation at the end of last year
It is essential to start from historical data (if available), from the previous year’s income and expenses and from the profitability level which you have already achieved. Together with a financial expert, make an analysis of the most important financial KPIs that will give you an objective reality of your business. Through this analysis, identify the company’s strengths and weaknesses, the opportunities and threats which you may face this new year.
- Set SMART financial goals that will provide precision to the entire team
It is important that financial objectives are specific (clearly defined), measurable (through financial indicators), achievable (achievable), relevant (aligned with the company’s strategy) and with a clearly defined time (time frame). An example in this direction is to set a goal to increase revenue by 40% as compared to the previous year, by opening new locations by the end of the current year.
- Plan and establish strategies for each objective
To achieve the established objectives, it is essential to develop strategies and tactical plans for each of them. Identify the necessary resources (financial, human, technological, etc.) and create an implementation calendar that contains precisely established deadlines.
- Carefully monitor progress in achieving financial goals
Together with your team set specific times to periodically check your progress towards your goals. By using monthly financial reporting and analyzing key performance indicators, you will have more clarity and precision on your status. If necessary, quickly adjust your strategies to meet your financial goals.
- Involve your management team in each of the stages above
Make sure that key people in the company fully understand and visualize the set out financial goals and strategies, so that they can delegate responsibilities to members of each department. Give them the authority required to deliver on the established strategies and hold regular meetings to discuss progress and make adjustments if necessary.
How can ELFWISE support you in achieving your financial goals
If you want clarity in your business figures, financial performance and achievement of the financial objectives you have set for this year, ELFWISE can be your trusted partner in successfully implementing your financial management plan. There are among the services we offer financial consulting, financial-accounting diagnosis, financial reporting and analysis, the execution of annual financial statements. The figures you propose can become real by establishing clear financial objectives for your business and by identifying the right partners. Call on our team with confidence and we will guide you towards wisest financial decisions and strategies which will ensure your growth!
If you want to stay close to us, follow our activity and discover useful and educational information in the field of financial management, don’t forget to follow us on social media: Linkedin, Facebook, Instagram.