1. Strategic Financial Management 9 February 2012
Jacqueline Williams
AAA Consultancy Services Ltd

2. Aims of the session
Understand the role played by strategic financial management in making and implementing decisions
Highlight the importance of using key financial management tools to develop, deliver and monitor local priorities implemented in accordance with national policies
Explore ways of comparing own strategies and budgets with those of colleagues, and to carry out benchmarking exercises as appropriate.

3. What is Strategic Financial Management?
Strategic planning
Financial planning
Strategic financial planning
The individual activities of a strategic plan are translated into financial figures to estimate future funding needs, and corresponding resources are analyzed for the strategic plan’s implementation.

4. Key Elements of Financial Management:
Good governance and leadership
Strategy and planning
Budgeting 
Monitoring, forecasting and reporting  
Risk management and internal control
A thorough understanding of costs, cost behaviours etc
Roles, responsibilities, skills and competencies
Value for money

5. A look at Strategy Development
Strategy is about giving an organisation purpose and direction, motivating governance, staff and collaborators to engage meaningfully with the external and internal environment – linking in to resources and end beneficiaries

6. Three Big Strategic Questions
Where Are We Now?
Where Do we Want to Go?
How Will We Get There?

7. Developing a Strategy is a Journey
Vision/mission
Evaluating performance
Environmental
Analysis
Implementing the plan
Setting objectives
Crafting the plan

8. The Steps in Detail National Requirements Aims 1) 2) 3) 4)
Developing a
Vision/mission
Local priorities
Vision: tends to be aspirational – where the organisation wants to be in the future
Mission: statement of purpose – describes what an organisation is there to do

9. Steps in detail Cont …
External
Environmental
Analysis
Internal

10. Steps in detail Cont …
Strategic
Setting objectives
Financial

11. Crafting the strategy –
Steps in detail Cont …
Writing the plan
Setting the
goals/targets
Crafting the strategy –
the service plan
Identifying key
Stakeholders
Budgeting

12. Steps in detail Cont … Change management Performance
Implementing the plan
Performance
Management
Project
Management

13. Evaluating performance
Steps in detail Cont …
Outcome
Assessment
Monitoring and
Review
Evaluating performance
Measurement and
Analysis
Continuous
Learning

14. Financial planning – Four Stages
Review the past
Set annual budgets
Forecast the future
Set the strategy

15. Why is it Important? Financial management:
is essential to good corporate governance;
forms part of the firm foundations of an organisation, underpinning service quality and improvement; and
is the basis of accountability to stakeholders for the stewardship and use of resources.
It is about managing performance and achieving an organisation’s strategic objectives, as much as about managing money.

16. Poor Financial Planning :
Adversely affects end beneficiaries
Will lead to money being spent inappropriately
Will result in failure to achieve national and local priorities

17. What are Budgets?
The financial description of an action plan for a given period
Expressed in money terms
Detailing both Income and Expenditure
Based on knowledge and assumptions
Against which actual performance can be measured.

18. The Purposes of a Budget Are:
To coordinate different activities toward a single plan
To communicate and set targets
To maximise and allocate resources
To identify financial problems
To establish a system of control by having a plan against which actual results can be compared
To compel planning

19. Setting Budgets Annual Budget Financial Plan Service commitments
Demands
Priorities
Financial Plan

20. Budget Management – Two Processes
Budget Preparation
Budgetary Control
Calculating
Checking
Negotiating
Investigating
Revising
Projecting
Agreeing
Acting
Learning

21. Who should be involved in budget creation
Managers
Accountants
Budget Holders

22. Value for Money Value for Money Inputs Objectives Outputs Economy
Where an organisation acquires resources
at the lowest cost
The extent to which the desired objectives
are achieved
Economy
Value
for
Money
Effectiveness
Efficiency
Where an organization
obtains maximum output from
a level of acquired resource inputs
Outcomes

23. Good Financial Management – Underpinned by:
Culture
Financial
Skills
assumptions
Challenging

24. Organisation Culture Impact on Financial Management
Centralised
Devolved
Power to make
important decisions
vested in only a few
Power to make
important decisions
delegated to different levels

25. Linking financial management and Strategic Planning
Prudent financial management – not policy driven
Supporting value for money
Not supporting sustainable improvements
Service strategy in place – not backed by resources
Long Term
Financial planning
Short Term
Strategic planning
Long Term
Short Term

26. Strategic financial management in councils
SFM for us
Strategic financial management in councils
Delivering services with a reduced income (audit commission report September 2010)
Identifies the challenges:
Demand for local services is growing; while
Income from fees and charges is reducing
Decline in investment returns and interest rates
Govt aim to eliminate the structural deficit

27. Strategic financial management in councils
SFM for us
Strategic financial management in councils
Delivering services with a reduced income (audit commission report September 2010)
Audit Commission research shows:
Councils that take a long term view are well placed to respond proportionately
Those that have focused on a closer horizon are likely to find it harder to adjust

28. Strategic financial management in councils
SFM for us
Strategic financial management in councils
Delivering services with a reduced income (audit commission report September 2010)
Audit Commission recommends that:
Councils should review the relevance and the volume of services they provide and challenge the design, management and delivery of services
Councils use the financial management checklist to test their financial management approaches, and
use the value-for-money self-assessment to assess how prepared they are for the future

29. Strategic financial management in councils
SFM for us
Strategic financial management in councils
Delivering services with a reduced income (audit commission report September 2010)
Councils have to review their priorities and reassess their definitions of front-line services to fit their reduced income
Everyone needs to understand the financial impact of objectives, priorities and actions

30. SFM for us
Assess how well you are managing money in the changed economic circumstances
Identify improvements needed to achieve good outcomes
Using the spending review framework 9 questions as part of this assessment

31. SFM for us
Expecting and managing financial risks for the short, medium and long term
This can be done using financial and other information to base decisions on the impact, likelihood and potential financial effects of risks
Enables recommendations relating to contingency planning and (use of) reserves