Develop Specific Financial Goals and Objectives
The financial health of any organization needs to have some real focus placed on it and it is certainly appropriate that specific financial goals and objectives be developed and focused on. First identify the key performance issues for your organization from a financial perspective. Then based on the key issues, identify performance targets and incorporate them into your goal(s). Generally, financial goals will address overall profitability, return on investment, return on equity, revenue growth, and overall financial strength of the company or some other pertinent aspect of the organization's financial stature. Here is an example of a financial goal focusing on overall profitability; Achieve a minimum 9 percent pre-tax net income. To bring greater focus to the financial stature of the company, develop some supporting objectives. Objectives are more specific and tend to be quantitative in nature with definitive time frames associated with them. Here are three examples; Reduce outstanding operating line debt to $1,250,000 by 12/31/99; Reduce inventory from 12/31/98 level by 10 percent by 12/31/99; Reduce A/R average collection period to 39 days by 12/31/99. These, in effect, become the company’s financial performance measures. By developing specific financial goals and objectives, greater clarity is realized in terms of understanding how the company is expected to perform. Operating units need to align their own goals with the overall goals to "encourage" their financial performance to mirror or better that of the organization as a whole.