What's the difference between strategic and financial planning?

The Pros and Cons of Strategic and Financial Planning

Perhaps the way strategic planning can be most invigorating to a company is that it gets everybody on the same page, following a precise, singular purpose that is clearly presented in writing. This in turn creates a company-wide focus in the long-term toward specific goals. It helps the organization grow, of course, but even in some not-so-obvious ways. The strategic plan can be used as a litmus for hiring new employees -- passion about the mission statement can determine which new hires are a great fit for the company and its long-term goals.

It's also very valuable to morale and company culture to have a well thought-out, clearly defined purpose, because everyone can carve out a unique niche in that environment. And the more intricate a strategic plan, the more that it may be itemized and quantified in terms of allocation of employees, cash, facilities and investments, which segues nicely into financial planning territory.

The cons of a strategic plan can present themselves when financial resources are low. When this happens, morale and purpose might become hard to come by. If times are good for the company, it's easy to work toward what is essentially just a "nice idea." However, if things get muddled, the strategic plan may grow out of focus.

In financial planning, every dollar counts (especially when the future is unclear), so foresight equals preparation and protection. Anticipating the future allows a company to prepare for things financially. Good financial planning helps a company maximize cash flow with pinpointed resource allocation and investment strategies. On the other hand, that means money can become tied up in long-term investments and investment strategies And if a company's strategic plan or financial plan ends up being woefully wrong, it may not have the money it needs to immediately rectify a problem.

It's much harder to convince shareholders and stakeholders of a company how to properly execute the company's finances; it's easier to get everyone behind a strategy, because it's goal-oriented, not cash-oriented. But the two can be integrated.