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Financial Optimization
Financial optimization is the process of ensuring business funds are allocated most cost-effectively. This could mean spending more in the short term to enjoy savings later down the line. At times, it could also involve running a product at a loss to engage more customers, boost brand loyalty, and increase the sale or uptake of future products or services. One example of financial optimization is switching to lightbulbs and heating technology that save energy. Over time, these devices will result in cost savings for businesses.
What Small and Midsize Businesses Need to Know About Financial Optimization
SMBs that keep accurate records of costs, expenses, and forecasts have the best chance at effective financial optimization. Financial optimization helps SMBs maximize profits while also providing the added benefit of making an accountant’s job easier in terms of taxes and financial modeling.
Related terms
- Tokenization
- ROIT (Return on Information Technology)
- SAC (Subscriber Acquisition Cost)
- Energy Trading and Risk Management (ETRM)
- Chief Revenue Officer (CRO)
- Core Banking System
- Record to Report (R2R)
- Fintech
- Financial Management System (FMS)
- Business Capability Modeling
- Capital Allocation
- Compound Annual Growth Rate (CAGR)
- Net Present Value
- Hedge Fund
- Gateway
- Selling General and Administrative (SG&A) Expenses
- ROE (Return on Equity)
- Financial Planning and Analysis (FP&A)
- Dollar-Cost Averaging (DCA)
- Procure-to-pay Solution
