Each enterprise has at its disposal finances, which should be directed to the formation of internal funds, operations with various production resources. This activity forms a special financial mechanism.
The financial mechanism of an enterprise is a system for managing internal finances with the aim of building effective financial relations and creating funds. This system affects the final results of production or other activities of the organization, reflects its monetary relationship with partner structures and consumers. At the same time, the financial mechanism of a particular enterprise is based on its local regulations, as well as legislative acts established by the state.
The following elements of the financial mechanism are distinguished:
- Financial methods and leverage.
- Financial assets and liabilities.
- Financial instruments.
- Legal support.
- Regulatory support.
- Information Support.
Financial methods are the methods of forming financial relations in an enterprise. This includes activities such as financial analysis and accounting, planning and forecasting, settlement system and financial control, financial regulation, lending and others. The listed methods, in turn, are based on special management techniques in the form of using loans and borrowings, setting interest rates, receiving dividends, etc.
Financial leverage includes income or profit, as well as dividends, discounts and interest. These are special instruments that have an impact on the increase in the financial assets of an enterprise. In contrast to this phenomenon, the partner party has financial obligations. Financial assets include cash or contracts to receive it, as well as shares in other companies. Each organization has an authorized and reserve capital, managing them in the ratio necessary to build effective activities.
Organizational financial liabilities are contracts for the payment of cash or the provision of other financial assets to other entities. As for financial instruments, they can be primary, secondary and derivatives. Primary ones cover cash and securities, secondary ones - accounts receivable and payable on current operations, and derivatives - elements of basic instruments in the financial departments of trading and industrial companies used in the banking sector, which include options, futures and forward contracts, interest and foreign exchange swaps.
The legal support of the financial mechanism is the legislation regulating entrepreneurial activity. Due to the complexity of the financial activities of large enterprises, it becomes necessary to regulate it at the state level. For this, by-laws are established on the regulation of the financial aspects of the establishment of entrepreneurial organizations, tax regulation and regulation of bankruptcy procedures for enterprises. This activity is also regulated by government decrees and presidential decrees.
The regulatory support of the financial mechanism includes internal instructions and regulations. This also includes tariff rates and norms, methodological explanations and instructions generated by the organization's management. Information support. financial mechanism is a continuous targeted selection of various informative indicators, due to which effective management decisions are made on the main aspects of financial activities. As the capital of the enterprise grows, more and more information data and tools (reports, quotes, archive structures, etc.) are required, the purpose of which is to increase the efficiency of the organization's activities.
