The financial mechanism of the enterprise is a set of measures to organize a resource management system in the field of finance. As the main strategic goal of creating the mechanism, the improvement of economic indicators indicating profit maximization is determined.
In this regard, we can say that the financial mechanism of the enterprise is aimed at the rational use of funds. That is why any costs incurred during the production process should be clearly justified and appropriate.
The financial mechanism of the enterprise has some functionality:
- distribution;
- providing;
- control.
All of them act in concert and have a deep relationship. The distribution function involves the organization of such a mechanism that would fully carry out the operational movement of funds from one counterparty to another. The system of providing the company with the required amount of financial resources is no less significant . Of course, to evaluate the effectiveness of the mechanism, the results of its activities should be carefully monitored. As the most striking example of such results, we can mention the revenue, that is, the amount received from the sale of products or services, or the cost, that is, the value of the costs incurred in the release of the goods.
We can distinguish the following elements of the financial mechanism:
- Methods involve various ways of influencing economic and financial relations and regulating the process of accumulation and distribution of funds. An example of such is analysis, planning and forecasting, deposit and lending, and others.
- The lever of financial activity includes all kinds of tools, with the help of which a direct impact on any aspect of the production process is carried out. The most striking levers are indicators such as profit, profitability, interest rate, discount. In other words, these are all operations through which an increase in the value of assets by one organization and the emergence of certain obligations of a partner company occur. It is customary to classify instruments into primary and derivative. Primary funds include cash, investments in securities, liabilities to creditors and uncollected receivables. Derivatives are those instruments that were formed from primary ones. These include futures and forwards, swaps and other foreign exchange contracts.
- One of the main elements of the financial mechanism is the legal framework, which is the main regulatory document of all relations in terms of concluding transactions and conducting operations, which results in the movement of cash resources. The legal framework presupposes the presence of the Tax Code, as well as a number of laws and regulations that establish the basic rules for the functioning of legal entities or private entrepreneurs.
- In modern conditions, the financial mechanism of the enterprise cannot exist without the introduction of new products in the field of information technology. Regular updating of information support is considered the key to a successful business, since development allows you to maintain a leading position in the market of goods and services.
In addition, it is worth noting the main features of the enterprise:
- Any organization has a specific structure and legal form.
- A company engaged in the production of goods or the provision of services is the main link in the chain of products to the consumer.
- Each legal entity is endowed with certain obligations to the state, manifested in the form of tax payments to the budget and extra-budgetary funds.
- The company operates on the principle of self-financing and self-sufficiency.