Financial operations are an integral element of entrepreneurial activity necessary to ensure its stable operation. Each enterprise carries out various financial transactions, which is associated with its legal form and direction of activity. In the article, we consider the main types of financial transactions, examine their features.
What is finance?
This term began to be used much later than financial relations actually arose. The history of this concept originates from the slave system. The first procedures that are commonly called financial transactions are those transactions that were carried out with the aim of paying mandatory payments, fees, taxes.
Over the entire period of the existence and development of economic relations, there is a relationship between various areas of activity and interaction of subjects. Financial transactions alone cannot occur. This is the result of regular processes that determine the socio-economic and political development of society. Despite the fact that chronologically the first financial manipulations arose in parallel with statehood, modern relations in this area have long gone beyond tax obligations to the state.
Finance is a unit of calculation in the economic sphere that cannot be imagined without a variety of financial transactions. Enterprises that conduct business activities are engaged in raising funds on a commercial basis to increase trade, expand the service sector, develop new products, introduce modern technologies in production. Finance can also be placed on bank deposit accounts, invested in securities, investment projects of other entrepreneurs. Profit received as a result of financial transactions is distributed between business owners and other participants in economic relations.
The purpose of the money
Individuals and legal entities are required to pay taxes and other payments to the federal and local budgets; they have the right to purchase state and municipal securities. In addition, there are also reciprocal financial operations: the state pays social benefits, scholarships, provides subsidies, subsidies and other types of assistance, and finances public sector institutions that provide services to the population. All these operations are combined in cash.
Previously, the main function of money was considered to be their use as a medium of circulation, that is, a payment instrument and a unit of calculation when performing basic financial transactions based on purchase and sale transactions. Another function of money is funded. Its essence lies in the possibility of accumulation of funds and the correct formation of income, the distribution of revenues and the determination of costs.
Thus, the purpose of financial transactions is to actually distribute the revenues of some business entities and expenditure of others. The object of distribution, which is carried out by means of various payment actions, is the gross domestic product, which is an indicator of national welfare and living standards of the population. Thanks to financial transactions, it is possible to correctly distribute the funds received during the sale of goods or the provision of services by a legal entity or private entrepreneur.
GDP is a generalizing element in the distribution of income, including profits made by the state from foreign economic activity. During economic and financial operations, the gross domestic product indicator is used in the distribution, being, for example, a tax on the extraction of natural resources, therefore all financial transactions are carried out in monetary terms.
Varieties of financial transactions
At each enterprise, different types of financial transactions are performed. This is due to the direction of the company and its form of ownership. For example, banking institutions carry out transactions on lending, opening depositary accounts, issuing funds, etc. Firms whose activities involve the rental of vehicles, equipment and other facilities are directly related to leasing, and organizations whose main commercial area is collection debt instruments, use completely different financial instruments.
In addition, each business entity automatically takes part in monetary relations. Thus, financial transactions are any settlement actions within the enterprise or those in which customers, partners, and investors participate.
Forfaiting
This type of financial transaction involves the purchase of debt, which is expressed in the negotiable documentation of the lender, most often from banks. A financial transaction of this type assumes that the purchaser of the debt, referred to as forfeiter, accepts the obligation of the creditor to refuse to make claims to the debtor. In fact, it is this failure that is called forfeiting. As a rule, the purchase of negotiable obligations is carried out under conditions favorable to the forfeiter.
The principle of forfaiting is used not only in financial transactions of banks. Such a mechanism for fulfilling debt obligations is used in various transactions, including export agreements, when, for example, exporters provide foreign buyers with forfeiting in order to facilitate the speedy flow of cash to their accounts. As a forfeiting security, a bill of exchange is mainly used. It can be transferable or simple. With such securities, any monetary transactions are carried out quickly, without difficulties in settlements.
In addition to bills of exchange, a debt obligation issued in the form of a letter of credit may act as a forfeiting facility. Such a settlement document represents a bank order to conduct a credit financial transaction at the expense of reserve cash. As the accompanying documentation, freight waybills for the shipped goods are used. Payments are made to the bearer of the letter of credit, in which the amount of money is clearly defined. A letter of credit is used infrequently as a forfeiting facility, which can be explained by the complexity of the financial transaction, taking into account all the nuances (compliance with the terms, terms of the transaction, etc.).
The importance of syndicates in economic development
Syndication is a new direction in improving the mechanisms for conducting transactions on forfeiting markets. Under the syndicate means the union of several business entities. Associations of banking institutions most often resort to this trend. The process of combining creditors is carried out by voluntary agreement of all parties to the agreement. When forfeiting, financial transactions by banking organizations are carried out by mutual agreement, including the distribution of forfeiting securities on the allocation of shares for each of them. Basically, such securities are acquired by several forfeiters, however, when it comes to large sums of money, bills are distributed among the participants, each of which receives equal rights. This method prevents the free circulation of securities and minimizes the likelihood of their secondary sale.
It is worth noting that the legal status of such transactions is currently not defined, so in practice organizations rarely use this method of conducting financial transactions. The experts consider increasing financing volumes using the calculation of discount and floating interest rates to be the primary direction for improving the forfaiting market. From an economic point of view, it can be explained by the lack of stability in interest rates and a reflection of the unwillingness of banks to provide loans at fixed rates.
If we are talking about export sales based on floating rates, then this calculation mechanism helps to reduce benefits. As practice shows, primary forfeaters sell paper at a secondary market at a discount that adheres to the prevailing interest rate. In addition, the sale of goods is subject to the settlement of financial issues within the specified period, taking into account the subsequent change in interest rates. In fact, before the expiration of the bill, the end dates may change several times. Consequently, the transaction involves a high degree of risk to the forfeiter and can lead to additional obligations. Forfaiting transactions are especially carefully checked by auditors.
Franchising Features
If we consider this type of financial transactions in the broad sense, it is more correct to understand the use of a trademark or brand on a “lease” basis. The right to use a franchise is given by an agreement between the franchisor (seller) and the franchisee (buyer). The content of the transaction can be very different, include one simple or several difficult conditions indicating the smallest details of the use of the brand. The franchise agreement shall indicate the amount of deductions for the use of the trademark in the form of a fixed rate, a lump sum payment for a specific period or as a percentage of sales. If there is no requirement to make deductions in the contract, this means that the franchisee agrees to purchase a certain amount of goods from the franchisor, use its services, etc.
Separately, franchise agreements prescribe the terms of use of the brand, which may consist of requirements for the use of goods only in a particular industry, the use of equipment only in the manner required by the franchisor, up to the size, color of shelves, work clothes of sellers, etc.
Leasing concept
Leasing refers to the granting of the right to temporary ownership of real estate, a vehicle, equipment or other type of movable property, by transferring it for use for a specific or unspecified period for a fixed monetary compensation. Leasing is a model of financial relations in which it is proposed to lease an object belonging to one party to another party to the transaction. But most often, a leasing agreement is a tripartite transaction in which one of the participants is a leasing company. With the consent of the user, the company purchases equipment from the manufacturer, then gives it to the buyer for temporary use for a fee, and after the lease agreement the property becomes the property of the tenant.
Factoring as one of the areas
This term refers to the transfer by a factoring company of unfulfilled debt obligations, including invoices and bills, which were drawn up between counterparties in the sale of goods and the provision of services under a commercial loan agreement. According to the Convention on International Factoring, the result of a financial factoring transaction is considered satisfactory if at least half of the above requirements are met:
- preliminary conclusion of a loan agreement and lack of debt;
- accounting and tax accounting of the supplier;
- collection of financial debt;
- insurance of suppliers against credit risks.
Factoring customer service is considered the most effective for small and medium-sized businesses, as well as enterprises that are constantly experiencing financial difficulties due to the inability to timely repay debts to creditors and having restrictions on the choice of credit sources. However, not all organizations that are classified as small or medium-sized businesses have the opportunity to use the services of a factoring company. For example, the right to apply factoring does not apply to firms:
- with a large number of debtors;
- with debts to creditors;
- manufacturing non-standard or highly specialized products;
- construction offices that work with subcontractors in production.
Factoring financial and accounting operations are not performed on debt obligations of citizens, branches or structural divisions. These restrictions are due to the fact that in some cases factoring companies are not able to assess credit risks or the degree of benefit when performing an increased volume of work. The insurance risk that arises from the assignment of contractual requirements is also not amenable to objective assessment.
Currency Operations
The purchase and sale of foreign currency at the national currency rate occurs in the foreign exchange market. In Russia, its participants are commercial banking organizations. Financiers who talk about the foreign exchange market more often mean a mechanism for selling and exchanging currencies on international exchanges, rather than the process of buying and selling banknotes. To purchase foreign currency used to pay for import transactions, participants in foreign economic relations export revenue from official sales in rubles on the Moscow Interbank Currency Exchange and other official exchanges of the Russian Federation.
To control financial transactions in the foreign exchange market in Russia, the settlement and payment relations of foreign trade are not used. In countries where there are no restrictions on the conversion of the national currency, the main requirement for cash settlements is the presence of a personal account. Moreover, large companies with a significant volume of export-import operations open additional accounts in parallel with national currency accounts in order to minimize losses on exchange rate fluctuations. In countries where currency restrictions are established, the opening of a foreign currency account is aimed at controlling settlements with foreign partners and regulating this financial industry.
As already noted, the main participants in the foreign exchange markets that serve all forms of relations are commercial banking organizations. They make currency exchange, participate in investment financial transactions. The income account is made by buying and selling telegraphic money transfers not only in national but also in foreign currency at a special rate.
Swap - what is it?
This is one of the varieties of financial transactions in a bank. Translated from English, the word "swap" means "make an exchange." Thus, we are talking about transactions in the exchange of assets or liabilities between entities that have a currency expression. The purpose of a currency swap is to improve their structure, reduce risks and cost. Banking institutions make currency or gold exchanges. Banks resort to the interest rate swap method much less frequently. This set of financial transactions may include:
- acquisition and at the same time sale of currency;
- sale when making forward purchase of foreign currency;
- obtaining a cash loan in different currencies;
- exchange of debt denominated in national currency for obligations in foreign currency.
When performing a swap, the parties sign agreements, which for each of them have a different focus. Settlement dates may not coincide, but under any contract, the currency is purchased in exchange for another currency with delivery at a specified time.
Swap financial transactions relate to the types of report or deport - options for combinations of sale and urgent purchase of cash currency. An urgent transaction, during which the seller of the currency gives it to a banking institution and agrees to redeem it after a specific period, but at a higher rate, is called a report. This operation is especially beneficial to banks, since it involves making a profit due to the difference in the exchange rate: at the time of debt repayment, it will be higher. In fact, a report is a kind of loan from a bank secured by a currency, and the interest rate for using a loan is the difference between selling rates.
Unlike a report, deportation is a transaction that is carried out in the opposite way. To conduct this financial transaction, the investor buys currency at a banking institution, provided that it is sold after a certain period at a more favorable rate. , , . – , – . , . - :
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