Financial control as an element of management of finance and state financial regulation

In modern conditions financial control is becoming increasingly important for the organization of effective management of financial resources of the state, enterprises, organizations, and individuals. Financial control is not only an element of theory of finance or an integral part of management of finance of the state, legal entities and individuals, but also an important element of state financial regulation carried out by state authorities. Financial control is exercised over the observance of current financial legislation, the appropriateness of incurred expenses, the economic efficiency of financial and business operations, and allows assessing how effectively resources are used to achieve the goals and objectives of the development strategy of an economic entity.

The concept of “financial control” is closely related not only to such terms as “finance” and “control”, but also “management of finance” and “government financial regulation”. Moreover, financial control is an integral part of management of finance and state financial regulation. We can consider the relationship between these concepts by answering some questions.

What is finance? The state represented by state authorities of different levels, legal entities, including commercial enterprises, nonprofit organizations, and individuals form various money relations with other economic entities. These money relations are connected with formation, distribution, and use of centralized and decentralized money funds. Each economic entity can form one or more money funds in accordance with the volume of available money resources and its current and future goals. These money relations are called financial relations, and their combination or system forms a category of finance.

Thus, finance is a system of money relations on the formation, distribution and use of money funds of economic entities to achieve the planned goals and objectives. Finance is an important economic category and permeates all sectors of the economy and the social sphere, almost all aspects of the activities of the state, enterprises, organizations and individuals and covers all economic or business processes carried out by economic entities [1, P. 13].

What is management? The effective functioning of economic entities is linked with management, which can be interpreted from different points of view. The category of management has following characteristics [2, P. 66]:

‒ management as a science is a system for creating, systematizing and disseminating knowledge about how to carry out management activities in the form of concepts, theories, principles, methods, methods, and forms of management;

‒ management as an art can be described as the ability to effectively and efficiently apply the data of management science in a specific situation;

‒ management as a function is implemented in a targeted impact on people and economic objects, carried out with the aim to direct their actions to obtain the desired results;

‒ management as a process is a set of management actions that ensure the achievement of goals by transforming incoming resources into the corresponding result at the output;

‒ management as an apparatus can be represented as a set of organizational structures and people ensuring the use and coordination of all the resources of the respective systems to achieve their goals.

Thus, management is a focused and continuous process of influence of the subject of management on the object in order to create an effectively functioning system based on informational links and relations. Management covers all aspects of the functioning of economic entities, including the organization of financial relations and the use of the financial resources of economic entities.

What is control? Control is an integral element of the management system, through which the entity managing the system receives complete and accurate information about the actual state of the control object and can make effective decisions on its management. Control can be represented as [3]:

– an activity or function of various Supervisory authorities;

– a function of the control system;

– a system of monitoring, comparison, verification and analysis of the functioning of the managed object in order to identify deviations from the accepted standards;

– a set of activities carried out by the Supervisory authorities to verify business transactions;

– a tool to reduce the risk of;

– a process to ensure that the organization achieves its goals;

– an integral part of the regulatory system;

– a form of feedback through which the control system receives the necessary information about the actual state of the managed object and the execution of management decisions.

What is management of finance? In the theory of finance, management of finance combines the basics of management theory and finance theory. It studies the impact of state authorities and management bodies of enterprises and organizations and individuals on financial relations (financial resources) with the aim of obtaining a certain result, the implementation of functions and tasks of the state, legal entities and individuals. Management of finance is a system of forms, methods and techniques by which money turnover and financial resources are managed. In the financial management process, the management bodies mainly perform the following functions: financial planning, operational financial management, and financial control [4, P. 541].

What is state financial regulation? In a market economy, the state:

‒ forms the legal framework for the functioning of the economy and guarantees the implementation of adopted laws and other regulatory documents;

‒ determines the conditions for the functioning of various economic entities:

‒ seeks to overcome the negative effects of cyclical fluctuations in the economy, resulting in the loss of a significant proportion of the financial resources of economic entities;

‒ establishes a system of taxes, mandatory payments, government procurement and other methods of regulating the activities of economic entities.

State financial regulation is the impact on economic and social processes aimed at preventing possible or eliminating existing imbalances, ensuring the development of advanced technologies and social stability, by concentrating financial resources in some market segments and limiting the growth of financial resources in others [1, P. 120].

What is the relationship between the concepts of “finance”, “management of finance”, and “state financial regulation”? Finance is a set of money relationships between economic entities on the formation, distribution and use of money funds; management of finance ‒ the impact of relevant authority bodies of the state, enterprises or individuals on the financial relations and financial resources of economic entities to obtain a certain result, and state financial regulation ‒ the impact on various processes using certain tools and methods.

What is financial control as a part of management of finance and state financial regulation? Financial control is a multidimensional concept and can be viewed as a part of control, management, financial management, and state financial regulation. It is an activity or function of various authority bodies and a system for monitoring the financial and economic activities of a controlled object. Financial control is an important element of financial management of the state, legal entities and individuals, covers all processes related to the organization of financial relations during the formation, distribution and use of financial resources of all economic entities, is carried out by specially created bodies, structures and departments of legal entities to verify compliance with all economic subjects of regulatory legal acts of financial and economic legislation and financial discipline [3].

The need for financial control is confirmed by its great importance in the development of the economy and the social sphere, including:

‒ ensuring quality and effective management of the activities of economic entities, their compliance with the norms of financial and other legislation;

‒ protection of interests of all economic subjects, including both the state authorities, and enterprises, organizations, and individuals;

‒ facilitating the implementation of directions of state financial, social, monetary and credit policy, carrying out reforms in all spheres of the economy and social life;

‒ identification of internal reserves for the use of financial resources by all economic entities;

‒ creating conditions for improving financial balance and sustainability in all areas of the financial system of the state.