Financial management as a system and mechanism of finance management

Financial management - financial management of business entities, financial analysis, planning, as well as finding and distributing capital. It covers all major areas of finance and applies to all segments of the financial market. Financial management is also a type of management activity. It is a system of influence of the subject of financial management (financial manager) on its object in order to improve the latter. Finance planning is the planning of all income and areas of spending money to ensure the development of the enterprise. The planning functions may be given different meanings depending on the type and size of the enterprise.

Forecasting is the development for the long term of changes in the financial condition of an object as a whole and its various parts. Forecasting can be carried out both on the basis of transferring the past into the future, taking into account an expert assessment of the trend of change, and direct prediction of changes. The organizational function provides a systematic approach to the organization of cash flows and funds. The function of organizations in financial management is to bring together people who jointly implement a financial program based on some rules and procedures.

Regulation - the impact on the control object, through which the state of stability of the financial system is achieved in the event of a deviation from the specified parameters. It covers ongoing measures to eliminate deviations from schedules, planned targets, established norms and standards. Incentives in financial management are expressed in the motivation of financial service employees to be interested in the results of their work. The control function of financial management reflects the state of the resource cycle, the efficiency of management, provides control over management decisions in the field of finance, providing for the collection of necessary information, analysis of factors. The essence of financial management can be defined as a system of principles and methods for the development and implementation of managerial decisions related to the formation, distribution and use of financial resources of an enterprise and the organization of its cash flow. Effective financial management of the enterprise is ensured by the implementation of a number of principles, the main of which are the following: Integration with a common enterprise management system. In whatever area of activity of the enterprise, a management decision is made, it directly or indirectly affects the formation of cash flows and the results of financial activities. The complex nature of the formation of managerial decisions. All management decisions in the field of formation, distribution and use of financial resources and organization of the company's cash flow are closely interconnected and have a direct or indirect impact on the results of its financial activities.

High dynamism of management. High dynamism should be inherent in financial management, taking into account changes in environmental factors, resource potential, forms of organization of production and financial activities, financial condition and other parameters of the enterprise’s functioning. Variability of approaches to the development of individual management decisions. The implementation of this principle implies that the preparation of each managerial decision in the field of the formation and use of financial resources and the organization of money circulation should take into account alternative options for action. If there are alternative projects of management decisions, their choice for implementation should be based on a system of criteria that determine the financial ideology, financial strategy or specific financial policy of the enterprise. Focus on the strategic goals of enterprise development. No matter how effective these or those draft management decisions in the field of financial activity in the current period seem, they should be rejected if they conflict with the mission of the enterprise, the strategic directions of its development, and undermine the economic base for the formation of high amounts of own financial resources from internal sources in the upcoming period.

Effective financial management, organized taking into account the above principles, allows you to form the resource potential of high growth rates of the enterprise’s production activity, ensure constant growth of equity, significantly increase its competitive position in the commodity and financial markets, and ensure stable economic development in a strategic perspective. So, financial management implements a complex system of managing the aggregate-value value of all the funds involved in the reproduction process, and capital, providing financing for entrepreneurial activity. The main objective of financial management is to maximize the welfare of the owners of the enterprise in the current and future period. This goal receives concrete expression in ensuring the maximization of the market value of the enterprise, which realizes the ultimate financial interests of its owners. Describing the foregoing main goal of financial management that is generally accepted in a market economy, it should be noted that it conflicts with the very widespread opinion that the main goal of financial activity of an enterprise is to maximize profit.

The tasks of financial management include finding the optimal balance between short-term and long-term development goals of the company and decisions made in short-term and long-term financial management. For example, in the short-term financial management, for example, decisions are made on the combination of goals such as increasing profits and increasing the market value of shares, since these goals can counter each other. In a long-term financial management focused on the same ultimate goals, first of all, risk and uncertainty factors are taken into account, in particular, when determining the estimated price of shares as an indicator of return on invested capital. The task of financial management is to identify priorities and find compromises for the optimal combination of the interests of various business units in the adoption of investment projects and the choice of sources of financing. Ultimately, the main task of financial management is to make decisions to ensure the most efficient movement of financial resources between the company and its sources of financing, both external and internal.

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