Financial management in the enterprise

One of the most important components of any financial activity is the formation and use of monetary funds. Therefore, the management of the company's finances is an important part of the company's managerial system, which is connected with the adoption of investment decisions, which are based on relevant concepts and methods.

The main goal of financial management is to make a profit. At the same time, an enterprise can be quite profitable, but unstable. This leads to the fact that managers must maintain solvency constantly. Particularly important and complex is the task of making settlement activities with shareholders and owners. Moreover, financial management can have several goals, which are formed on the basis of stages of the life cycle of the firm, its competitiveness. However, the most effective goal is to satisfy the interests of investors and owners through increasing their welfare. This is possible due to the increase in the value of the company through the mechanism of formation and use of profit in the most effective way.

In order to manage the company's finances effectively, a number of principles were developed:

• First, legal and economic independence. The firm, regardless of the form of ownership, itself determines the costs, sources of cash flows and their direction for profit. For these purposes, the use of additional funds, for example, the acquisition of various securities, participation in the formation of the initial capital of other companies, deposit money into deposit accounts is possible . To date, independent firms must instantly adapt to changing external conditions and quickly draw up a strategic plan.
• Secondly, self-financing, which means satisfying the full payback of the costs needed for production and further implementation, as well as for the development of production. First of all, financial management is carried out through the accounting of all costs of the company, including the fulfillment of credit obligations.
• Thirdly, the material interest, which is determined by the profit. This criterion concerns the state in a broad sense, the collective and every employee of the enterprise - in a narrow one. It is provided with a stimulating system of taxation, an appropriate level of pay, etc.
• Fourthly, the material responsibility, which is determined by the availability of a reporting system for the results of monetary relations. For a particular firm, financial management on this principle is implemented through a system of penalties, fines, penalties. Moreover, this principle also consists in the fact that deterioration of the state of money turnover leads to the impossibility of uninterrupted operation. Responsibility of individual entities is realized through penal sanctions, loss of bonuses.
• Fifth, the use of financial reserves to ensure the security of risks. Any activity that is exclusively aimed at making a profit is connected with the possibility of risk occurrence. The latter, in turn, have an impact on financial performance.

Solving complex problems leads to the need for financial planning, as well as the formation of a budgeting system. The methods used to achieve these goals are determined by the financial policies of the company. So, for example, recently in the countries of the European Union, financial management is carried out according to the criteria aimed at achieving the greatest possible added value. Any method requires a specialist to use a wide range of skills and the use of deep knowledge.