The financial mechanism of the enterprise and its elements

The financial mechanism of the enterprise is a complex of arrangements for the organization of a resource management system in the field of finance. As the main strategic goal of creating the mechanism is determined by the improvement of economic indicators, indicating the maximization of profits.

In this regard, we can say that the financial mechanism of the enterprise is aimed at rational expenditure of funds. That is why any costs arising during the production process must be clearly justified and expedient.

The financial mechanism of the enterprise has some functional capabilities:

• Distributive;
• Providing;
• Control.

All of them act in concert and have a deep relationship. The distributive function presupposes the organization of such a mechanism that would fully implement the operational movement of funds from one counterparty to another. Equally important is the system of providing the company with the required amount of financial resources. Of course, in order to assess the effectiveness of the mechanism, the results of its activities should be closely monitored. As the most vivid example of such results, it is possible to note the revenue, that is, the amount received from the sale of products or services, or the cost price, that is, the value of the costs incurred in the release of the goods.

It is possible to allocate such elements of the financial mechanism:

1. Methods imply various ways of influencing economic and financial relations and regulating the accumulation and distribution of funds. An example of such is analysis, planning and forecasting, depositing and lending, and others.
2. The lever of financial activity includes all kinds of instruments with the help of which the direct impact on any aspect of the production process is carried out. The most striking levers are such indicators as profit, yield, interest rate, discount. In other words, these are all transactions by means of which the value of assets from one side of the organization increases and certain obligations arise from the partner company. It is customary to classify tools into primary and derivative ones. Primary presumes cash, investments in securities, liabilities to creditors and uncollectible receivables. Derivatives are those instruments that were formed from primary ones. These include futures and forwards, swaps and other currency contracts.
3. 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, resulting in the movement of monetary resources. The legislative framework presupposes the existence of the Tax Code, as well as a number of laws and regulations that establish the basic rules for the operation of legal entities or private entrepreneurs.
4. In modern conditions, the financial mechanism of an enterprise can not exist without the introduction of novelties in the field of information technology. Regular updating of information support is considered the key to a successful business, as development allows you to retain a leading position in the market of goods and services.

In addition, it is worth noting the main features of the company:

• Any organization has a specific structure and organizational 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 vested with certain obligations to the state, manifested in the form of tax payments to the budget and extra-budgetary funds.
• The enterprise carries out its activity on the principle of self-financing and self-sufficiency.