Functions of Enterprise Finance

The finances of enterprises as an economic category are manifested in the functions they perform.

Enterprise finance performs the following functions:
- distributive (stimulating);
- control.

The distributive function of finance at the enterprise is that with their help all monetary incomes and funds available at the enterprise are formed and used.

Performing a distributive function, finance serves the reproduction process as a whole, ensuring its continuity and influencing all its stages. In addition, the correct distribution of funds has a stimulating effect on the improvement of the enterprise.

The ability of finance to quantitatively display the course of the reproductive process allows you to control it. The basis of the control function is the movement of financial resources in both stock and non-stock forms. The control function is implemented in two ways:
- through financial indicators in accounting, indicators of statistical and operational reporting;
- through financial impact.

The control function of enterprise finance is implemented in the following main areas:
- control over the correct and timely transfer of funds to funds of funds for all established sources of financing;
- control over compliance with the specified structure of funds of funds, taking into account the needs of industrial and social development;
- control over purposeful and efficient use of financial resources.

To implement the control function of the enterprise, it develops standards that determine the size of cash funds and the sources of their financing. The targeted and efficient use of financial resources is controlled on the basis of the planned and reporting estimates for the formation and expenditure of funds.

In world practice, the budgets of enterprises have become widespread. The main meaning of budgeting is that each division of the enterprise compares the amount of resources with the needs of servicing the production and sale of goods, the proposals of each division are considered by a higher management structure, consolidated and adjusted in accordance with common goals and capabilities. The budget also allows you to implement the planning function.

(Rostovenergo draws up a budget on a monthly basis: the revenue part is formed from paid products, the expenditure part - from marketable products.)

The control function of enterprise finance also includes:
- control over the receipt of proceeds from the sale of products and services;
- control over the level of self-financing, profitability and profitability.

The following principles underlie the organization of enterprise finance:
- independence in the field of financial and economic activity;
- self-financing;
- interest in the results of work;
- responsibility for these results;
- formation of financial reserves;
- division of funds into own and borrowed;
- priority of fulfillment of obligations to the budget and state off-budget funds;
- financial control over the activities of the enterprise. As part of the financial relations of enterprises, the following groups of relations are distinguished:

- with counterparties - regarding the formation of primary income, the formation and use of trust funds for on-farm purposes (authorized capital, production development fund, incentive funds, etc.);
- with enterprises - about the distribution of finances. At the same time, the movement of financial resources is carried out in a non-fund form (payment and receipt of fines in case of violation of contractual obligations, making various share contributions, participating in the distribution of profits from joint activities, acquiring securities of other enterprises and the state, receiving dividends on them, etc.);

- with consumers of products - entering into contacts with them, enterprises independently choose the form and type of contracts, determine the conditions for fulfilling obligations and the procedure for imposing sanctions, set prices for their products and services and evaluate the validity of suppliers' prices. These factors significantly affect the final financial results;
- with insurance organizations - regarding various types of compulsory and voluntary insurance;

- with the banking system - regarding settlement and cash services in connection with obtaining and repaying loans, paying interest, as well as providing banks for temporary use of free cash for a certain fee;
- with the state - regarding the formation and use of budgetary and non-budgetary funds. This group of monetary relations is implemented through the introduction of various taxes, fees, contributions, etc. into the budget and off-budget funds. On the other hand, budget financing of the non-productive sphere, targeted programs, etc. is carried out;
- with higher management structures - "vertical" and "horizontal" relationships regarding intra-industry redistribution of financial resources.

These groups of monetary relations make up the whole content of the finance of enterprises, which are financial relations associated with the formation and distribution of cash income and savings from business entities and their use to fulfill obligations to the financial and banking systems, to finance current costs and expenses under an extended reproduction, social security and material incentives for workers.

The financial mechanism consists of five interrelated elements that contribute to the organization, planning and stimulation of the use of financial resources:
- financial methods, financial leverage, legal, regulatory and information support.
- Financial methods are ways of influencing financial relations on the economic process, which operate in two directions: through the management of the movement of financial resources and through market relations related to the comparison of costs and results, material incentives and responsibility for the efficient use of funds.
- The impact on market relations is due to the fact that the functions of finance in the sphere of production and circulation are closely related to commercial calculation - this is a comparison in monetary (value) form of costs and results of financial and economic activities.
- The purpose of applying commercial calculation in the most general form is to obtain maximum profit at minimum cost, although goals may change in different periods of the enterprise's activity. In foreign practice, the requirement to commensurate the size of capital invested in production with the results of activities is denoted by the term "input-output". The action of financial methods is manifested in the formation and use of monetary funds.

- Financial levers are methods of action of financial methods.
- Legal support for the functioning of the financial mechanism includes legislative acts, resolutions, orders and other legal documents.
- Regulatory support for the functioning of the financial mechanism - these are instructions, regulations, norms, tariff rates, guidelines, explanations, etc.

- Information support for the functioning of the financial mechanism is associated with obtaining various economic, commercial, financial and other information. Financial information includes information about the financial stability and solvency of partners and competitors, prices, rates, dividends, interest on the commodity, stock, foreign exchange markets, information about the state of affairs on the exchange and over-the-counter markets, information about the financial and commercial activities of business entities, etc. Possession of information helps to assess the situation in the markets. Various information (for example, information about suppliers, buyers, etc.) can be one of the types of intellectual property (know-how) and be made as a contribution to the authorized capital of the enterprise.

The Concept of "Financial Mechanism" of an Enterprise, its Composition, Structure and Development

Financial management of the enterprise is carried out with the help of a financial mechanism.

Financial mechanisms and instruments should be understood as bills, securities and transactions with them, electronic, investment and credit money, depreciation rates and forms of payment, credit and lending, insurance payments, interest and dividends, depreciation rates, taxes and taxation, grants, subventions , forms of financing and the financial mechanism of an enterprise is a system for managing the finances of an enterprise in order to achieve maximum profit.

The financial management system includes: financial methods, financial instruments, legal support, information and methodological support for financial management.

Financial methods are - financial planning, fin. accounting, financial analysis, financial regulation and financial control.

In accordance with International Accounting Standard 32 “Financial Instruments: Disclosure and Presentation” A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or capital instrument (ie equity) for another.

A financial asset may be in the form of: cash, a contractual right to receive cash, or another financial asset from another entity.

A financial liability is any obligation that is contractual: to deliver cash or another asset;

Operations with financial instruments are always accompanied by financial risks. Information support allows users of financial statements to assess the degree of riskiness of financial instruments.

Consider the main types of financial risks.
- Price risk includes not only potential losses, but also potential profits. Price risk is subdivided into currency risk, interest rate risk and market risk.
- Currency risk - the risk that the value of a financial instrument changes as a result of changes in the exchange rate of a foreign currency.
- Interest rate risk – the risk that the value of a financial instrument will change as a result of changes in market prices, regardless of what factors cause these changes.

-Market risk - the risk that the value of a financial instrument will change as a result of changes in market prices, regardless of what factors cause these changes.
- Credit risk is the risk that one of the counterparties involved in a financial instrument will not be able to liquidate an obligation and cause losses to the other party.
- Liquidity risk, or financing risk, is the risk that an entity will encounter difficulty in raising funds to pay its obligations under a financial instrument. It may arise from an inability to quickly sell a financial asset at a cost close to its fair value.
- Cash flow risk is that the amount of future cash flows associated with a monetary financial instrument will fluctuate.

The cost of production and sales of products. Revenues from sales. The costs of production and sale of products are classified according to the accounting attribute, according to the method of attribution per unit of output, according to the degree of cost homogeneity.

The distribution of enterprise costs according to the accounting attribute is determined by the current legislation and is the basis for determining the legal framework. The state establishes certain principles and rules according to which taxpayers are obliged to keep records of the costs of production and sale of products (works, services), regulates the procedure for their accrual and write-off, and establishes the sources of their coverage.

The cost of production includes the following groups of costs:
- production;
- managerial;
- commercial;

and financial costs are:
- contributions to the Pension Fund, Social Insurance Fund
- Compulsory Medical Insurance Fund;
- payments for voluntary insurance of means of transport, property;
- the cost of paying interest on bank loans received
- (with the exception of loans related to the acquisition of fixed assets, intangible and other non-current assets) provided to suppliers;
- the cost of paying interest on budget loans (except for loans issued for investments and conversion activities)
- payments for compulsory types of insurance;
- taxes, fees, payments and other mandatory relations;
- costs of certification of products and services in the field of fire safety.

Revenue is the main source of formation of the enterprise's own financial resources. It is formed as a result of the activity of the enterprise in three main areas:
- main;
- investment;
- financial.

Revenue from core activities is in the form of revenue from the sale of products. Revenue from investment activities includes the result from the sale of non-current assets, the sale of securities. Revenue from financial activities includes the result of the placement of bonds and shares of the enterprise among investors.

Two methods of reflecting revenue from product sales are legally fixed:
- for the shipment of goods and presentation of settlement documents to the counterparty - the accrual method.
- As payment - cash method.