What Is Ethics in Financial Management?

Financial management is the management of asset purchase (investment), capital financing (funding), cash flow (working capital) in operation, and profit distribution under certain overall goals. Financial management is an integral part of corporate management. It is an economic management task that organizes corporate financial activities and handles financial relationships in accordance with financial laws and regulations and the principles of financial management. Simply put, financial management is an economic management task for organizing corporate financial activities and handling financial relationships.

The main contents include: financial objectives and functions, the concept of valuation, market risk and return rate, multivariate and factor valuation models, option valuation, capital investment principles, risks and actual options in capital budgeting, etc. ^[1]

Assets serve as the basis for the smooth development of various operating activities of enterprises. With the comprehensive reform of China's social and economic system, the scale of business operations has gradually expanded and the scale of assets has continued to increase, which has set new standards for enterprise asset management. Once asset management is not in place, many problems will inevitably arise. Based on this, this article first outlines the basic meaning of asset management and budget management. It analyzes the problems of enterprise asset management from three aspects: unclear division of labor, incomplete system, and irregular preparation. It combines asset management and budget management. The significance of the combination is to propose an effective combination of enterprise asset management and budget management. ^[2]

Financial management cycle

Financial control and financial budget are closely related. Budget is an important basis for control and control is a means to execute the budget. They form the financial management cycle of the enterprise.

The main links of the financial management cycle include:

(1) Make financial decisions, that is, formulate action plans for various financial problems of the enterprise, that is, make project plans.

(2) Formulating budgets and standards, that is, formulating plans and standards expressed by specific figures for various production and operation activities in the planning period, that is, formulating period plans.

(3) Recording actual data, that is, recording the actual capital circulation and turnover of the enterprise. It is usually an accounting function.

(4) The calculation should reach the standard, that is, the work level that should be achieved is calculated according to the changed actual situation. For example, "the standard cost of actual business volume", "the budget limit of actual business volume", and so on.

(5) Compare the standard with the actual, that is, compare the above two amounts and determine the difference to achieve the exception.

(6) Difference analysis and investigation, that is, conducting in-depth investigation and research on sufficiently large differences to discover the specific reasons for the differences.

(7) Take action, that is, take action according to the cause of the problem, correct the deviation, and make the activity develop according to the set goals.

(8) Evaluation and assessment, that is, the performance of the executor is evaluated and assessed based on the differences and their causes.

(9) Incentives, that is, rewards and punishments for executives based on the results of evaluations and assessments, in order to stimulate their enthusiasm for work.

(10) Prediction, that is, economic activity changes after incentives and actions are taken. It is necessary to re-forecast according to the new economic activity conditions to provide a basis for the next decision. ^[2]

Basic principles of financial management

Principle 1: Trade-offs between risk and return-additional risks need to be compensated for additional risks;

Principle two: the time value of money-today's dollar is more valuable than future dollar;

Principle 3: The measurement of value should consider cash rather than profit;

Principle 4: Incremental cash flow-only increments are relevant;

Principle 5: There are no particularly high-profit projects in the competitive market;

Principle 6: Effective capital market-the market is sensitive and the price is reasonable;

Principle 7: Agency issues-the interests of managers and owners are inconsistent;

Principle 8: Taxation affects business decisions;

Principle 9: Risks are divided into different categories-some can be eliminated through decentralization, and some are not;

Principle ten: Ethical behavior is to do the right thing, and moral confusion exists everywhere in the financial industry.

Financial management considerations

In modern enterprise management, financial management is a systematic project that involves a wide range of aspects, comprehensive and highly restrictive. It is a comprehensive management of decision-making, planning and control of capital movements through value forms. It is an enterprise management core content. The "Boss" magazine stated that in the financial management activities, some enterprise managers emphasized on the use of physical management of the value, but not on the comprehensive management of value; on the cost of production, on the cost control of funds; on current income, on risk control; on post-event analysis, but before the event Prevention, etc., has caused the disorder and disorder of the financial management of the enterprise, which has hidden risks for financial work. The more common problems are mainly the following aspects:

1. The budget was weak beforehand and the analysis was not in place after the fact. Many enterprise managers did not collect data beforehand for careful analysis and preparation of budgets, nor did they conduct strict assessment of budget completion during the implementation of events. Post-evaluation and analysis were not in place, which is also an important issue facing enterprises.

2. Informatization is not high and lacks financial innovation. In modern enterprise management, many companies' financial management models are limited by network technology. They adopt a more decentralized management model, which is not highly electronic. Financial information cannot be shared between superiors and subordinates. Regulatory information is lagging behind, working efficiency is low, and there is no development. Develop a financial management information system that can adapt to the e-commerce environment.

3. The financial structure is imperfect, and the organizational structure is unreasonable. Most corporate financial institutions have multiple intermediate levels and low efficiency; there are also some corporate managers who are not scientific enough in setting up financial institutions, and some do not even have special financial institutions.

4. The internal control system is imperfect and lacks risk management awareness. The financial operations of some enterprises are not standardized, powers and responsibilities are not in place, and basic financial management systems such as internal control systems are not sound. Some companies lack risk management and control mechanisms.

5. Expense management is not standardized and asset management is scattered. In terms of expenses, some enterprises are not strictly managed and have not established or implemented a "one pen" approval system. In terms of asset management, some enterprises do not regularly take stock of assets. The physical assets are not consistent with the register, and there are many loopholes in physical management and account management.

6. The cost accounting is extensive and the cost control is not strict. Some companies' cost accounting is very extensive, and it is not conducive to strengthen cost control to summarize the cost of various products. Some enterprise managers only focus on the cost control of the production process, and the control ability is low before and during the event, causing unnecessary waste. .

In financial management, it is important to avoid the above problems. Only strengthening financial management in daily business management will increase the competitiveness of the company, improve its ability to resist market risks, and expand corporate profits. Therefore, financial management is orderly and standardized. Is the prerequisite for sustainable development of the enterprise.

Financial management precautions

1. Establish a financial crisis early warning system. The enterprise financial crisis early warning system, as a low-cost diagnostic tool, can predict the signs of financial risks. When key factors that may endanger the financial status of the company appear, the financial crisis early warning system can issue a warning to remind the operator to prepare or take early Measures to reduce financial losses and control the further expansion of financial risks. Operators and managers of enterprises should strengthen the analysis of financial risk indicators at any time, adjust corporate marketing strategies in a timely manner, reasonably dispose of non-performing assets, effectively control the deposit and loan structure, moderately control the amount of capital investment, reduce capital occupation, and also pay attention to accelerating inventory and The revolving speed of accounts receivable enables it to be converted into monetary assets as soon as possible, reducing or even eliminating bad debt losses, accelerating the company's ability to realize cash, and increasing capital utilization.

Measures

2. Establish awareness of financial risks. Enterprises should always pay attention to changes in national macro policies, changes in national industrial policies, investment policies, financial policies, and fiscal and tax policies. Management should take early action on possible negative effects of corporate investment projects, operating projects, borrowing funds, and operating costs. Forecast so that action can be taken in a timely manner. Management should pay attention to the changes in the market supply and demand relationship, and prevent the increase of corporate costs and capital requirements to increase financial costs and interruption of the capital chain, resulting in financial losses from operating losses or insolvency. Business operators must adjust their business strategies and investment directions in a timely manner in accordance with changes in policy factors to prevent the company from entering a financial crisis. In terms of sales, we focus on the production and sales convergence, use sales to set production, adjust marketing strategies in a timely manner, actively explore new channels, cultivate new users, accelerate payment collection, strengthen business integration, and improve the overall level of risk resistance of enterprises.
3. Establish an internal supervision system for enterprises. Internal audit control is an independent evaluation system on whether the internal economic activities and management systems of a company are compliant, reasonable and effective. In a sense, it is the re-control of other controls. Internal audit should be relatively independent in the enterprise, and should be independent of other business management departments, to ensure that important issues found by the audit department can reach the management and management. For non-qualified enterprises, external audit institutions and personnel may be hired to conduct internal audits.
4. Establish an internal control system. It is necessary to establish an enterprise's internal control system and accounting control system, such as the control of the company's monetary funds, purchase and payment control, sales and collection control, and external investment control. Implement internal containment system to separate and restrict mutually incompatible positions; establish avoidance system; immediate family members of the person in charge of accounting are not allowed to act as cashiers; unauthorized misappropriation and lending of monetary funds are strictly prohibited; income is not allowed to be recorded; one person is strictly prohibited All seals required for payment; the same department or individual cannot handle the entire process of purchase and payment, sales and collection business; sales income must be recorded in time.
Financial risks exist in all aspects of financial management. Mistakes in any link may bring financial risks to the enterprise. Operators, managers and financial personnel of the enterprise must integrate risk prevention throughout the financial management work. Understand the real situation of the company's financial operations in a timely manner, optimize the financial structure, thereby avoiding risks, improving poor operating conditions, and realizing goals to ensure the survival and development of the company. ^[2]