What Is Internal Finance?

Internal financial control is a general term for a series of methods, technologies, procedures, and concepts that scientifically regulate, constrain, and evaluate financial activities using the basic principles and methods of cybernetics, with a view to achieving the intended goals of financial activities.

Internal financial control

Right!
Internal financial control is a general term for a series of methods, technologies, procedures, and concepts that scientifically regulate, constrain, and evaluate financial activities using the basic principles and methods of cybernetics, with a view to achieving the intended goals of financial activities.
Chinese name
Internal financial control
Meaning
Use the basic principles and methods of cybernetics
Form
Scientific regulation of financial activities
Types of
Financial Control
1. Internal financial control is the specific application of cybernetics in corporate financial activities. Its theoretical basis is cybernetics, not "
(I) Relationship between internal control, accounting control and financial control
Internal control, also known as the internal control system, was published in a special report entitled "Internal Control, Coordination System Elements and Their Importance to Management Authorities and Independent and Fair Practice Accountants" prepared by the Audit Committee of the American Institute of Certified Public Accountants in 1949. The definition of internal control is: "Internal control includes the design of the organization and all coordination methods and measures adopted within the enterprise. It is designed to protect assets, check the accuracy and reliability of accounting information, improve operating efficiency, and promote established management policies. Implementation. "This definition emphasizes that internal control is not limited to controls that are directly related to the accounting and finance departments, but also includes budget control,
1. Internal financial control is the core of modern enterprise financial management
The content of the financial management system has different expressions from different perspectives: from the analysis of financial elements, the content of financial management includes assets, equity, income, cash flows, financial risks, etc .; from the analysis of management, financial management includes financial forecasting, financial Decision-making, financial control and financial analysis; from the analysis of the fund movement process, financial management includes fund raising, capital investment, capital operation, income distribution, etc. Regarding what is the most core part of the above contents, there are different views in the theoretical world. The more concentrated views are: financial decision-making as the core; capital structure decision-making in the fund raising process, and investment in the use of funds Dividend decisions on decision-making and fund allocation are at the core. The author advocates internal financial control as the core of corporate financial management for the following reasons:
Modern enterprise management is mainly based on the theory of organizational behavior of management, which solves the conflicts of interest and coordination among various actors in the enterprise, and between the enterprise and external interest groups, that is, resolves the differences between different management subjects or interest subjects. Contractual relationships, so as to coordinate the responsibilities, rights and interests of financial actors (such as shareholders' meetings, boards of directors, operators, financial managers, creditors and other interested groups) in a management system. Corporate finance mainly belongs to the category of management. It takes system management as its main feature, solves the asymmetry of incentives and constraints of various actors in corporate management from the financial system, and coordinates and guides the financial activities of various departments and units. Achieve overall corporate goals. The task of internal financial control is to integrate individual, decentralized financial actions through the adjustment, communication, and cooperation to jointly pursue the financial goals of the enterprise. Therefore, using internal financial control as the core of an enterprise's financial management system is feasible for both the decision-making level (investors) and the executive level (operators).
As far as the investor is concerned, the goal of its internal financial control is to maximize the financial value of the enterprise. It is necessary to balance agency costs and financial benefits. The object of internal financial control is the operator. Through internal financial control, they are prevented from being lazy and irresponsible. Deviate from the established financial goals of the investor and obtain wealth from the company by improper means; for the operator, the focus of internal financial control should be built on internal financial control measures that ensure the realization of the financial goals of the investor, such as short-term financial Budget control, capital flow and stock control.
2. Internal financial control is the guarantee for the realization of corporate financial plans
The purpose of corporate financial management is to promote the realization of corporate financial planning. To ensure the realization of corporate financial plans, it is necessary to monitor and adjust the implementation process of corporate financial plans. At the same time, the financial plan of an enterprise is made before the start of financial activities. Because the factors affecting financial activities are very complex and changeable, it is difficult to make the financial plan of the enterprise seamless and often has some shortcomings. And all of this can only be found during the control of financial activities, and adjustments can only be made through the control of financial activities. Therefore, strengthening the internal financial control of an enterprise is an important guarantee for the positive and reliable financial planning of an enterprise.
On the other hand, internal financial control is a key link in achieving the financial management goals of an enterprise. In financial management, if it is limited to determining reasonable decisions and formulating practical financial budgets without controlling the actions of implementing budgets, the predetermined financial goals are difficult to achieve. In a certain sense, financial forecasting, decision-making and budgeting are the direction, basis and planning measures for financial control, and financial control is the implementation of these plans. Without control, any forecasting, decision making, and budgeting is useless.
3. The role of internal financial control in practice
In market economy management, it is very necessary for enterprises, governments and even the whole society to establish and continuously improve the internal financial control system of enterprises. Throughout the world, many successful companies regard internal financial control as important to life as blood, and strengthen internal financial control as a secret weapon for company success. However, some companies have caused huge losses and even bankruptcy due to neglecting internal financial controls. The "fall" of the Giant Group still makes us remember even more. The reasons for the collapse of the Giant Group are various. Chairman Shi Yuzhu said in a sad interview in an interview with reporters: "The most important reason is the fickle and chaotic internal management The direct reason is the lack of experience in financial operations and financial control, and the ineffective use of financial leverage. "
It can be seen that internal financial control plays an important role in ensuring, promoting, supervising, and coordinating the economic control system of an enterprise. Strengthening the internal financial control of an enterprise has become the need for the survival and development of the enterprise itself. In particular, after China's entry into the WTO, the domestic market is in line with the international market, market competition will become more intense, and the pressure on the survival of enterprises will increase, all of which put forward urgent requirements for enterprises to strengthen internal financial control.

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