STATE TO SUPPORT THE FINANCIAL MANAGEMENT OF ENTERPRISE

By Dr. Revaz Kakulia

All of the employed at managing board of each industrial subject are related to decision making for formation and utilization of financial resources on all levels of operation, which logically requires the knowledge and analyze of principles of finance management.

None of managers in financial and industrial business can achieve the success, if not familiar with the theory of finance and analyze of technical and financial patterns of industrial business.
Planning the financial streams and analyzing the production financially should take an essential role in implementing the industrial and production management in terms of economy in transition. For now, when the industrial subjects have already acquired the independence for formation as those, it’s impossible to run the enterprise – to maximize the profit – without planning and analyzing the financial streams. Financial management, with its tools, gives the opportunity to family farm, industry, enterprise, company and corporation owners and managers to regulate factually achieved economic results in time and rapidly take the measures for normal flow of financial processes.
The manager that is responsible to the effectiveness of financial decisions owes to scrutinize financially before concluding, which requires relevant utilization of analyze technique, tools, financial theory and financial management principles. Otherwise, success is unimaginable. Each financial decision, as a rule, influences the industrial business as well as all sides of life.
Financial decision should be relied on criterions those are made up from assumption of probable profit of industrial subjects. Moreover, main criterions should aim at enlarging the capital on the background of increasing the market price of investments, stipulating also the hazard in proceeding.
Financial manager should provide many of such routine tasks as analyze of profitability and state of liquid assets in enterprise, permanent supervision and control upon current financial operations etc. Financial manager should take participation in long-term and important projects, especially, in analyze of capital structure and investment variants. Moreover, it should anticipate the part of year incomes that should be allocated for dividend compensation, which is the alpha and omega for financia l management.
For succeeding the serious prosperity of national economy, government, first of all, should formulate the purpose of national economical policy and with the aim of achieving the goal, enact the relevant legislative acts those will influence all of the industries in country.
For how important, in national economy, envision of aim and its achievement is we can see on the sample of United States of America. How is the same in our country? First, we’d say, that haven’t got the perfect national economic policy and its aims thereof. Second, entrepreneur works out the activities itself, in own interest and favour. Third, the most of enterprises, because of entrepreneurs “will” are closed. For example, only 179 treasury shared companies of total 602 have profited in 1999, and budget mobilized as a dividend only the income of 300 000 GEL. It’s now clear that if the treasury shared companies work with loss, what will the private companies be in case?
Highlighted above sample indicates to the fact that instead of creating the perfect system for national economic policy, we discuss the distinct to each other, interrupted from each other financial and economic events trivially, with no end in view and complex purpose.
To the financial management of material production in country, each level of state bureaucracy appears violently inadvertent, which, besides the objective reasons, has the subjective ones as well. Being unable to overtake these, especially subjective, reasons will finally bring to failure. First, central legislative and executive organs ignore the importance of employing the qualified specialists, as they’re grown up on economical ideas of Marxism-Leninism and socialism and are unable to accord with contemporary developments. Changing high qualified specialists with young, strong people with foreign education and western diplomas, but less experienced in economics won’t bring us to economic prosperity and advance of life standards; Second, negative economic results caused by the demolish of social integration; Third, confusion inside country, civil war and territorial conflicts as the result of what we’re now having the problems of keeping 300000 refugees; Fourth, attempt by Russia to maintain the ambitious and colonial policy to Georgia.
For overtaking the economic crisis, entrepreneurs, with the purpose to manage their companies and corporations effectively and to bring the financial management on contemporary level, should use the experience of Soviet government in 20’s of previous century, like bourgeoisie that employed small number of economist-specialists in government. We do not advice to deny the private property, or to give the lessons of becoming richer. We’re aimed at saving our country and its economy from the destroying processes, which is unimaginable without correct management of finances of industrial subjects that is available for experienced economists only.
In process of forming the market relations, improvement of Georgian national economy is unavailable without perfection of management system for finances in industrial subjects. Despite financial management of enterprises was paid a certain attention in terms of centralized economics, today, its level can not satisfy even the minimum of requirements in this field of management. Moreover, financial management should be changed in new direction, which will give an answer to the next questions of life:
1. What size of changes does the market environment cause in financial mechanism of industrial subject?
2. Which are the criterions of financial decisions, and how to manage enterprise finances in terms of market environment?
3. In terms of market environment, how to accord the strategy of economic and financial lives of industrial subjects with tactic, long and short term aspects to each other?
4. What is the influence of inflation upon finance management?
5. Which legal methods of financial variation does the economic theory have, for facilitating the existing tax burden for taxpayers?
These questions could last with no end, as human’s demand is indefinite even if the means definite.
An answer to these questions as well as the formation of new market-led stage of economy objectively require investigation of financial management as the science that is directed to achievement of strategic and tactical purposes of subjects. Besides, strategic and tactical purposes should be individual for each of industrial subject. Moreover, important is to establish and perfect the theoretical and practical methods of finance management.
Today, enterprises have to exist under hard tax burden and expanding corruption as well as hidden economy. Therefore, each of them has the distinct interest – to profit, dynamic and regulation of profit, increase of shareholders’ incomes, dividends, exchange rate control etc.
Thereof, finance management is actual in country, but we haven’t perfected neither theoretical-methodological nor practical basis of it, which is caused by objective reasons including, colonial regime of Russia, 70-year practice of centralized industry that, actually, did not require the difficult art of finance management.
Emerges the question: what can we do? Experience by west won’t help, as it already has the perfect practice and tools for that. We’d be better acquiring the management tools of theirs first, then establish and finally operate them with special computer equipment introduced.
As to experience of Russia, it’s less favourable for market economy. To our opinion, for lifting up from crisis it’s important to establish the special commission that will unify the initiators and forms the long-term programs fixing provided actions indicating also the dates of accomplishment.
Should also be mentioned that important part here could be played by western pragmatism, if attaching it to the theory of finance management, or in other words, theoretical acknowledgement should flow coincidentally with its practical establishment. Should be acquired such western methods of financial management as financial policy of enterprise in terms of inflation, finance management in terms of decreasing production, lifting up from crisis etc.
Financial management should be rapidly perfected not only on level of industrial subjects, but on that of other business subjects – insurance companies, banks, investment institutions etc.
Solvency of finance management problems, at ours, is obstructed more by the lack of fitting cadres with relevant knowledge and experience. Teacher of finance management has to be comprehended in theoretical knowledge that will be integrated with practical experience.
Besides, finance management is unavailable without using the economic theory, financial analyze, accounting, mathematics, econometrics and other disciplines. Unfortunately, we face the serious gap in all of them.
In terms of centralized economy, above enumerated disciplines were aimed at providing the reliable information for ministries and other governmental bodies as well as analyzing such affairs of treasury enterprises as planning, pricing, purchase and supply, wages and other managerial questions those were solved by “phone calls” in upper layers.
In terms of market economy, finance management has different functions, because, first, privacy structure changes if transits to market economy; state property turns as one of the most meaningless ones. All that creates the army of proprietors those are interested in results of enterprise actions, because of the simple reason – they’ve invested; second, enterprise owners have to look for and accept the decisions those provide important for them financial results and wins in competition; third, in terms of market economy, own and self attracted investments become the main financial source, instead of state budget and national bank credits; fourth, in terms of market economy, changes the field of information users as well. Priority here goes to internal employers of enterprise and governing elite that makes financial and managerial decisions. Receiving information is also in favour of outer users like: shareholders, creditors, suppliers, customers, company servants, auditing services, consultants, exchanges, legislative and executive branches of government, press, informational agencies, trading and producing associations and trade unions.
Besides, market economy has the own requirements to information. It has to be in time, fair and true, neutral, understandable and comparable. Right with this kind of information, finance management will be able to run the high efficient production.