The financial mechanism can be represented by a set of methods for organizing financial relationships that are used by society to ensure favorable conditions in the economy. This mechanism uses the forms, methods and types of relations in the field of finance and methods for their quantitative determination.
The financial mechanism has a complex structure, which includes elements corresponding to various financial relations. Due to the multiplicity of interconnections, the application of a huge number of mechanism elements is predetermined, which includes financial planning and forecasting, as well as regulatory documents regulating the correctness of financial relations and, of course, control over the implementation of various forms, methods and types of emerging relations in the financial sphere.
Based on the above definitions, the main elements (links) of this mechanism include:
- planning, forecasting;
- indicators, limits and regulations in the financial sector;
- financial management;
- leverage and incentives;
- control.
Depending on the specifics of the various components of the economic economy, as well as on the basis of the allocation of individual links of relations, the financial mechanism can be classified as follows: financial mechanism of the organization; mechanism working in the field of insurance; public finance mechanism . Each of these species, in turn, includes isolated structural units.
All the components of this mechanism in the complex should be a single whole, since they are all closely interconnected and are in constant relationship with each other. With all this, these links can function independently, and this can cause constant coordination of the components of the whole mechanism. It is from the internal coordination of all structural elements of the financial mechanism that its effectiveness depends.
In other words, the financial mechanism is a combination of methods, forms, levers and instruments of formation, the use of sources of financial resources to meet state needs. This also includes the needs of business entities and the needs of ordinary citizens.
The financial mechanism of the organization is a financial management system of the subject. Its main goal is to make a profit. The financial mechanism of enterprise management provides the business entity with the necessary funds that can ensure its solvency (the possibility of timely settlement with banks on borrowed funds, suppliers, etc.).
The financial mechanism of the organization operates in the system of economic laws and is aimed at:
- providing finance in the form of loans, financing and self-financing;
- financial regulation, represented by taxes, subsidies and loans;
- a system of financial instruments.
In the structure of the financial mechanism of the organization are:
- methods involving taxation, planning, forecasting, investing;
- leverage in the field of finance - the use of certain indicators of economic activity to obtain the largest amount of profit (interest rate, depreciation, exchange rates, etc.);
- informational, regulatory and legal support.
To manage financial resources in the structure of any organization is the appropriate unit or just an expert (in a small enterprise). The main task of these units (specialist) is to implement the functions of finance to achieve high profitability, improve the quality of finished products or reduce costs. Only with the effective application of the financial mechanism can high profits be achieved in the enterprise.