The doctrine of financial resources in our state was first introduced in 1928, when the development goals of the USSR for the period from 1928 to 1932 were determined.
At the moment, there is no single exact definition of this concept, which is associated with the practical diversity of the concept. There is a huge amount of financial resources of commercial organizations and their composition, because different economists give the concept different definitions.
Financial resources - this is all the means that a company (organization) is obliged to use in its work in order to maintain financial stability.
Concept and characteristic
To understand what financial resources of commercial organizations are, it is necessary to find the difference between the definitions of “financial resources” and “company capital”. Capital is part of financial resources in addition to equity (money, UK) and borrowed capital (loans, loans, etc.).
As a result of the existence of a huge list of financial resources, it can be noted that they differ in a wide range of parameters in relation to other outcome indicators. The most important of them:
- close connection of all components of financial resources. Not a single element can satisfy all the possibilities of the company, because the company uses not only its own capital, but also attracts additional borrowed funds;
- interchangeability of all resource components, which allows the enterprise (institution) to implement its plans;
- lack of regular income can replace a bank loan;
- financial impact. Financial resources are subject to various fluctuations, such as inflation and devaluation. This fact suggests that such funds are almost always presented in cash, in kind, its equivalent, even if the company does not have cash, but there are loans and receivables.
The importance of the financial resources of the company cannot be reduced, since their availability and rational implementation ensure the highest degree of financial viability, liquidity of the organization and its rapid development in the future.
Main types
In addition to the variety of sources of financial resources of commercial organizations, one can identify the criteria according to which typology is carried out.
Depending on the criteria of attractiveness, financial resources are divided into:
- short period (less than 1 year);
- long-term (over 1 year);
- unlimited period.
The first two types are associated with borrowed funds, such as credit, and the third type is own, for example, share capital.
The following types of financial resources of commercial organizations, depending on the degree of availability:
- non-profit;
- with limited access;
- with unlimited access.
Nonprofit resources include those of nonprofit companies. Limited resources have additional requirements for their receipt and use. Unlimited resources are loans, bank loans, and interest on securities.
Sources
The main prerequisite for the emergence of different types of financial resources is the abundance of sources of their formation. To get a full assessment of the options for this financial concept, you need to understand how to obtain and form these resources. Among the sources of financial resources of commercial organizations, the following types are distinguished:
- Own sources. These include all types of company capital (incremental, reserve, etc.) and retained earnings. Current responsibilities can also be attributed to this source of funds.
- Involved funds. This source of formation of financial resources of commercial organizations may include income from securities and interest thereon, as well as shares, additional contributions of owners to the target capital, for example, payments on shares.
- Borrowed funds. This source is the most diverse, as new sources are created every year to receive funds, and then return part of them in shares. Borrowed funds include:
- credit;
- loan;
- leasing
- budget appropriations.
Formation Basics
A whole program is being developed to form the financial resources of commercial organizations. It is aimed at strengthening the financial position of the company (institution) in the market and the allocation of reserves.
We will represent the formation of financial resources of commercial organizations in the form of stages:
- creating the required quantity;
- use of acquired amounts;
- increase business profitability;
- development of risk reduction measures;
- cash flow management development;
- formation of results and strengthening the company's position in the market.
Stage 1. Creation of the necessary amount of financial resources
In order to complete this stage of the program, it is necessary to conduct a detailed study of the company’s work when calculating the required amount of resources that could provide all the goals of the company. The goals may be to strengthen the market, compete for customers or expand the sales sector.
It is necessary to comprehensively study the sources of funds with a possible assessment of the attractiveness of their application. In other words, you need to make a list of all the likely sources of funds and choose from them having more attractive conditions for the company.
As a result, at this stage, financiers determine the nominal amount of the financial resource and the source of its creation: own funds or borrowed capital.
2 stage. Development of the use of acquired amounts of financial resources
Having determined the size of financial resources, it is necessary to create goals for using the collected funds. Goals should fully or partially cover not only the needs of the company, but also implement social plans among employees. In addition, at this stage, the level of effectiveness of each goal is calculated after adding resources to it. As a result, the company may find funds that will be replenished, for example, from sales proceeds.
3 stage. Increase business revenue
After studying and distributing cash flows, it is necessary to carry out activities that are aimed at increasing the level of the company's constant income, and specifically, the level of profitability and profitability.
Activities to increase income are associated with an increase in the financial risk of the company (institution). This is an accompanying dependence in the economy, so the next step will be the regulation of financial risk.
4th stage. Development of risk reduction measures
The risk is extremely difficult to assess given the growth of the company's profitability. But if, before using the identified financial resources, financiers will act in accordance with the forecast for calculating the results of the business, then financial risk will be minimized.
As a result, the main principle of the implementation of this phase of the program is a high-quality study and premature programming of the organization's work order.
5 stage. Development of flow control measures in the organization
This stage is a lever to limit financial risk. It implies synchronization of receipts and disposals of funds, which allows the company to manage monetary dependence on contractors and partners.
Almost all economists say that reducing the balance of unused funds of the business contributes to the increase in fixed income without increasing financial risk.
This approach creates the duality of money in the general flow of financial resources of the company. On the one hand (cash), as before, meet the needs of the company, on the other hand, companies cannot distribute their funds for a certain amount.
6 stage. Formation of results and strengthening the company's position in the market
This stage consists in the development and use of financial resources. Given all the conditions, we can conclude that the company will achieve positive results from the implementation of the program in order to strengthen the financial position of the company (institution) in the market.
It should be noted that the final stage, based on the beliefs of strengthening the company's position in the market, is the first step of the next program, which consists in the constant analysis and calculation of the company's financial resources.
Management basics
The formation and use of financial resources of commercial organizations is closely related to the process of managing them.
Management consists in making various decisions regarding the receipt of funds used in the process of the company’s activities and its continuous development.
The goal of the process is to maximize its value. This means that every decision made in the company is closely associated with obtaining a constant profit that improves the performance of the company. The unit responsible for the process should fully control the level of the company's debt, timely fulfillment of the company's obligations, as well as the level and structure of assets for the financial year. This determines the effectiveness of the strategy adopted at the enterprise and the achievement of goals, that is, profit.
Financial resource management plays a very important role at every stage of enterprise development and in almost all areas of management. To conduct business, an enterprise must have both physical and financial resources. The latter include financial resources, including cash balances on current and term accounts at the cash desk of the company, as well as short-term securities (checks, bills, treasury bills, etc.). Both material resources and financial resources are closely interconnected. The need for financial resources includes financing of current operations, as well as financing of investments aimed at creating material resources. This, in turn, contributes to the creation of finished products, which is a source of cash inflows at the enterprise. The acquired funds increase the company's resources and are used in the next cycle of its activities. For this to happen, it is necessary to properly control the time and intensity of these flows.
The management process includes two stages:
- the diagnostic stage concerns the study of certain areas of the financial economy using numerous methods of financial analysis. These studies are designed to identify the strengths and weaknesses of the financial position of the company;
- the decision-making phase includes current and long-term decisions that affect the financial phenomena of the enterprise.
Financial resources management is a process consisting of a number of decisions aimed at obtaining funds, investing them in company resources and ensuring maximizing its value. The increase in the value of the company is the result of the corresponding level of increase in return on capital that the company has at its disposal. The advantage is maximization of financial surplus, but at the same time, maintaining the ability to timely repay obligations. This is an important element in the process of managing financial resources, since the relationship between influence and cash outflow at the enterprise determines its further functioning.
Usage Basics
The financial management of the company to ensure the use of financial resources of a commercial organization takes such actions as:
- analysis of the economic results of the company and the situation in its environment. This is the starting point in the decision-making process;
- planning the distribution of cash flows over time, analysis of inflows and outflows, to ensure the maintenance of company liquidity in the short and long term;
- planning activities aimed at reducing the risk of operations;
- assessment of the need for financial resources necessary for the implementation of the planned investments, and an attempt to obtain these funds;
- planning the optimal financing structure, which will reduce costs and maximize revenues;
- allocation of funds received for the most effective and profitable projects;
- planning earnings per share and preparing proposals for its distribution. This is an important point to ensure proper cooperation between owners;
- control and financial performance of tasks undertaken by the company.
The problem of choosing the direction of application of resources is relevant for many enterprises.
The main areas of use of financial resources of commercial organizations are as follows:
- payments to government bodies;
- investing in capital costs and investments;
- education funds;
- social goals;
- distribution between owners;
- employee incentives.
Conclusion
Thus, the financial resources of a commercial organization is the totality of absolutely all types of cash of the company, which are formed as a result of the economic activity of the company. Among the main sources allocate own funds, borrowed and borrowed. The main source is income in the form of revenue from the implementation of activities.