Financial management in the organizations of consumer cooperation
An integral part of modern management in consumer cooperative societies should be financial management.
Under the financial management understand the financial management process of the organizations (enterprises), that is their own and borrowed capital borrowed for production and business activities. Financial management is the adoption of a set of solutions for the formation and maintenance of optimum structure of financial resources of the organization to maximize its profits. In this context, financial management includes two areas of financial activities — increase profits and achieve financial sustainability of the organization, i.e. its ability to maintain its financial obligations to other organizations and enterprises solvency.
Therefore, the quality of the functioning of the organization is manifested in the ratio between her income and expenses. On the harmonious functioning, it is usually possible to say when the ratio of income and expenses are stable over time, and the amount of income consistently exceeds the amount of expenses that is a prerequisite for the development of the organization.
A financial Manager needs to understand professionally not only in financial matters but also in micro - and macroeconomics, focus on economic theory and economic policy. In addition, he should know the basic methods of statistical analysis, to know features of functioning of financial institutions.
In General, financial management deals with those issues that affect the money markets and capital markets, macro and mcrofinance indicators. He is obliged to analyze risk, to have a close relationship with the flank intermediaries: banks, brokerage companies, pozabankowe agencies, dealers.
Profit and risk is the failure of the two key link of financial management. The ratio of these variables at each particular moment determines the content of specific decisions the financial management of the organization.
The financial Manager makes decisions and performs operations only in the case when the results will be higher costs. Moreover, if there are several alternative embodiments of operations, the financial Manager selects a maximum from the point of view of profit, and based on the ratio of risk to profit.
Financial management includes the management of finances in many types of business transactions, both financial and economic in nature, in transactions which have the purpose of generating income, and activities that do not put before themselves such purposes.
Consequently, the financial Manager always solves the contradictions between the company's goals and financial capabilities of their implementation.
The complexity of these problems requires the introduction in the United States cooperative organizations, positions of financial managers, especially in the lower levels. Now the solution to these issues is vested in the consumer societies for chief accountants (formation of financial resources) and the chairmen of the boards (management of resources), and in respoiise — Deputy chief accountant of Finance and chairmen of the boards of the unions of consumer societies. However, in a market economy, the direction of the General management should be done by specialists, i.e. people who are able to professionally manage the finances of the cooperative organizations.
Constituent parts of financial management is financial analysis, developing financial strategies, managing assets and liabilities of the organization.
Analysis and evaluation of the financial condition of the cooperative organization are carried out according to accounting balance, report on financial results and their use of other forms of accounting and statistical reporting in the intervening period.
During the financial analysis to analyze structural changes of assets and liabilities of the balance sheet: the dynamics of fixed assets and other non-current assets, inventories and expenses, cash settlements and other assets equity in terms of sources of their formation, long term liabilities, settlements, and other liabilities total financial results, directions of use of profit organizations, payments to the budget, education and the use of General and special funds etc.
Requires special attention to the analysis of solvency of the organization. Under the solvency (liquidity of the organization understand its ability to perform in a given period obligations associated with the various payments due to the existing and the received means of payment.
* Technological tools and techniques in financial analysis are covered in the course "Finance of consumer cooperatives".
The organization's liabilities include: wages of workers and employees, payments, financial authorities and social insurance institutions, payment of goods at the expense of own funds, the repayment of debt on loans to banks, the reimbursement of turnover etc.
Payment by the funds of the organization are: cash balances on settlement and currency accounts, in cash, in transit and letters of credit; the proceeds from the sale of goods; puffing coming from customers for goods sold on credit; agents for goods shipped in the settlement documents; revenues from sales of containers.
If the amount of means of payment equal to or greater than the amount of liabilities, the organization is solvent. So, the point of the analysis is to determine and comparison of the total commitment and the available amount of means of payment
Conducted thus a comprehensive analysis of the financial condition of the cooperative organizations is the basis for development of strategy of financial management.
Under the financial strategy understand the concept of how you will use your organization's financial resources to achieve sustainable growth of income; how and on what terms will attract the necessary financial resources; how will settle on funds raised and what will be tax policy. Financial management strategy also includes the obligatory analysis of possible changes of the state policy in the field of Finance, as well as evaluating the relevance, that is, matching in time the strategy and goals of the organization.
Therefore, the strategic objective of the financial Manager are financial ensuring production and economic objectives of co-operative organizations. The basis for the development of the financial strategy is, therefore, the system of economic objectives expressed defined planning parameters for the year or longer period.
Current activities of the financial Manager is to effectively manage the assets and liabilities of the organization. After determining the ratio and type of assets on its balance sheet, the financial Manager must maintain optimal levels of each type of assets.
Current assets are cash, securities, which can be implemented on demand in the market and the inventory. Fixed assets include buildings, machinery, equipment, vehicles, and what is the status of the lease.
There is another criterion of division of assets into current and fixed. The current may be, such assets that are returned for the account of the organization during the year, and fixed for longer time.
Managing assets, the financial Manager must determine which financial assets it is better to have, and how and at what point you need to change their quantitative and qualitative composition. If the funds invested in the assets of the organization, you can productively use otherwise, then it shows that they are used inefficiently. The transfer of funds from fixed assets to current opportunities for short-term financing, resulting in a weakened liquidity risk. However, the decrease of fixed assets reduces the volume of sales, resulting in loss of profits. Revenue on fixed capital is always more income at the current capital.
Financial management, developing financial strategy, with their daily skilful actions should contribute to its implementation. To do this he must have special financial tools, to use his own means of the organization and borrowed. The expansion of financial activities of the organization takes place primarily at the expense of reinvestment, i.e. of capitalisation of part of profit of the organization. However, this possibility is limited to the absolute amount of profit. Another source of financial resources of the organization are Bank loans. The Bank loan is an additional lever, is able to restore the Affairs of the organization in the right direction and in a short time. However, this tool also has its limits. First of all, the size of the Bank loan is not determined by the organization, and the Bank, which was guided by the potential of the organization to repay the debt with the creditor. This makes it difficult to budget. The cost of Bank credit for the organization is determined by the interest rate on loans.
Attraction of additional financial resources the grass-roots cooperative organizations, consumer societies and raspugivali, may also be
Leasing — the right of economic use of fixed assets (assets) to another entity in the contract period, without ownership of these assets. the target shares for both individuals and legal entities become creditors of the organization.
However, to attract these funds cooperative organization should ensure shareholders dividends not lower than the interest that banks pay depositors.
Analysis and planning of financial operations require the financial Manager to determine the scope, quality, composition, timing, movement of financial resources from providers to recipients through financial markets and financial bodies, and every movement of financial resources must be accompanied by a guarantee of their movement in the opposite direction. In the form of guarantees are commercial papers, certificates and deposits issued by the government, financial bodies, or a specific business organization.
Thus, the main method of work of the financial Manager is the continuous analysis. Only on the basis of these analysis you can make decisions on short - and long-term financing.
Decision-making short-term financing involves the determination of the optimal value of functioning funds cash management turnover and marketable securities, the determination of the size and sources of short-term loans, factoring.
During the peak seasonal demand for liquid assets do not cover this need own the assets of the organization. It is better to use short-term loans, and their own use for investment.
The art of the financial Manager to control cash is the ability to invest excess cash into profit, while maintaining adequate liquidity levels that can meet the needs of the organization. To preserve the organization's liquidity and simultaneously profit cash it is best to invest in reliable securities, which if necessary can be quickly implemented.
An important task of the Manager is also optimally determining the required size of the current cash. For this purpose the Manager should determine the likely cash flows that will be reflected in the assets and liabilities, including cash, to consider the balance between benefit and risk in the activities of the organization, the maturity dates of the loans and amount of payments, the ability of the organization to obtain new loans and their terms.
Great art requires management of the funds invested in inventories.
This activity of the financial Manager takes on special significance in a period of inflation. Investment in inventories, on the one hand, reduces the intensity of inflationary pressures on the organization, and with another — increases the costs to maintain inventory, and thus reduces its profit.
In the management of the liabilities of the organization Manager should determine the appropriate balance between long - and short-term resources of the organization. Thus consider a number of factors: economic environment, ongoing government financial regulatio policies, and so on. Specific decisions are made as needed, but some of them require deep analysis of the available alternatives, their comparative advantages in the future.
The art of the current financial management is maneuvering with its own funds, short - and long-term loans, issue of own securities.
Funding their own activities through long-term loans has less liquidity risk than financing through short-term loans.
Therefore, the Manager should look for alternative ways of financing when assets are funded with liabilities with specific maturities.
Short-term financing of economic activities is based on these types and sources of financing (tab. 6).
Most are given in table. 6 types of short-term financing known to all. Detailed consideration is given to factoring.
Factoring lies in the fact that the seller of goods sends their demands to the debtors (invoices, bills) a special company which assumes the risk of non-payment of invoices, although the paying customers standing behind them, were tested. The seller receives from the company the amount of the debt minus a percentage factor, and the factor collects from the debtors their debts in full amount after the expiry of the term notes or pay bills.
Consequently, the financial Manager chooses a particular tactic short-term lending based on the organization's financial situation at a specific point in time and conditions of lending from one source or another.
More complex is the system of making long term financial decisions.
The scope of the solutions covers the budgeting of funds, dividend policy, the type of growth and diversification, the choice of sources of long-term.
financing (long-term credit, leasing options and warrants).
Budgeting funds is called - process associated with the selection and evaluation of the corresponding cost structure means that to the greatest extent meet the objectives set by the organization. Under the cost of funds understand the long-term investments, which are carried out for expanding the volume of business, move, or upgrade of fixed assets or for other real benefits. The process of budgeting funds consists of five separate but interrelated steps: proposal development, analysis and consideration of the proposal, decision-making, its implementation, monitoring of deadlines.
The expenses of the organization can be independent or mutually exclusive.
Budgeting means you can run different methods: the average rate of profit; definition of payback period; determination of net present value; determination of yield.
The method of average rate of profit. Before you make investment, the financial Manager must calculate the expected ratio between the average income, which remains at the disposal of the organization after payment of taxes, and the value of future investments.
The method of determining the payback period is to estimate the relationship between future investments and the annual amount of the profits of the organization on investment.
The method of determining the net current profit is that the financial Manager determines the difference between the sum of net profit and the estimated investment. The decision is made when this difference is greater than or equal to zero P—T—J0. Otherwise, the investment is inappropriate.
The method of determining the rate of return is a calculation of the ratio of the sum of net profit to the proposed investment.
The long-term solutions include policy dividends. In consumer cooperatives the question of dividends until recently, not received adequate attention. This is both due to the meager size of shares, and views that were cultivated in the society: \legitimate source of income was labor, and return on invested capital is not recognised for the equal-wage source
the existence of people. Therefore, dividends to shareholders or paid in miniscule amounts, based on the residual income of the consumer society after all possible investments and other manufacturing investments have not: had not been paid.
The functioning of consumer cooperatives in market conditions requires a change in attitude to the issue of dividends. Fundraising shareholders will be more effective, the higher the dividend will be payable on the contributions in different forms: individual, collective, mandatory, voluntary and targeted. The task of the financial Manager of consumer cooperatives is to determine the amount of dividends in each year so as to attract the funds of shareholders and however to prevent the excessive transfer of profits of the organization in the form of dividends.
The financial Manager should also participate in addressing issues of production and economic combination. The basic types of combination are: consolidation, mergers, holding. Consolidation is a merger in which a new venture (organization). The most effective is consolidation at the level of the enterprises of consumer cooperation within potrebsoyuza for the transition to new products, development of new market segments etc.
A merger is the combining of two or more enterprises, which maintains the legal status of a larger enterprise.
Is called a holding company that has control over a variety of other enterprises (subsidiaries).
Select the type of combining is of great importance. Explanation of combination can be the decision to change the scope of business activities or diversification, an increase in aggregate funds (capital), increase management efficiency, changes of tax conditions, increasing the level of liquidity. In any case, the combination is a effective measure to improve the financial situation of the cooperative organization. The effectiveness of the combination in terms of consumer cooperatives is rising due to the fact that the internal combination does not change the essence of the cooperative form of ownership. However, the combination should also apply to effective management of the cooperative economy based on other forms of ownership.
In the practice of financial management in consumer cooperative societies also need to implement leasing operations. The essence of these operations follows from the fact that the economic process is the main use of production capacity, and is not the property for them and therefore for the economic activities is not necessary to purchase the corresponding title of ownership of the means of production. In the leasing contract the property owner (lessor) allows the use of their property lzero (user) within a certain specified contract time. The latter is obligated to make periodic payments lessor, to maintain the equipment in working condition and to insure it at your own risk.
There are two types of lease transactions: lease with full amortization and the lease agreement with the partial amortization of the leased equipment.
Agreement to lease with full amortization (capital leases) provides that lter pays the leasing company within the prescribed time the entire amount spent by it on purchase of the object, that is, the sale price, plus administrative costs and interest, regardless of lter makes a profit or not.
Agreement to lease with partial amortization of the leased equipment (operational leasing) comes from the fact that the term of the contract is less than the economic life of the assets. The time of the lease, the leasing company gets only part of its costs associated with the function lsor. As a result, after the expiration of the agreement remains uncovered part of the cost of the equipment. This cost the lessor may return the sale of equipment or a new hire.
Consequently, the financial Manager of a fairly wide range of activities, and a skilled functioning in this area, the use of special methods of financial management can give significant results for the organization.