State financial mechanism

The financial mechanism is a combination of forms and types of relations, methods and conditions of calculations, planning, forecasting. This complex is used in the process of forming cash resources, education and the use of trust funds.

general characteristics

The financial mechanism is a tool for influencing the socio-economic sphere. It is used in the implementation of a unified budget policy at the local, regional and federal levels, as well as in the field of business entities. The impact of this institution on socio-economic relations On the one hand, it is carried out through the focus of its various elements on the implementation of specific tasks, achieving real results. On the other hand, its influence is carried out through monetary resources, which are formed in the course of the activities of entities and are aimed at meeting social needs.

The financial mechanism and its structure

The internal structure of the institute is quite complicated. This is due to the huge variety of forms and types of budget relations. The financial mechanism system is presented in two categories. They reflect the economic content of the relationship. The financial mechanism of the state consists of:

1. Methods of distribution of national profits.
2. Ways of forming budget funds at the territorial and federal levels.
3. Methods of formation of social extra-budgetary funds.
4. Financial forecasting and planning.
5. Types of payments to the treasury and other funds.
6. Financial control.

The subsequent division is determined by the specifics of the methods of distribution and redistribution of national income and the value of GDP. Elements of the financial mechanism of business entities are presented as follows:

1. Legal support.
2. Financial methods.
3. Normative base.
4. Financial leverage.
5. Information Support.

The financial mechanism also includes the following links: mobilization, stimulation, investment, etc. The functioning of the institute is carried out at the expense of the amount of resources allocated for solving specific problems, methods of their formation, channels and forms of movement of funds, conditions in which they are allocated and subsequently are used.

Component Specifics

The financial mechanism, the purpose of which is to set in motion cash flows, affects social production through investment and regulation. The more perfect the socio-economic sphere, the more significant is the role of this institution. Investing (collateral) is realized by lending, self-financing and irrevocable transfer of funds. The main task when using the components of the institute is to establish the optimal ratio between them. It is determined in accordance with the level of development at which a particular society is located.

Legal aspect

Budget policy acts as the basis on which a specific financial mechanism is created. The development of the institution is impossible without the establishment of certain rules and regulations. They are reflected in the budget legislation of the country. The use of norms allows us to formulate uniform rules by which the establishment of relations and relations in the sphere of monetary circulation is carried out. The legislation provides, in addition, the protection of the economic interests of business entities, citizens, and authorities. Following regulatory requirements contributes to budget discipline.As a result, an effective state financial mechanism is being formed.

Methods

The financial mechanism is a multi-link institution. Inside it there are certain ways of influencing monetary relations on the process of managing, education and use of funds. They are called financial methods. Their action is carried out in two directions: in the field of cash flow management and in the sphere of commercial market relations. The latter are associated with the comparison of results and costs, material incentives and specific responsibility for the efficient use of funds.

Leverage

These tools are used in applying financial methods. To leverage, in particular, include:

• Revenues (profit).
• Trust funds.
• Depreciation deductions.
• Financial sanctions.
• Contributions to capital.
• Mutual contributions.
• Interest rates on bonds, deposits, loans.
• Dividends.
• Portfolio investment.
• Discount.
• Currency quote course and so on.

Forms of collateral

As mentioned above, the financial mechanism becomes more effective if there is a certain legal framework. In the framework of the enterprise, it includes orders, instructions, decrees, circular letters, other local acts of the administrative apparatus of an economic entity. All of these documents are adopted in accordance with legislative provisions. In this regard, it is not an exaggeration to say that the financial mechanism of any enterprise operates primarily in accordance with federal legal acts.

Regulatory support involves the use of certain indicators and parameters. In particular, they include tax and tariff rates, depreciation rates, working capital ratios. However, these forms of collateral are not enough for the financial mechanism of any entity to function efficiently. Equally important in the sphere of money circulation is information support. It involves the exchange of various kinds of data of a commercial, industrial, technological, economic and other nature. These, for example, include information on the financial situation of competitors and partners, their solvency, on exchange rates and market prices, interest on foreign exchange, stock, commodity trading international platforms and so on.

Relationship building

The financial mechanism is a tool with which certain relationships are established between business entities. At the same time, it ensures the formation of interactions within enterprises, as well as within the framework of agricultural and industrial associations, holdings, and trade and purchasing organizations. The functioning of the mechanism ensures the establishment of relations between companies and the financial and credit sector, investment institutions, higher organizations, as well as insurance companies and the state.

Relationships within the enterprise

They are formed between the administrative apparatus and structural divisions, between departments, employees and management. In joint stock companies, the board of directors is also added to the participants. Meanwhile, it should be said that, despite the fact that these communications are established within the enterprise, they are influenced by the state mechanism. This is primarily manifested in the legislative requirements established for all business entities. In accordance with them, methods and forms of implementing relations are selected. They are focused on:

1. Establishment and subsequent observance of the rules for bringing financial tasks to structural units.
2. Providing control over the implementation of the plan.
3. Assessment of financial and economic activities of structural units
4. Establishment and application of incentives aimed at improving financial results.

Institute changes

The components of the financial mechanism are adjusted depending on the conditions of the country's socio-economic development. Their changes determine the quantitative and qualitative impact on the business sector. The first is expressed through the proportions and volume of mobilization by authorities and economic entities monetary resources and their distribution between the levels of the financial system of the state. Qualitative influence relates to the use of such methods of formation and directions for the further use of funds, methods of organizing relationships that would allow them to be considered as incentives for a particular enterprise and the entire economy as a whole. Regulatory components include:

1. Establishing the limit for the budget deficit.
2. Tax burden reduction.
3. Terms of providing state loans to organizations.
4. Rules for applying financial sanctions and so on.

Institute flexibility

The implementation of financial policies in practice is impossible without a scientifically-based and operational regulator. Institute components cannot be static. They should be changed in accordance with the dynamics of relations in the field of monetary turnover of the country. Clearly enough, these changes are noted in those states that are in a transitional stage and have recently begun to use market mechanisms. In such countries, innovative approaches to the formation of monetary relations are used.

Prospects

The financial mechanism in the Russian Federation has undergone dramatic changes. This was due to the above-mentioned transition to new market relations. Changes in the mechanism were primarily reflected in the transfer to the tax base of the relationship between the public sector and private, privatized companies. Inter-budget relations have also become new. With the formation of the stock market, the procedure for the redistribution of finances by business entities on the basis of the issue of securities and their sale and purchase has undergone changes. Social insurance funds were withdrawn from the state budget. Extrabudgetary state funds have been formed. Despite all these innovations, the process of transformation in Russia is still ongoing.

Reform Specifics

The leading role in the transformation processes belongs to changes in the country's financial mechanism. This is due to the fact that the money supply determines the quality and the vector of results, which, in fact, all reforms are aimed at. As the practice of many developed countries shows, the transformation of the financial system is a priority. In accordance with this, the budget forecasting and planning block is in the first place. Monetary policy is the second most important component. It is aimed primarily at solving operational and tactical tasks that are within the traditional budget. Meanwhile, the tasks and goals of the financial mechanism and state policy should correspond to long-term planning and be linked to it.

Conclusion

In modern conditions of the formation of the state financial mechanism, the development of a methodology for improving approaches to budget management is relevant. Here it is necessary to take into account the results of cost estimates. On their basis, it is possible to develop the most effective methods of managing the costly part of the budget, and ensure socio-economic stability. Automated systems are part of the general financial management mechanism. Their functioning is based on economic and mathematical methods and the operation of electronic computers. Transformation in the financial sector expands the use of automatic systems. They are implemented at all levels of management. Moreover, automatic systems are not created in parallel, but act as an integral component of the financial mechanism. This undoubtedly contributes to a better and more efficient functioning of the institute.