Small and medium-sized enterprises are an important part of the national economy. Since the reform and opening up of the People's Republic of China, small and medium-sized enterprises in our country have achieved great development and have played an important role in promoting economic development and social stability. However, due to the small scale of its output, the low composition of capital and technology, and the large influence of traditional institutions and external macroeconomics, small and medium-sized enterprises have financial management aspects that are not adapted to their development and the market economy.
Strengthening the financial management of small and medium-sized enterprises is not only the need for the development of small and medium-sized enterprises themselves but also the need to improve the core competitiveness of enterprises in the face of the fierce market competition after accession to WTO, which has great theoretical and practical significance. Based on the analysis of the basic concepts related to corporate financial management, this paper carefully analyzes the operating status of small and medium-sized enterprises in our country and puts forward corresponding suggestions on the shortcomings in their financial management.
Small and medium-sized enterprises respond to changes in market demand promptly, and can reasonably mobilize capital and labor resources. Since the reform and opening up, the flexible business mechanism of small and medium-sized enterprises has enabled them to develop rapidly and has become an important part of our national economy. The rapid development of small and medium-sized enterprises has promoted the establishment and improvement of the socialist market economy system, which plays an important role in promoting economic development and social stability.
At present, there are 3.026 million corporate legal entities in China (excluding 23.77 million individual industrial and commercial households), and small and medium-sized enterprises account for more than 99% of all enterprises. According to statistics, 50% of China's gross domestic product, 60% of total exports, and 43% of tax revenue are contributed by small and medium-sized enterprises. However, due to the small scale of output of small and medium-sized enterprises, the low composition of capital and technology, and the large influence of traditional systems and external macroeconomics, small and medium-sized enterprises have financial management that is not suitable for their development and the market economy.
With China's accession to the WTO, the degree of openness of the domestic market has increased day by day, and the sales market space for the development of small and medium-sized enterprises has gradually shrunk. In the face of fierce market competition, optimizing the financial management of small and medium-sized enterprises and improving the quality of financial management is of great theoretical and practical significance for the development of small and medium-sized enterprises.
Overview of relevant theories of corporate financial management
(1) Definition of financial management
Financial management is based on the objective financial activities and relationships that exist in the process of enterprise reproduction. It is an economic management work that organizes corporate capital activities and handles the financial relations between the enterprise and various aspects. It is an important part of enterprise management. The content of financial management mainly includes three aspects: financing management, investment management, and distribution management.
(2) Financial management functions
The function of financial management refers to the responsibilities and functions of financial management, including the formulation and implementation of the company's financing policies and plans, the investment and allocation of funds, the improvement of the level of capital utilization, the rational distribution of the company's income and the establishment of an effective financial management system. These specific functions can be classified into the basic functions of financial forecasting, financial decision-making, financial planning, financial control, financial analysis, and financial inspection of financial management.
(3) The status of financial management in modern enterprises
In a society with an increasingly developed commodity economy, the financial management of enterprises has an extremely important position in modern enterprises.
First, the management of capital (capital) movement is the center of modern enterprise management. Because financial management is based on currency as a unified measurement scale, and the overall management of the business activities of the enterprise and its various links are implemented, the quality of its management effectiveness will be directly related to the overall efficiency of the enterprise. The advantages and disadvantages.
Second, is the significance of capital (capital) movement management. Because whether the capital turnover of an enterprise is smooth, reasonable, and effective is the fundamental condition that affects the survival and development of an enterprise.
(4) Corporate financial management objectives
Under the modern enterprise system, the success and survival of an enterprise depend to a large extent on its past and current financial management system. Financial management is not only related to the decision-making of the acquisition and rational use of assets, but also directly related to the production, sales, and management of enterprises. As part of enterprise management, financial management's goals depend on the overall goals of the enterprise, and at the same time are restricted by the characteristics of financial management itself. As a for-profit organization, the goal of an enterprise is to achieve the survival, development, and profitability of the enterprise, and financial management is required to complete the task of raising funds and effectively investing and using funds.
The company's goal is to maximize profits, that is, to maximize after-tax income. However, in modern companies, the separation of ownership and control often leads to potential conflicts between managers and shareholders. The goals of the two are inconsistent so managers often work to maximize their interests. Financial management needs to give full play to the role of financial management supervision, control, and incentive, to achieve the goal of maximizing the interests of shareholders. Therefore, it is determined that the goal of financial management is to maximize the wealth of shareholders or maximize the value of the enterprise.
Business overview of small and medium-sized enterprises in our country
As a special enterprise group in our country's economy, small and medium-sized enterprises have experienced rapid growth in the urban economy, the individual, and the private economy after more than 20 years of reform and development. In particular, the majority of rural township enterprises have sprung up. The main body is small and medium-sized enterprises. In addition to the original state-owned small and medium-sized enterprises and joint ventures, various forms of ownership and various industries have been formed. A group of small and medium-sized enterprises coexists. Small and medium-sized enterprises make a huge contribution to maintaining the vitality of the entire national economy. As a group, small and medium-sized enterprises must-have business characteristics that are different from large enterprises.
(1) Unification of business managers and owners
Among small and medium-sized enterprises, operators are often the largest shareholders. Self-funded and self-operated. On the one hand, it is manifested as flexible and timely corporate decision-making, clear business goals, and a strong pursuit of profit maximization advantages, and the goals of business operators are consistent with the interests of shareholders; on the other hand, it is manifested as the company's lack of strong external supervision in its operations, and there is a certain arbitrariness in the use of funds, which is not conducive to the healthy development of the company.
(2) Most of the operations belong to individuals who are fully responsible for them.
The business decision-making of an enterprise mainly depends on the leader's intuitive grasp of the market, so the success or failure of an enterprise depends entirely on the personal ability of the operator. On the one hand, its characteristics are manifested as power and kindness; on the other hand, it shows an inherent incentive mechanism, and there is less “agency cost” for operators. Operators have mobility, cost awareness, the courage to take risks, a strong sense of responsibility, and a pioneering spirit.
(3) The initial capital and the available capital are small
The initial capital of an enterprise's operation mainly comes from personal accumulation and borrowing. The small amount of capital, coupled with the limitations of external financing capabilities, makes the shortage of funds the main reason restricting the development of small and medium-sized enterprises, and capital appreciation are also restricted to a certain extent, which limits the field of activities of small and medium-sized enterprises to the scope of small and medium-sized capital to operate, otherwise, they will encounter great risks.
(4) Have the flexibility and variability of the business mechanism
In the operation of small and medium-sized enterprises, they are characterized as responding to changes in market demand promptly, and can reasonably allocate and allocate capital and labor resources. For example, in Zhejiang Province, where small and medium-sized enterprises are concentrated, it is manifested as outstanding leading products, a high degree of specialization, and low management costs. In the period of relative depression in the general environment, it can accelerate the pace of adjustment, adapt to the environment, and maintain relatively stable development.
(5) Facing greater market competition pressure
Small and medium-sized enterprises are engaged in industries that are easy to enter, so when expanding their industrial markets, many new competitors will participate, which is easy to form a situation of excessive competition, and small and medium-sized enterprises themselves are weak, it is difficult to withstand the impact of frequent fluctuations. For this reason, many operators of small and medium-sized enterprises have participated in joint organizations for their reasons, of lacking coordination. Therefore, it is manifested that operators often look for a way out to avoid competition, differentiate in quality, performance, and design, avoid price competition, and strive to achieve incomplete competition.
(6) Stimulated or impacted by environmental changes
Compared with large enterprises, small and medium-sized enterprises generally lack the human resources owned by large enterprises, have small capital, few product varieties, and narrow customer base. They often rely on a certain product and technology. Therefore, once the environment changes, the impact and pressure on small and medium-sized enterprises will increase, and many small and medium-sized enterprises will go bankrupt due to the difficulty of adapting to the new environment and policy pressure.
Analysis of the current situation of financial management of small and medium-sized enterprises in China
At present, the current situation of financial management of small and medium-sized enterprises in our country is not optimistic. A considerable part of China's small and medium-sized enterprises blindly pursue sales volume and market share, ignoring the core position of financial management, and limiting enterprise management to a production-management management pattern. At the same time, many small and medium-sized enterprises are limited by their size and personnel quality, and often have incomplete accounting and lack of financial management. In addition, due to changes in the macroeconomic environment and the influence of the economic system, they have also encountered obstacles in strengthening financial management, and the role of corporate financial management has not been fully utilized.
(1) Shortage of funds and poor ability to raise funds
The registered capital of small and medium-sized enterprises is small, the capital strength is limited, and the number of real estates recognized by banks such as land and housing is small. At the same time, many small and medium-sized enterprises are in a period of growth and development. The demand for capital at this stage is the largest in the production cycle of the enterprise, and the shortage of funds has become a bottleneck in its development. The main external problem faced by small and medium-sized enterprises in raising and financing is the lack of government support, resulting in few financing channels so that they can only raise funds through indirect channels, it is difficult to obtain funds, resulting in insufficient follow-up funds, which has become a key issue restricting their development.
First, there is discrimination in bank credit policies. The distribution of credit funds is overly tilted towards large and medium-sized state-owned enterprises, but small and medium-sized enterprises do not receive the credit support they deserve, and the scale of credit investment in them is extremely disproportionate to their proportion in the total economy. At the same time, the loans of financial institutions to small and medium-sized enterprises are limited to liquidity loans, and it is difficult to meet the funds required for long-term development. In terms of financial organizations, there is a lack of financial institutions that specialize in the development of small and medium-sized enterprises (especially small and medium-sized private enterprises).
Second, there is ownership discrimination in bank interest rate policies. The government and the central bank give more interest rate concessions to state-owned enterprises, but not to private enterprises. When floating interest rates are implemented, the fluctuation of private enterprises is often higher than that of state-owned enterprises. A few financial institutions have also adopted some non-compliance methods to increase loan interest rates for private enterprises without authorization or in disguise. These problems have increased the financing costs of private enterprises and put private enterprises at a disadvantage in market competition.
Third, in terms of direct financing, the capital market focuses on providing quality services to large enterprises. The management has always regarded stock listing as an effective magic weapon for large state-owned enterprises to solve their difficulties. As for the entry of small and medium-sized private enterprises into the corporate bond market and stock issuance, the management is repulsive. So far, there have been no examples of private enterprises issuing bonds.
Fourth, due to the disadvantaged position of small and medium-sized private enterprises in the market and the lack of government support, due to the low transparency of financial information of small and medium-sized enterprises, the guaranteed entity cannot be accurately implemented, and it is difficult to carry out good cooperation and communication with banks, that is, the asymmetry of information between banks and enterprises makes their natural credit ability low and their financing ability low, which further creates a shortage of funds.
(2) The level of financial management is not high
Small and medium-sized enterprises regard accounting more as a need for information disclosure or a means of bookkeeping, rather than as a management tool. In the accounting and bookkeeping process, the actual situation of the enterprise is often ignored, and sometimes incorrect information is generated, which is misleading to decision-makers, and even if the financial statements reflect existing problems, managers often do not pay attention to them and cannot use financial tools to service management.
(3) Imperfect financial management system
Judging from the actual situation, many small and medium-sized enterprises do not have a ledger at all. In addition, companies with a ledger also have problems such as kinship management, accounting and cashier confusion, and chaotic financial management. From the perspective of small and medium-sized private enterprises, enterprises have a hot inner urge to chase profits. In recent years, with obvious advantages such as flexible business methods and social functions, they have developed rapidly in the ocean of the market economy like a fish in the water. However, compared with the standardized modern enterprise system, there are many problems in its financial management system.
(4) Lack of investment budget decision-making function for funds
Since investment decision-making is not the main part of the daily financial activities of small and medium-sized enterprises in their operations, operators generally pay less attention to the planning and budget of funds. The behavior of small and medium-sized enterprises is often manifested as a lack of long-term planning, and most of the decisions of the enterprise are made by the operator alone based on experience. At the same time, because the organizational structure of small and medium-sized enterprises is generally unsound and there are few financial personnel, they are generally busy with daily financial work and do not have more energy to carry out this work.
(5) Lack of scientific management of assets and weak control
Small and medium-sized enterprises generally do not have a strict system for asset management, and there are more artificial roles in management. Manifested in the following aspects：
First, there is a lack of analysis of accounting information. It is believed that the preparation of accounting statements is already a phased summary of accounting work, and there is no need for further analysis. It is believed that accounting work is only accounting for income, costs, profits, and tax income, ignoring the analysis and utilization of accounting information.
Second, there is no control over inventory, and a large number of inventory products take up a lot of funds, resulting in sluggish funds and poor turnover.
Third, the control of accounts receivable is not strict, which makes it difficult to recover a large number of funds. Generally, there is no strict credit sales policy. When the sales are in good condition, no attention is paid to the recovery of funds. Often when the turnover is not good, the funds are difficult to recover, and there is no strong collection measure, which often forms a large number of bad debts.
Fourth, the lax management of cash has caused idle or insufficient funds. Some companies do not have a favorable investment method when they have sufficient cash, resulting in idle and wasted funds, while some companies have no plans to use funds blindly and fall into financial difficulties, leading to corporate crises.
Fifth, the custody of assets is unfavorable, and there is no perfect management method for raw materials, semi-finished products, fixed assets, etc., which makes it impossible to check when there is a problem, and the loss of assets is serious.
Countermeasures to improve the financial management of small and medium-sized enterprises
Due to the small scale of output of small and medium-sized enterprises, the low composition of capital and technology, and the large influence of traditional systems and external macroeconomics, the current situation of financial management of small and medium-sized enterprises in our country is not optimistic. To better solve the problem, small and medium-sized enterprises themselves should pay attention to market research, improve the internal financial management and operation mechanism of the enterprise, adopt scientific management methods, and strive to improve the comprehensive quality of the enterprise.
(1) Set financial management goals that meet one's own needs
The consistency of ownership and control of small and medium-sized enterprises eliminates the need for financial management to spend a lot of supervision and incentive costs like large enterprises, but the goal of financial management to maximize shareholder wealth or maximize corporate value has not changed. Business owners should fully realize that financial management is the core content of enterprise management and make necessary investments. The financial management of an enterprise can be used as a means of operation and management to ensure the realization of the goal of maximizing the value of the enterprise.
This point has not been taken seriously in the companies mentioned earlier. Although these small business operators have their own near-term, medium- and long-term goals in their minds, and they also have an inherent motivation to pursue profits, they have not formed specific financial goals. Each enterprise has set certain business indicators, but it has not been transformed into realistic financial indicators on this basis. After any business indicators are achieved, they must be attributed to the realization of financial indicators. Only when the final financial goals are achieved can the company's survival and development be guaranteed.
(2) Strengthen one's own ability to raise funds
Insufficient funds are a key issue restricting the survival and development of small and medium-sized enterprises, and it is also an issue that the national management has been paying attention to and committed to improving recently. Solving this problem requires the support of the government and the efforts of the enterprise itself.
First, the government supports and enhances the external financing capabilities of enterprises. Reference can be made to the financing methods of small and medium-sized enterprises in the United States. It can be seen from the information that there are mainly the following financing methods in the United States: first, personal deposits; second, loans from friends and relatives; third, commercial bank loans; fourth, financial investment companies; fifth, government funding, issued through the Small and Medium-sized Enterprise Administration; sixth, securities financing; seventh, insurance companies; eighth, social development organizations. This shows the broad external financing channels for small and medium-sized enterprises in the United States.
Based on learning, the external managers of small and medium-sized enterprises can choose methods suitable for our country's national conditions, such as encouraging small and medium-sized enterprises to borrow from friends and relatives, continuing to accelerate the establishment of a credit guarantee system for small and medium-sized enterprises, especially science and technology-based small and medium-sized enterprises, encouraging state-owned commercial banks to increase loans to small and medium-sized enterprises, establishing policy-based financial institutions, setting up special funds for small and medium-sized enterprises, speeding up the establishment of the second board market, improving the capital market, and enabling efficient small and medium-sized enterprises to issue corporate bonds to create financing conditions for small and medium-sized enterprises.
At the same time, the state should strengthen external management, strengthen policy support, promote the standardized development of small and medium-sized enterprises, and implement unified leadership and hierarchical management of small and medium-sized enterprises. Further, improve the policies and regulations of small and medium-sized enterprises.
Second, small and medium-sized enterprises themselves should strive to overcome the weakness of weak financing capacity. Improve one's financing ability by improving commercial credit and standardizing the use of financial statements. When encountering financial difficulties, one should also fully explore one's capabilities. For example, the internal employee financing method adopted by Xiamen Sunshine Mechanical and Electrical Import and Export Co., Ltd. mentioned in the case is a good attempt oneself. This is similar to the employee shareholding plan in a joint-stock company. On the one hand, it solves financial difficulties and provides a strong guarantee for the source of funds; on the other hand, it can stimulate the enthusiasm of employees within the enterprise and promote the long-term development of the enterprise.
(3) Strengthen the financial budget function and standardize the use of funds
Give full play to the functions of financial management, budget, control, and supervision. Financial managers should strive to improve their quality and can actively participate in the formulation of the company's strategic plan. Of course, this requires the owner's financial support and adopts a rolling budget or a comprehensive dynamic budget system that can be continuously adjusted to provide managers with detailed information so that the budget can more serve the needs of the company's strategic management and make the budget closer to the continuous planning process. Managers of enterprises should be able to make corresponding decisions through financial information.
(4) Strengthen financial analysis and control
On the one hand, we must strengthen financial analysis and establish an effective financial supervision system. Ensure that the policies already formulated by the enterprise are effectively implemented, and strengthen the financial management and supervision of the company's debts, assets, investment recovery, cash return, and asset appreciation. Strengthen financial control and improve the level of capital utilization. In the distribution of profits, enterprises should give priority to accumulating, enriching capital, maintaining a good capital structure, striving to improve the efficiency of the use of assets, forming a reasonable capital structure, and maintaining appropriate liquidity, so that the use of funds produces the best results, and rationally allocates funds.
Strengthen the analysis of accounting information, and cannot rely on subjective feelings in decision-making, and subjective preferences in internal management. It is necessary to carry out cost and profit control in a practical manner, analyze the business environment and business objectives of the enterprise, analyze the business strategy of the enterprise, analyze the input and output of production factors, and comprehensively analyze the economic benefits of the enterprise to improve the management level and economic benefits; on the other hand, strengthen the external supervision function. Give full play to the role of accounting firms, audit firms, and other institutions, strengthen services and verification, to improve the level of financial management of small and medium-sized enterprises.
(5) Improve the internal financial management system
A good financial management system is the institutional guarantee for improving the financial management of small and medium-sized enterprises. Only by improving the internal organizational structure of small and medium-sized enterprises and establishing a financial management system suitable for them can they truly provide institutional protection for the financial management of enterprises.
First, establish and improve the internal organizational structure. Divide the powers and powers of each position or staff member within the organization, and establish a corresponding post responsibility system, so that the authorized person and the executive have a clear division of labor, and the executive and the auditor have a clear division of labor.
The company's financial department should clarify its functions and conscientiously implement the relevant national financial management systems; establish and improve various rules and regulations for financial management, prepare financial plans, strengthen business accounting management, reflect and analyze the implementation of financial plans, and inspect and supervise financial discipline; actively serve business management and promote the company to achieve better economic benefits, strictly implement savings, and use funds rationally; rationally distribute the company's income and complete the taxes and management expenses that need to be paid promptly; understand and inspect the financial work of relevant institutions and financial, tax, and banking departments, and take the initiative to provide relevant information to truthfully reflect the situation.
Second, build a sound financial accounting system and hire high-quality accounting personnel. Accountants and cashiers must be strictly managed separately to avoid the loss of funds. Business managers themselves must correct the misconception that they want to evade taxes. Of course, legal tax avoidance is an issue that companies should consider. The establishment and improvement of financial systems include:
- The reimbursement system stipulates which items can be reimbursed and which items cannot be reimbursed, and stipulates the approval procedures for reimbursement;
- The property management system strengthens asset control and operation management, stipulates collection and registration methods for daily necessities, and stipulates registration and custody methods for fixed assets;
- The management of cash and bank deposits. It mainly stipulates the collection and management methods of cash and cheques;
- The accounts receivable management system. Excessive accounts receivable often cause insufficient liquidity and poor capital turnover of enterprises, forming corporate risks. Therefore, it is necessary to set up a relevant management system and designate special personnel to strengthen management;
Cost analysis system. The current accounting in our country is often an after-the-fact record. Accountants should be the managers of enterprises. Cost analysis is an important responsibility of financial accountants. Business managers should keep abreast of the company's receipt, payment, and balance, and understand the company's capital status and cash flow.
Corporate accounting personnel should regularly provide managers with detailed schedules of costs and expenses to help managers do cost analysis, cost control, and benefit calculation. It is also necessary to establish a wage system and a welfare system. Financial personnel should design a reasonable salary and welfare system within the scope permitted by the enterprise's costs to mobilize the enthusiasm of the enterprise's employees and retain talents.
Conclusion:
In summary, strengthening the financial management of small and medium-sized enterprises is a system project. It is necessary to establish an effective financial management system in combination with the actual situation of small and medium-sized enterprises and determine the financial management goals suitable for the enterprise. On the one hand, strengthen the ability of the enterprise to raise funds, on the other hand, improve the internal financial management system, strengthen financial budgeting and control, standardize the use of funds, and improve the efficiency of the use of funds. Our enterprises need to develop and strengthen financial management. I believe that the financial management system in small and medium-sized enterprises can be improved.