Enterprise Group Financial Control

Since the recent economic reforming and open door policy, the national group companies have experienced formation and early development stages, and starts to represent more significant force in the national economic growth. At the mean time, the lack of internal financial control management has become a strong hurdle which impedes the scale expansion of the group companies. This issue is not only a theoretical one, but also more of an operational and practical topic, and has strong implication to the group companies. This paper outlined the preliminary analysis and application of financial control management of group companies in China. First of all, the paper compared the start and development period of the group companies in China to those of the western companies, and concluded that the main reason for the lack of appropriate financial control management system in the national group companies is because of the governmental guidance and support structure of the economy, rather than the market driven economy of the western countries. Secondly, focused on the group company hierarchy and complex organization structure, the paper compared the functions of the financial management activities of the group to that of the parent companies, and pointed out that the financial control system is the essential core function. Thirdly, the paper defined the group company financial control concept, analyzed control system management, controlling objects, control techniques, and controlling objectives. The intention is to base on the internal demand of the financial control, focusing on the practical and operational aspect of the financial control system of the group companies, and concluded, the financial control system is not a simple and traditional sense of finance related issues. It is related to the share holding structure, the organizational management system, the human resources system, the capital budgeting, and management techniques. Fourthly, the paper discussed the implementation of the four aspects of financial control mentioned above. Related to control system management, the group companies need to strengthen their organizational system, improve organizational structure; related to controlling objects, the companies need to control its capital allocation and human resources; related to the control techniques, the companies need to strengthen its management regulations; related to the controlling objectives, the companies need to perfect its evaluation system. The financial control system should include all of these aspects. Finally, the paper used AW group company as an example to illustrate the application and implementation of the above mentioned principles, and explained in detail about the process to establish and implement the financial control system in group companies.