Transformation Of Private Company Financial Management - Accounting, Management And Operation

Private economy has developed only for a short time and remains immature in China. Many private enterprises develop rapidly by catching certain opportunity, but they soon go to closure because of the lack of internal management mechanism, the focus only on extensive expansion and not on intensive operation, especially the loose of financial management and poor capital operation causing financial crisis. At present, there are numerous book studies the capital model of holding companies more than the model under which private enterprises operate. The author emphasizes the financial problems of private enterprises in the transition period and presents the solutions on the basis of his own experience and financial management practice. This essay studies the case of ABC Pharmaceutical Co.. After five years of expansionary development, the corporation has increased from 3 million yuan to nearly 300 million yuan in assets with yearly sales income over 140 million yuan. However the corporation's further development gradually reveals the chaos and deficiency in the financial management mechanism. Ownership finance confuses the finance of legal person; financial objectives of corporation and working staff have little in common. Corporation headquarter exerts weak financial control over the subordinate enterprises. The corporation has vague financial objectives and loses control of operation expense, input and output are improportional, and capital input isn't planned, advanced and systematic. Management responsibility of assets isn't clearly classified, assets control is weak at different levels, management is in disorder, and resources are seriously wasted. After the 140 million investments in fixed assets, marginal security of operation lowers greatly while the ratio of liability to assets increases enormously, so the financial risk aggravates. This essay deeply analyses the financial activity, and tries to make clear the potentially deep financial crisis by analyzing the profit composition, stock assets adaptability, fund-raisings as well as capital cost, financial structure and money flows. It then goes to the transition and restructuring of financial relations between the legal person and ownership, ownership and management, corporation and workers. This paper analyses the present economic, financial and social environment, establishes the financial strategy to realize the aim, and emphasizes the mature and sound financial strategy after the rapid development. It also erects systematic and scientific financial management ideas, analyses the financial management mechanism transition from vague to regular. Long-term investment management changes from subjective centralized style to democratic and scientific decision-making, assets management change from vague responsibility to clear definition, and special attention is paid to protect invisible assets. The focus of fund-raising management changes from quantity to capital cost and the corporation's value maximum. The corporation should carry out fiscal budgetary management, enhance the secondary accounting in the subordinates. At last, the corporation should change from product operation to capital operation, conduct shares diversification and capital expansion of various types. The corporation's financial mechanism should transfer from external expansion to human-based, strategy-oriented, management-regularized. This paper sticks to reality, seeks common character from individual cases, tries to reveal the comprehensive internal economic principles of private enterprises, and gives out it's solutions to solve the financial management problems in the transition period.