Improved Financial Management Of Private Enterprises

Chinese private enterprises, which originated in the shortage economy era of 1980s and grew with the adjustment of the state-owned economy in the 1990s, have gained a great momentum in their development in recent years. Today, the private enterprises have become one of the significant sections in supporting the growth of the economy, enhancing employment and sustaining social stability and have demonstrated an increasing prominence in its role and status along with the adjustment of state-owned economy. The private enterprises have encountered an important opportunity of development endowed by the "Decision on The Issues Concerning to Improvement of Socialist Market Economy" enacted in the 3rd Plenary Session of the 16 National Congress of CPC. However, according to statistics, the private enterprises have only an average lifespan of no more than 2.9 years! And in recent years there has even been a saying that the private enterprises are Seven-year Itch. What should be held accountable for the early death or stunt growth of private enterprises in their early stages? Among various reasons, the main one is that the financial management falls short of the need of the development of the enterprises.In my opinion, there currently exist two problems in the financial management of private enterprises: one is the scant awareness of the upper echelons of enterprises about financial management and inadequate concept about the cost of capital, the value of time and opportunity cost. The administrators fail to adjust the ways of financial management at different stages of development from strategic prospective and ignore the cultivation and optimization of corporate culture as well as the role it plays in enterprises. The other is the weakness of internal financial control, featured by institutional imperfection, systematic insufficiency and indefinite financial goals. Deng Xiaoping once said that "A good system can prevent the perpetrator from doing evils while a bad system will spoil a well-doer." Thus, enhancing the institutional construction of financial control is a key to the improvement of financial management of private enterprises, on which this paper will focus.First of all, this paper will briefly discuss the four ideas to improve the financial management of private enterprises from the prospective of a high-level administrator: strengthening strategic control on financial affairs; perfecting the frameworks of corporategovernance and organization; stepping up the construction of corporate culture and exerting overall financial control with financial network.The second part makes up the main part of the paper. By virtue of many years of accumulated experience in financial practice, as well as over two years of systematic study at the Business School of Zhengzhou University, especially under the earnest guidance of Professor Fan Shiqiu, I have finished the institutional designs of internal financial control on daily currency capital, sales and gathering, purchasing and payment, cost and expenses. Each operation has been elaborated in four aspects such as its characteristics, goal of internal financial control, operational flow and critical control points, so that the institutionalization, systemization and specification of internal financial control can be clarified.This paper chiefly discusses the specific measures and operational criterions in the financial management of private enterprises in terms of consolidating the institutional construction of their inner financial control. I believe that it caters to the characteristics of MBA (practice-oriented) and serves as a practical requirement of MBA. I hope this paper will be of help and edification in boosting the improvement of the financial management and the sustained, stabilized and healthy development of private enterprises.