Three Modes Of Financial Management In Enterprise Groups

The financial management mode of enterprise group members can be divided into three types: centralization, decentralization and decentralized management under the guidance of group headquarters.

Centralized financial management mode: the group of the mode and the financial power are mostly concentrated in the parent company, and the parent company takes strict control and unified management on the subsidiary company.

Centralization is characterized by highly centralized decision-making power in financial management and only a small part of the financial decision-making power of a subsidiary. Its human property and production and marketing are controlled by the parent company. The major financial matters such as capital raising, investment, asset reorganization, loan, profit distribution, expenses, wages and bonus distribution, and appointment and removal of financial personnel are all managed by the parent company.

The parent company usually produces the tasks of production and operation, and controls the production and operation activities of the subsidiary by direct management.

To a certain extent, a subsidiary is only a subsidiary factory or branch company of the parent company, and its investment function is entirely concentrated on the parent company.

Centralized mode of financial management advantages: one is easy to command and arrange a unified financial policy, reduce administrative costs; two is conducive to the parent company to play the role of financial regulation and control, complete the group's unified financial objectives; three, it is beneficial to play the role of the financial experts of the parent company, reduce the company's financial risks and operational risks;

One of the defects is that the financial management authority is highly concentrated on the parent company, which is easy to dampen the enthusiasm of the subsidiary companies, inhibit the flexibility and creativity of the subsidiaries, and the two is the decision pressure is concentrated on the parent company.

"Decentralized" financial management mode: the sub company has sufficient financial management decision-making power, and the parent company's management is indirect.

Its main features are: financial rights, subsidiary companies have full decision-making power in capital integration and investment and application, financial expenses and expenses, financial personnel selection and dismissal, wages and benefits, bonus and so on, and make greater financial decisions in actual situations. Management parent companies do not use mandatory way to intervene, but indirect management is the main reason. Business encourages subsidiaries to take an active part in competition and seize market share.

The centralization and decentralization of authority are different from each other, and their advantages and disadvantages are opposite.

The advantages of financial management of decentralized enterprise groups are: first, the subsidiary has full initiative, quick decision making and easy to catch business opportunities; two, the parent company's decision pressure is reduced, and the direct intervention of subsidiaries is reduced.

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The defect of this mode is: it is difficult to unite command.

The two is to weaken the financial control function of the parent company, and not to discover the risks and major problems faced by the subsidiary companies in time. Three, it is difficult to effectively restrict the operators, resulting in the problem of "internal controllers" of the subsidiaries.

Decentralized management under the guidance of group headquarters: absolute centralization and absolute decentralization do not exist. The decentralized management mode guided by group headquarters emphasizes decentralization based on decentralization. It is a centralized mode of fund raising, utilization, recovery and distribution, participation in market competition and bottom-up multilevel decision-making.

This mode can not only give play to the financial control function of the group parent company, stimulate the enthusiasm and creativity of the subsidiaries, but also effectively control the risks of the operators and subsidiaries, help overcome the defects of excessive centralization or decentralization, and be advantageous to the advantages of comprehensive centralization and decentralization, and it is a relatively ideal mode pursued by many business groups.

The main factors to be taken into consideration in the choice of the group financial management model are that the three models are different. Generally speaking, the choice of the financial management mode of the enterprise group should mainly consider the factors such as the ownership concentration, the nature of the subsidiary company, the group size, the manager style of the parent company and so on.