Financing Of Marketing

To achieve the goals of marketing, the implementation of marketing activities, enterprises must find funds to finance their own marketing program. It can be either own or borrowed funds.

Before finding the required amount, it is necessary to calculate the level of expenses for each area of ​​marketing policy and strategy. This data is reflected in individual budget lines, first in the preliminary marketing program, and then in the marketing business plan, which becomes a binding document.

Obtaining a loan involves the risk of non-repayment of funds if the expectation of receiving a certain level of income from investments made on the basis of the loan has not been justified. This can lead to re-borrowing. This process can be repeated several times and then the enterprise will find itself in a “usurious stranglehold”.

In the sacred books: the Koran, the Bible and others, usury is directly condemned, considered as one of the greatest socio-economic evils. Only the Jewish Talmud – not holy scripture, but a collection of human interpretations of the Bible – calls on the Jews to give growth to strangers, but not to give to their fellow tribesmen.

The use of only the company’s own funds only limits its investment opportunities.

To determine exactly how much funds are required to achieve the goals, a preliminary analysis of the ratio of marketing costs and its economic effect is carried out. This analysis will allow attracting sufficient, but not excessive amount of funds.

Typically, the analysis of the costs of marketing activities is carried out in the following three stages:

• Analysis of financial statements. A comparison is made of receipts or sales of products with the costs of producing and promoting goods or services.

• Recalculation of the costs incurred for each marketing function: research, advertising, planning, control,


The basis for ensuring the financial side of the marketing program is the analysis of the estimated costs of collecting, analyzing, processing information about the markets and forecasting their capacity.

When planning and conducting marketing research, you need to focus on collecting only really necessary information. Often, companies collect, process and store huge amounts of data that are completely unused in the activities of the department or marketing specialists of the enterprise.

An example of the high cost of collecting marketing information is product life cycle analysis. Moreover, it can be a completely different life cycle in a wide variety of markets and their segments. The external market of any foreign state and the internal market, the market of the central region of the country and its peripheral regions, the prestigious segment and the mass one, and so on can be strikingly different.

Equally difficult is the question of the price level.

Price is the only marketing element that generates revenue. All other elements entail costs, being in fact designed to work to ensure that the price can be optimal for the enterprise in terms of the current strategy. Therefore, we say that the prices and pricing of the company occupy a special place in the marketing system.

Another area for analysis is advertising, sales promotion, customer service. It is especially difficult to assess these areas of marketing work, since a lot in this area is based on psychological nuances, which, of course, cannot be accurately quantified (financial).

These difficulties are superimposed on the difference in psychology, mentality of people of a given country and foreign ones, if a company seeks to enter foreign markets with its product.

The provision of services to consumers, both related to material objects and not related, is characterized by an extreme variety of acceptable options that have different effectiveness. Sometimes, product service translates into a specific line of business.

The question of determining the effectiveness of certain channels of product distribution is complicated.

Economic and organizational support for the company’s marketing plan is also associated with the training of its own staff or the involvement of independent organizations specializing in any areas of marketing. Even before starting activities in any direction, the enterprise must clearly define where and how the training of personnel or their professional development will be carried out.

In essence, all marketing is based on the information available, specially organized. An enterprise can obtain the necessary information on the side, from firms that are specially engaged in its collection, further processing, analysis, but this information can be too expensive. It is better to use it only when there is no way to do marketing research on your own and is significantly cheaper.

Rationally share the cost of obtaining the necessary information with some partners. Or collect information separately, but so that everyone is engaged in their own direction of research, and then all the data obtained is processed and used together.

In any case, the main difficulty lies in determining the costs of various activities. But in this matter, you can focus on the traditional level of prices in this industry, or conduct strict forecasting and cost accounting for each direction.

Enterprise finance functions

The finances of enterprises as an economic value category in the process of reproduction are manifested through their functions. The functions of enterprise finance are implemented at the microeconomic level, they are directly related to the formation and use of capital and monetary funds of enterprises in the conditions of their economic isolation and the satisfaction of private goods on a reimbursable equivalent basis.

Today, there is no consensus among economists both regarding the number and content of the functions of enterprise finance. However, for the most part, there are 3 key functions of enterprise finance 

Supporting function of enterprise finance

The supporting function of enterprise finance assumes that the enterprise must be fully provided in the optimal amount with the necessary funds, while observing a very important principle: all costs must be covered by their own income. The temporary additional need for funds is covered by loans and other borrowed sources . At the same time, optimization of sources of funds is one of the ways to obtain the highest financial result .

Thus, the providing function of enterprise finance is the systematic formation of the required amount of funds from various alternative sources to ensure the current economic activities of the company and the implementation of the strategic goals of its development. It should be noted here that it is finance in a certain sense that allows and forces the enterprise to use funds from various sources in its activities, including bank loans, loans, attracted funds in order to form the volume of resources necessary for doing business.

Distribution function of enterprise finance

The distribution function of enterprise finance is closely related to the provisioning function. Through the distribution function, the initial capital is formed, formed from the contributions of the founders, the basic proportions in the distribution of income and financial resources are created, an optimal combination of interests of individual commodity producers, economic entities and the state as a whole is ensured. The distribution function is based on the fact that financial resourcesfirms are subject to distribution in order to fulfill monetary obligations to the budget, creditors, and counterparties. Its result is the formation and use of targeted funds of funds, maintenance of an effective capital structure. Distribution relations affect the interests of both society as a whole and individual economic entities, their founders, shareholders, employees, credit and insurance institutions.

The gross domestic product produced in a country is intended for consumption by participants in the production process and others. However, before consumption, it must necessarily be distributed between the state, enterprises and the population. The distribution of GDP created in the sphere of material production occurs primarily at enterprises and other business entities through the distribution function of finance.

The distribution function of enterprise finance is to distribute the proceeds, other incomes and savings received by business entities in the appropriate areas. So, the proceeds received are directed primarily to reimbursement of the cost of the means of production used in the production process, and its remainder – gross income – is distributed to the wage fund for workers in the sphere of material production and net income ( profit ). Part of the net income (profit) is directed primarily to pay the corresponding taxes and payments to the budget, and the rest – to create reserves and funds of the enterprise. The distribution of income and savings received by enterprises is shown in the figure.

In other words, when distributing income and savings with the help of the distribution function of finance, funds and reserves are formed at enterprises, which are subsequently used for various purposes.

The distribution function separates finance from the sphere of action of money and turns them into an independent economic category, a tool for the distribution and redistribution of income and savings, the formation of appropriate funds and reserves. Through this function, the primary distribution and redistribution of GDP, created in the sphere of material production, occurs through the formation of centralized and decentralized funds of funds that are used for the needs of the state and enterprises.

Control function of enterprise finance

The control function of enterprise finance involves the implementation of financial control over the results of production and economic activities of organizations, as well as over the process of formation, distribution and use of their financial resources. With its help, control over the formation of the company’s own capital , the formation and targeted use of funds, and changes in the financial indicators of the enterprise is carried out . The implementation of this function in practice is associated with the use of various kinds of incentives and sanctions, as well as the corresponding financial indicators, on the basis of which the necessary measures are developed to improve the efficiency of all production and economic activities of the enterprise.

The control function of the finance of enterprises is manifested in the control over the implementation by enterprises of the volumes of production and sale of products, making a profit, the formation and targeted use of funds of funds, financial resources of enterprises.

Financial control covers all aspects of the economic activities of enterprises, including the distribution, redistribution, creation and use of all types of resources.

Financial control is control over the formation and rational use of material and financial resources at each enterprise and in the national economy of the country as a whole. The purpose of the control is to check the safety and correctness of the expenditure of material and financial resources in accordance with the current legislation and regulations, as well as to identify and prevent violations during their use.

Control over the economic and financial activities of enterprises is carried out by management bodies and departments of all levels in different directions:

state bodies – regarding the receipt of profit, the correctness of the calculation and the timeliness of the payment of taxes and payments to the budget and centralized extra-budgetary funds;

institutions of banks – regarding the procedure for lending and making settlements for enterprises.

At the same time, control over the activities of enterprises is associated with the application of various sanctions and incentives that contribute to the improvement and enhancement of the efficiency of enterprises.

Thus, the control function of finance allows you to identify the results of the work of enterprises, the shortcomings of their activities, and then take the necessary measures to improve the situation. The control function of finance at the national level is manifested in the organization of cash flows, in the timely formation of centralized monetary funds and their most rational and economical use, in creating certain conditions for the sphere of material production.

In the conditions of the modern economy, finance within the framework of the control function performs a rather important subfunction associated with combating the legalization (laundering) of proceeds from crime . Financial control in this respect is largely administrative rather than economic in nature. The need to strengthen it was caused by a significant increase in these phenomena.

The need for finance in the context of expanded reproduction

Expanded reproduction includes the continuous renewal and expansion of production assets, growth of GDP and its main part – national income, reproduction of labor and production relations. It is carried out using economic levers, commodity-money, financial and credit relations. An important role in the reproduction of all constituent parts of GDP belongs to public finance and enterprise finance.

The role of finance can be summarized in 3 main areas: 

1.  Financial support for the needs of expanded reproduction means covering all costs at the expense of financial resources (own funds, borrowed or attracted sources)

2.  Financial regulation of economic and social processes. Changing the growth rate of individual structural units for the restructuring of production in accordance with the needs of society. 3 types of economic regulation: – self-regulation, i.e. regulation of the economy by a market mechanism; – state; – regulation of the economy through the finances of enterprises (the enterprise itself determines the proportions between consumption and accumulation of funds).

3.   Financial incentives for the efficient use of all economic resources are carried out by the following methods: – through the effective investment of financial resources; – through the creation of incentive funds; – through the use of budgetary incentives; – through the use of financial sanctions.

4 . The relationship of finance with other economic categories

Finance is closely related to such categories of a distributive nature as money, wages, price, credit.

Finance and money. Finance is often (especially at the household level) defined as a certain amount of money that is at the disposal of a legal entity or an individual. Finance is always expressed in monetary terms. However, a certain amount of money is not finance yet. In addition, finance differs from money and in the functions it performs.

Finance and prices. Both price and finance are involved in the distribution of GDP. Price is a monetary expression of the value of any product. It acts as the initial degree of the distribution of the value of GDP and creates conditions for its further redistribution. The state, using various financial levers, influences the price level. When a product is sold, the price is determined based on supply and demand. Therefore, the market sometimes experiences sharp fluctuations in the general level of prices, which can significantly affect the state of the financial sector and the financial security of the state.

+Finance and wages. The relationship between finance and wages is manifested in the fact that the state regulates the amount of wages with the help of financial levers, in particular taxes, by creating national funds of financial resources. At the same time, the state, with the help of these funds, can stimulate the development of certain types of activity, and as a result, promote the growth of wages in certain areas.

5. Spheres and links of financial relations

Financial relations  are relations associated with the distribution, redistribution and use of monetary income.

All financial relations are responsible for the distribution of GDP and ND; participate in the formation of funds and funds, in their use. All financial relations control and regulate the distribution process.

In the general set of financial relations, three large areas can be distinguished: finance of enterprises, institutions and organizations; insurance; public finance.

Links are distinguished within each of the named spheres. The grouping of financial relations is carried out depending on the nature of the entity’s activities, which has a decisive influence on the composition and purpose of targeted monetary funds. 

Different links of the financial system serve different types of financial distribution: intra-economic – with the finances of enterprises, intra-sectoral – with the finances of enterprises, complexes, associations; inter-sectoral and inter-territorial – by the state budget, extra-budgetary funds.

Each link of the financial system is subdivided into sub-links in accordance with the internal structure of the financial relationships it contains.

6. Financial system of Ukraine

The financial system is a set of separate but interconnected spheres and links of financial relations, as well as financial bodies and institutions that manage cash flows in the country.

The organizational structure of a financial system is a collection of financial bodies and institutions that characterizes the financial management system. The separation of the governing bodies of the financial system is based on its internal structure.

Internal structure of the financial system. Finance is allocated in the following areas: finance of business entities, public finance, international finance, financial market, insurance.

Links: state budget, special purpose funds, state credit, public sector finance, foreign exchange market, finance of international organizations, international financial institutions, money market, capital market, credit system, securities market.

The organizational structure of the financial system of Ukraine includes:

a) governing bodies : – Ministry of Finance of Ukraine; – State Tax Service; – Control Revision Service; – Treasury Department; – the Accounts Chamber; – Audit Chamber; – Committee for supervision of insurance activities; – State Commission on Securities and Stock Market; – Pension Fund; – Social Insurance Fund; – State Innovation Fund.

b) financial institutions: – National Bank of Ukraine; – Commercial banks; – Insurance companies; – Non-bank credit institutions (pawnshop, credit unions); – Interbank Currency Exchange; – Stock exchanges; – Financial intermediaries in the securities market.

7. Essence and significance of financial policy

Financial policy is the purposeful activity of the state in the formation and distribution of funds of the state funds for the implementation of its functions and tasks. Financial policy is a set of government measures aimed at stabilizing and increasing financial resources, their rational distribution and efficiency of use.

8. Financial mechanism in the implementation of financial policy

The financial policy finds its practical embodiment in the financial measures of the state, which are implemented through the financial mechanism. It is a set of methods for organizing financial relations used by society in order to ensure favorable conditions for economic development. The financial mechanism includes the types, forms and methods of organizing financial relations, ways of quantifying them.

The state, represented by its executive and legislative authorities, on the basis of a thorough study of the operation of economic laws, patterns of development of finance, tasks of economic and financial policy, establishes methods for the distribution of the social product, national income, forms of monetary savings, provides for the types of payments, determines the principles and directions of use of state financial resources, etc.

When considering the financial mechanism from the point of view of its impact on social reproduction, its functional links are distinguished: financial planning and forecasting, financial indicators, financial levers and incentives, financial control, resource mobilization, financing, incentives, etc.

Consequently, the financial mechanism is a set of forms and methods, tools and levers for the formation and use of funds of financial resources in order to meet the needs of the state, business entities and the population.

The financial mechanism plays a special role in the implementation of the financial policy of the state. The modern financial mechanism is designed not only to create a real financial base to ensure the economic independence of the state, but also to ensure economic regulation in the conditions of a functioning market and a mixed economy.