Principles and Functions of Monitoring the Financial Condition of an Enterprise: A Critical Review of Scholarly Approaches

Abstract

The relevance of the topicstems from the shortening horizon of predictability in the operations of Ukrainian enterprises, under which discrete retrospective analysis of financial statements loses its managerial value: by the time adverse deviations are detected, the enterprise is usually already in a fully developed crisis. This necessitates a shift from periodic assessment of financial condition to its continuous observation. At the same time, the theoretical and methodological foundation of monitoring remains insufficiently structured: it is conflated with financial analysis, diagnostics, internal control and controlling, while the statutorily prescribed set of principles of financial monitoring in its legal sense is mechanically transferred into research on intra-firm observation of financial condition. The purpose of the article is to provide a critical review and systematisation of scholarly approaches to defining the principles and functions of monitoring the financial condition of an enterprise, and to substantiate an ordered, internally consistent system of these. The methods applied include structured content analysis of scholarly sources, morphological analysis of definitions, comparative analysis, classification and typologisation, structural-level decomposition, scientific abstraction and theoretical generalisation; the empirical base comprises 43 publications selected according to criteria of thematic relevance, DOI verifiability and publication tier. It is established that monitoring should be distinguished from adjacent categories by three generic attributes: the mode of observation, the presence of predefined benchmark and threshold values, and the mandatory managerial output, the last of which is decisive yet most frequently left unarticulated in domestic definitions. Five approaches to the interpretation of principles are identified, revealing a persistent asymmetry in the field: four of them formulate requirements concerning the quality of input information, the statistical properties of the model, or the alignment of indicators with strategy, and only the information-technological approach treats continuity as a constitutive rather than declarative principle. The scientific novelty lies in a two-level structuring of the principles of monitoring, distinguishing constructive principles that define the architecture of the observation system from operational principles that govern its functioning over time, and in defining the functions of monitoring through the outcome they produce for the management system, with each function supplemented by an operationalisation attribute, an effectiveness indicator and a typical degeneration risk. The regulatory-activating function is identified as the weakest link, being where the gap between signal and managerial action most often arises. The practical value lies in providing financial managers with a diagnostic tool for assessing existing monitoring systems.