Basic Concepts of Company Financial Administration
Companies’ financial administration is generally understood to include book-keeping, invoicing and financial auditing. The legal requirements for financial administration vary somewhat depending on the form of incorporation and the company’s size.
Treasury management and cash management play a central role in a company's financial administration.
Treasury management means all activities which have as their purpose to increase yield from funds contained in the financial assets of the company, and to decrease cost of debt, in particular short-term debt. A company may also use debt to achieve financial yields.
When the concept of treasury management is understood broadly, its range of activities stretches into several operations of a company, such as product dispatch frequency and stock size. In most cases, it is difficult to unambiguously determine the best course of action for the entire company’s profitability. During decision-making, the achievable financial benefit and other benefits are often compared. Such other benefits may include, e.g., completion of deals. Provided that such situations are identified, they can usually be managed with the help of profitability calculations.
The financial markets provide for various instruments of investment, credit and risk management, which have been designed to assist with treasury management. The choice and use of such instruments are usually associated with profitability issues, where an evaluation is made between the applicable cost and yield factors. For further information regarding financing options and instruments, see [Equity Financing] and [Debt Financing].
In addition to administering the routine tasks relating to cash transactions, cash management, on the other hand, includes ensuring formally correct administration of a company’s finances. The tasks of the cash manager often include reporting on the sufficiency of cash funds and other related tasks.