Financial Management Systems

I know what you're thinking: You've learned all about accounting, and you know what your business needs to do and what you need to track in order to thrive—only then, you find out there's a whole new type of accounting software to learn about to manage your company's cash. I get it. But hear me out—there's a big difference between accounting systems and financial management systems, and it really is important for you to consider both when approaching your business funds.

In this Buyer's Guide, we'll cover the basic need-to-know aspects of financial management systems, including a definition and an overview of some key features of the software.

What Is a Financial Management System?
How Do Financial Management Systems Fit Into ERP Software?
Common Features of Financial Management Systems
Benefits of Financial Management Systems

What Is a Financial Management System?

A financial management system is made up of both software and strategies that companies can use to supervise and manage all finances, including income, expenses and assets, with the goal of increasing profits and maintaining steady income.

So what's the difference between financial management and accounting? To put it simply, accounting is record keeping, and financial management is using those records to actually manage your money. Where accounting software is designed to document and classify all of your business transactions, financial management software goes a step further to track, analyze and report financial data that can help you do a lot of things, such as:

• Make informed decisions about where to spend money
• Present your business to potential investors
• Accurately calculate your company's value, including nonmonetary assets and resources

Companies can certainly function without a financial management system in place, but only up to a point. A good rule of thumb is, if your business is big enough to benefit from an enterprise resource planning (ERP) system, it's big enough to benefit from a financial management system as well. In fact, quite a lot of ERP software includes financial management modules in its functionality.

How Do Financial Management Systems Fit Into ERP Software?

When you think about everything an ERP system does, it makes a lot of sense that so many of these products include financial management features. The main function of an ERP system is to connect every department within a company to ease the transfer of data, provide higher visibility of all business processes and empower managers to make better decisions.

While financial management software can function as a stand-alone solution, it can provide even more accurate feedback for managers when linked to ERP systems. In turn, an ERP system's reach across the entirety of your company can enhance financial management software in many ways. For example:

• Connecting manufacturing data, stock levels and sales trends to financial tracking systems results in more refined demand forecasting, which means knowing exactly how much to spend on production.
  
• Data collected from asset tracking features can improve financial reporting and make it easier to decide where to invest in resources and where there's no need to spend that money.
  
• Through combined reporting capabilities, ERP and financial management systems provide the deepest level of insight into your company's financial health.

Common Features of Financial Management Systems

It's useful to know how ERP and financial management systems work together when integrated into one product, but don't forget that you can implement a stand-alone financial management product without having to invest in a more expensive ERP system. But regardless of what route you take, you'll want to make sure the financial management system you're getting includes some essential functionality:

Benefits of Financial Management Systems

Because it's always good to know what value you should anticipate from new software, let's take a look at some of the main benefits you'll see from a financial management system.

• Things happen faster. Information is made available in real time, so you get an instant view of what's happening with your finances at any given moment. Also, you can make decisions quicker without having to wait for information.
  
• Revenue goes up, expenses go down. By being able to see exactly what's bringing in money and what's taking it out, you'll be able to cut any unnecessary costs and focus your resources on improving what you do best.
  
• Everything happens in one place. Well, everything to do with your money, that is. A designated financial management system can handle processing and tracking all of your transactions to ensure consistency and accuracy.

All of these (and many other) benefits combine to make financial management software a valuable tool for any business, but before you run out and buy a new system, it's useful to take the time to assess your company's needs. Make a list of features you need to get out of financial software and jot down any questions that come up in the course of your research. That way, you can be completely confident that whatever product you select meets all your needs and answers all your questions.