A financial management system is the methodology and software that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability.
An effective financial management system improves short- and long-term business performance by streamlining invoicing and bill collection, eliminating accounting errors, minimizing record-keeping redundancy, ensuring compliance with tax and accounting regulations, helping personnel to quantify budget planning, and offering flexibility and expandability to accommodate change and growth.
Other significant features of a good financial management system include:
- Keeping all payments and receivables transparent.
- Amortizing prepaid expenses.
- Depreciating assets according to accepted schedules.
- Keeping track of liabilities.
- Coordinating income statements, expense statements, and balance sheets.
- Balancing multiple bank accounts.
- Ensuring data integrity and security.
- Keeping all records up to date.
- Maintaining a complete and accurate audit trail.
- Minimizing overall paperwork.
ERP financial management software should include features that support creation of ad hoc reporting as well as month-end closing, quarter closings and year-end reporting.
Understand the basics of a financial management system