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.
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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