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Benefits of business finance software

Benefits of business finance software

As a mid-sized or small business owner, growth is probably one of your main goals. With the right financial management software, you can simplify complex financial processes, gain clarity over expense tracking and business budgeting, improve profitability by reducing costs, and deliver better client service, all at the same time.

What is a financial management system?

Whether you’re the owner of a medium or small business, or you’ve successfully scaled to enterprise-level operations, you need to find a way to support your growing operations while addressing increasing financial management needs.

Automating the financial planning process with comprehensive accounting software enables small business owners to gain better control over their finances and reduce human error when generating financial reports.

A financial management system (FMS) is a special type of software that organizations use to identify and manage assets, income, and expenses. This type of accounting software is a one-stop solution for business leaders to create, store, and report all types of finance transactions.

Financial management systems help businesses support their daily, quarterly, and annual financial operations. With the right accounting features, keeping track of money and organizing all aspects of it feels practically effortless—especially when it comes to everyday operations, such as:

  • Invoices
  • Bill collection
  • Daily, monthly, quarterly, and annual cash flow
  • Providing budgeting options and forecasting predictions
  • Inventory management
  • Managing business bank accounts
  • Automating financing processes to reduce errors
  • Ensuring compliance and determining tax obligations with accounting standards to avoid audits
  • Optimizing profitability and predicting long-term sustainability

For business owners today, the most common solution for financial management is budget and expense tracking software—but before computers were standard in business, many companies relied on other accounting software options, like electronic spreadsheets and paper books.

Let’s dive into the different types of financial management systems that can help with business accounting.

System #1: Finance and accounting software

Finance software helps automate processes and keeps track of every dollar that comes in and goes out.

Typical software includes modules for budgeting and expense tracking. Budgeting functionality will help you control spending and see transactional data in real-time. And with expense management, your business can track and analyze business expenses and store your expense data in one location.

Modern financial and accounting solutions for businesses will also have the ability to calculate a company’s sustainability through statistical forecasting predictions. Some software solutions may also offer pipeline tracking, asset management, fund management, and data warehousing.

With no room for error, finance software records, categorizes, analyzes, and presents accurate financial transactions within the business. You’ll also be able to track your investments, levels of debt, and savings accounts so you can find growth opportunities and make smarter spending decisions.

System #2: Financial spreadsheets

Although traditionally done by hand, most spreadsheets are done electronically these days. You can use them on their own or in conjunction with your financial management software.

No matter the size of the business, spreadsheets are a timeless way to record, organize, and review financial information via categories and formulas.

A spreadsheet can store essential business data, provide business calculations, offer budgeting and spending insight, generate reports, keep track of administrative tasks, and even help create forecasts.

However, spreadsheets have a major weak spot—they are vulnerable to human error.

Around 9 out of 10 spreadsheets contain errors due to wrongly entered data, overwrites, and copy and pasting mistakes. Spreadsheets can also be extremely time-consuming to create and review since they need to be customized from scratch.

System #3: Paper bookkeeping

Keeping track of finances with paper books is the oldest and most traditional method for finance management. (In fact, some of the earliest accounting records were found 7,000 years ago in ancient Mesopotamian ruins.)

Since bookkeeping is done by hand, business leaders are given a more intimate look into their business accounting. Paper bookkeeping requires daily, weekly, and monthly processing and reporting to ensure nothing slips through the cracks.

Unfortunately, there are reasons that this method of manual accounting has become outdated and outmoded. Paper accounting books are incredibly time-consuming, leave too much room for human error, don’t provide backup records, and of course, contribute to environmental issues.

Top benefits of business finance software

As we dive deeper into the 21st century, small, medium, and enterprise-level businesses, corporations, and government agencies all heavily rely on computers and automation. It’s easy to see why: there’s a growing need for automatic business finance software to keep up with an increasingly complex environment.

Financial management software offers customizable solutions that help businesses tackle their everyday accounting tasks. With the right technology, income and expense tracking, finance management, and expense reporting are finally an effortless process.

Benefit #1: Gain control and visibility of your budget

As a business leader, you realize how essential it is to know when you go over budget. Business financing software is all about the ease of recording, organizing, and analyzing your transactions so you know what you have, what you can spend, and where you’ll be financially next week, month, year, and decade.

All of these financial data insights allow for better budgeting, planning, and forecasting.

Instead of manually managing your budget with a spreadsheet or by hand, you can automate the process with a business finance software solution. What would typically take you days by hand now takes just a couple of minutes with automation.

Within moments, automated software like this can monitor your spending and income, which can help you create a budget that reflects your finances in real-time. This is powerful information because you can use it to make proactive decisions and stay in control of your finances.

After all, you can’t create an effective budgeting strategy with outdated data.

Nearly a third of small businesses exceeded their budgets in 2020—but by automatically tracking your spending habits and income vs. expenses with financial software, you can better understand your business’s finances.

And greater understanding will help you manage your finances more effectively so you can stay ahead in an increasingly competitive market. With tools like automatic payments, financial report generation, and invoicing reminders, your business is always one step ahead.

Benefit #2: Reduce human errors and operational costs

Operational costs are the expenses directly related to the operations of a business so that the company can remain open and keep generating an income. Standard short-term operational costs include labor, utility bills, and office supplies, while long-term expenses include insurance, marketing, maintenance, and property taxes.

The hours your accounting staff spends creating budgeting sheets, recording, and analyzing operational costs like these can be reduced to minutes with automation.

With automated financial reporting, you’ll also have better accuracy and more clarity. Then, with a clearer picture of these costs, you can decide where to reduce operational spending and still generate the same output.

Even better, lowering operational costs can lead to a more productive and efficient team, which no business owner would argue with.

Ultimately, automated financial management software can minimize the amount of time spent on manual processing, which leaves more man-hours available in your company to focus on other aspects of projects that require human attention.

It also greatly reduces the problems caused by human error. For example, nearly 88% of recorded cybersecurity breaches are human errors, most often caused by a distraction or poor decision making.

Cybersecurity breaches are a significant issue that can hurt a company’s reputation and cost millions in recovery and repairs.

Computers don’t get distracted. They make decisions based on statistics, thus increasing your company’s efficiency and accuracy and leaving little to no room for future mistakes.

Benefit #3: Ensure privacy compliance

Something that may slip under the radar is ensuring that you’re meeting privacy compliance regulations. You’re likely familiar with privacy regulations like GDPR, CCPA, and PIPEDA, which are put in place to inform consumers how your business gathers, uses, discloses, and manages their personal information.

And, as the amount of data you collect increases, so does the global privacy regulatory landscape. Your reputation as a business matters more than you might think, so you need to ensure that you’re:

  • Handling all your current data per the legal privacy requirements and rules that regulate business practices in your industry
  • Fulfilling client expectations and continuing to maintain their trust by ensuring you’re doing everything possible to protect data

Modern finance software will adhere to the latest privacy requirements, making compliance far easier to manage.

5 key elements when choosing business finance software

When it comes to choosing business finance software, you need to look for essential elements that will allow it to keep up with your company’s needs.

Here are five key elements you should look for when choosing a business finance software system for your company—and why.

Element #1: Privacy and security

As you already know, security is one of the most important elements that you need to address as a business owner. Businesses are required to meet specific privacy laws and regulations to protect consumers’ and employees’ information. Without doing so, you risk being fined thousands of dollars or even shut down.

A good financial management system should offer features that focus on:

  • Controlled permissions: Who can and can’t access certain private information?
  • Automatic backups: How far back will data be saved?
  • Customized approval controls: What actions need to be approved first?

But security also goes beyond customer data protection—it’s for you, too. For example, these features can help if you were ever to be audited, which happens more often than you might think.

Finance software should keep track of every single transaction your company processes throughout the year, allowing you to produce the proper documentation for taxes, the IRS, or other agencies within moments.

Element #2: Ease of integration and platform use

No matter how specific new software appears to be, there will always be some element of a learning curve when you first start using it. While this is unavoidable, the learning curve should be a small one.

Adaptation is key, so businesses should be able to cut down on training costs for finance and accounting teams and save time with a solution that is easy to use and implement.

Try a software demo before you buy and look to answer essential questions, like:

  • Can less tech-savvy users understand the interface and how to work the program?
  • Is the interface intuitive and straightforward?
  • How many aspects of the software are automated?
  • Will employees learn the ins and outs of the software quickly?
  • Will transitioning to the software be simple?

The last thing you want is a steep learning curve and a confusing interface that brings you more questions than answers. Ideally, an expense tracking and accounting solution should be easy to use when brief yet proper training has taken place, with the key focus being on ease of integration.

Integration is one of the most important aspects of introducing new software to your business. The right finance analysis tools will utilize the data you have and combine it with your current financial goals to create a powerful cash flow management software solution.

The business finance software should integrate easily by leveraging your current payroll systems, CRM (customer relationship management), ERP(enterprise resource planning) systems, and payment processing systems with no added burden (or cost) to the process.

Look for typical integration features like API, data import and export, email integration, mobile integration, and third-party integration.

Element #3: Flexibility for diverse business needs

Even in the same industry or niche, companies operate differently and require different financing and accounting features. The best finance software will have all of the basics and the option to add extras, depending on what your business needs specifically, such as:

  • Online accounting software functionality: With accounts payable and accounts receivable features, you can customize your general ledger to include whatever equity, revenue, and expenses you need to prepare your expense reports and financial statements properly.
  • Analysis and tracking tools: Independently review your business’s financial activities all in one area that is visually easy to digest.
  • Cash and expense management tools: Keep track of your bank statements, checks, and credit card statements. This is especially helpful if your business reimburses or uses per diem.
  • Reporting and analyzing features: Review and analyze revenue, expenses, and cash flow so you can better optimize your budget.
  • Permissions and security features: Built-in security features will protect you and your customers from leaking confidential data.

Ideally, you’ll also customize each aspect of the feature within the software. For example, your business may require billable hours or project-based billing versus traditional 40-hour payrolls. It’s crucial that you can customize the software to meet these specific needs.

Why choose business finance software

Using business finance software is the easiest, most accurate, and most efficient way to record and organize all of your company’s financial transactions.

You can hold onto years of records to gain better insight into your budget, reduce operational costs, increase efficiency and accuracy, and more easily abide by US and global privacy laws.

When choosing accounting software, consider your specific financial management needs. An effective software solution will be scalable to fit your goals, customizable to suit your increasing business needs, and adaptable to your ever-changing financial environment.

For business owners looking for a fully-automated platform specializing in budgeting and expense management, consider taking a closer look at one of the leaders in accounting software for small and medium businesses.

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