Introduction
As business grows, the financial data becomes more and more difficult to handle in spreadsheets because it is time-consuming, prone to errors and confusing. With growth, there is a need for a scalable accounting solution. To opt for such complex financial data, business owners have to think beyond spreadsheet accounting and for that the best solution is financial software. Financial software offers several features to optimize your business. From basic invoicing and billing to tax calculations and accounting software is an essential tool for managing your business’s financial data. It also helps the business in managing clients, reconciling bank accounts, and generating insightful financial reports for smoothly and continuous growth. In this blog, we will discuss why there is a need to use financial software in your business.
What is Financial Software?
Accounting software manages and records an organization’s day-to-day financial transactions, including fixed asset management, expense management, revenue management, accounts receivable, accounts payable, and reporting and analytics. A full accounting system keeps track of an organization’s assets, liabilities, income and expenses. These transactions then populate the general ledger in real-time, providing CFOs, treasurers, and controllers with immediate access to real-time, accurate financial data. It also allows P&L owners visibility into their operations at the operational level.
Systematic recording of these financial transactions enables the production of quarterly and annual financial statements, including balance sheets, income statements, statements of cash flows, and statements of stockholders’ equity. Financial software is a core component of an enterprise resource planning (ERP) system. ERP systems integrate important business functions like accounting, financial planning and analysis (FP&A), supply chain, inventory management, and procurement.
What are the features of financial software?
The software must handle a variety of financial data including bank accounts and statements, which makes it essential for the accounting system to stay updated. Whether you are a small startup adopting accounting software for the first time or a large enterprise considering the development of an accounting software solution. It is important to include key features such as invoicing, electronic tax payments, basic billing, payment processing, payroll management and inventory management to streamline your operations.
The following are the features of financial software that will help your business grow:
1. Automatic scalability & updates
When building software, taking a forward-looking approach is critical. Technology continues to evolve, with daily innovations aimed at streamlining business operations and accelerating management processes. It is important to anticipate that customers will need to upgrade their technology over time, and therefore, your accounting software must be designed to strike a balance to manage finances effectively, vendors, and expenses. This well-designed software will provide your business with long-term benefits.
2. Account Payable
By including the feature of account payable in your financial software, business owners will gain access to complete vendor information, systems for managing outgoing business transactions, and a tool to monitor the company’s outstanding liabilities. These aspects are key in the payables context.
- Purchase Orders
- Vendor Credit Memos
- Automatic Payments
3. Payment Processing
Many financial software/systems allow your customers to pay their invoices online by clicking a button on the electronic invoice you send them. There are many benefits for the seller, including less staff time devoted to processing checks or making bank deposits, greater security for payments, and faster processing times, but there is also a cost involved. Expect to pay the same rate as credit card processing companies to have your accounting system handle debit and credit card payments. Some systems allow ACH payments to be deposited directly into your account, and there’s nothing like having payments automatically poured into your checking account each month without you waiting for a check in the mail or running to the bank. Although there is often a fee for this, it is usually less expensive than card payments.
4. Record Financial Transactions
Basic features of financial, such as general ledger, charts of accounts, invoicing, tax management, account reconciliation, accounts payable, accounts receivable, payroll and financial reporting and payment records, should be integral components of any accounting software. These facilities also play an important role in ensuring compliance with financial regulations, including state-specific laws governing aspects such as online sales tax.
5. Mobile Friendly
Mobile-friendly financial software is no longer a luxury that only large businesses can afford. Enterprises now offer their clients their enterprise mobility as the new standard. Most of the online financial software has Android and iOS applications. Some mobile applications can help you keep track of your expenses, while others may also be able to create and send invoices.
6. Payroll
Some accounting systems have highly sophisticated payroll modules, offering complete payroll services that do everything from calculating hours and processing wages to paying payroll taxes and making 401(k) deductions. Some of the best payroll features for financial software:
- Direct Deposits
- Variable Wage Schedule
- Expense reimbursements and deductions
- Automatic Tax Calculations
7. Bank Reconciliation
Bank reconciliation is a key accounting feature of a business and accounting software streamlines it. Connecting your bank account to accounting software allows you to automatically receive statements from bank feeds into your account. You can set up custom criteria and bank rules in your accounting software to classify automatically and match imported bank transactions. Once your transactions are matched, you just need to verify and confirm them to reconcile your accounts. Along with easy bank reconciliation, accounting software helps keep your business audit-ready throughout the year.
8. Identify errors and prevent them
When using accounting software, both accuracy and transparency are guaranteed. A reliable solution is designed and developed to deliver data instantly, perform calculations accurately and eliminate errors. As a result, you can assume that the financial progress of your business will be transparent and easy to understand. You will be able to create initiatives and plans that are consequently customized to the needs of the company.
Why do businesses need financial software?
Handling your business finances with piles of expenses, boxes of receipts, and spreadsheets of income and expenses leaves your information open to potential errors and deductions. However, this can be solved with the right financial solution by providing you with an up-to-date, computerized accounting file, which is especially crucial during the tax season. Here are the reasons why financial software is useful for your business:
1. Helps you file taxes
To use a good accounting system in place you simply need to record the amount of money you spend and receive organized. This allows you to stay on top of your accounts while easily compiling and exporting documents and receipts to your accountant. Properly compiled records also make your accountant’s job easier to take care of your taxes. Some software also complies with tax office rules by automatically formatting invoices so you don’t have a headache come tax season.
2. Automates unnecessary tasks
Data entry can be time-consuming. As with any popular accounting system, automated payment plans allow you to enter customer information just one time. Customer payment habits and purchase history are tracked for reference. When the payments are due to be collected, you will receive the payments without additional work from your end. It also gives you vendor history and aging with reports for each member making invoices and payments faster to locate and retrieve. A complete history of each transaction history is also saved in the system, without you having to manually input the data one by one. This not only saves you time, but also eliminates the potential errors of manually transcribing data.
3. Monitor Cash Flow
Operating a business involves the net amount of cash and cash equivalents that flow in and out of your finances. Tracking all transactions to pay and to be paid can mean devoting your productive hours to flicking through contact lists, files and Excel sheets without an accounting program to streamline the task. The software helps you stay on top and keep track of incoming cash, invoices and overdue payments, to ensure that you don’t miss any critical financial transactions. An accounts payable system tracks bills as they come in so you can plan and forecast future cash flow instead of just cutting checks when bills are due. It is also important to keep formal financial statements, such as balance sheets and profit and loss statements, to assess the progress of your business.
4. Reduce Costs
Automating your accounting functions saves you money in the long run. It eliminates the need to hire a bookkeeper or devote extra hours of their shift to handle all the books, invoices and transactions. In business, time equals money, and optimizing this process can greatly reduce accounting hours. In addition, the software has subscription-based pricing models with low costs to pay monthly or annually. By subscribing to the plan you get regular updates, support and tools that enable you to focus on actually running your business.
5. Provides a digital invoice
In a technology-driven world, paperwork is outdated. Nowadays many processes are empowered by technology. It has also been predicted that enterprise software interactions will take place in mobile devices, which emphasizes the importance of keeping ahead of your competitors. Sending digital invoices to your clients via email is convenient for both you and your clients. Customers can send their payments with just a few clicks, making it quick and easy. Some accounting platforms nowadays integrate with various payment channels that allow credit and debit cards, bank transfers and e-wallets.
What is the role of financial software in financial management of a company?
The following are the roles of financial software in financial management of a Company:
- Financial software offers powerful reporting features that allow businesses to generate customized financial reports.
- One of the main roles of accounting software is access to real-time financial data. It enables businesses to monitor their financial performance & make informed decisions, ensuring effectiveness of financial management.
- Financial software simplifies tax compliance by automating tax calculation and reporting, ensuring businesses comply with tax rules and avoid penalties.
- Financial software automates a variety of financial management tasks, such as invoicing, expense tracking, and payroll processing. This automation reduces manual data entry, streamlines processes and reduces the chances of errors, resulting in more accurate financial records.
- Financial software is designed in a way to scale your business by allowing you to add users, manage multiple currencies, and handle more complex financial transactions without compromising efficiency or accuracy.
Final Words
Financial software is an important tool for businesses of all sizes. With the help of financial software, businesses can keep exact and stay updated with financial records, manage cash flow, automate financial processes, comply with tax laws and regulations, etc. For a business owner, it’s worth investing in financial software to help you stay competitive and grow your business. Good financial software for financial transactions is half a way to your success, your hard work ensures the rest.
CAclubindia
