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What is a Financial Management System?

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Welcome to Manufacturing ERP 101 where you can fast track your understanding of ERP and assess its value to the continued success of your business.

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What is Financial Management?

Financial management is the planning, organizing, directing, and controlling of an organization’s financial resources. It involves things such as maintaining the supply of funds, ensuring shareholders get a good return on their investment, optimizing use of funds, and investing the organization’s money in practical and secure opportunities.

Financial management is important to an organization because it helps determine how to acquire and distribute funds, make important financial decisions, improve profits, increase the value of the company, and keep the business financially stable. Financial management is at the core of every organization.

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What Is the Difference Between Accounting and Financial Management?

Accounting is the process of recording, maintaining, and reporting the movement of money and assets of a company to demonstrate their financial position. Conversely, financial management administers the economic activities of the organization to achieve financial objectives and help management make informed decisions. Accounting is focused on reporting and financial management is centered around higher-level activities, like how to generate cash, create wealth, utilize assets, and get good returns on investments.

What Is a Financial Management System?

A financial management system handles all of the financial transactions within a business and keeps track of the money as it comes in and out of the organization. It’s software that an organization uses to view and manage its income, expenses, and assets to maximize profits and ensure sustainability. It helps to improve both short- and long-term business performance.

What is a Financial Management System?

A financial management system handles all of the financial transactions within a business and keeps track of the money as it comes in and out of the organization. It’s software that an organization uses to view and manage its income, expenses, and assets to maximize profits and ensure sustainability. It helps to improve both short- and long-term business performance.

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What Is the Role of a Financial Management System?

A financial management system is designed to help with the tactical and strategic goals related to the financial resources of a business. Its role is to make sure things are handled correctly for tax purposes, keep on top of business costs, identify the business’s financial position, improve earnings, show areas of weakness, indicate areas for growth, and predict risks to avoid.

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What Is the Role of a Financial Management System?

A financial management system is designed to help with the tactical and strategic goals related to the financial resources of a business. Its role is to make sure things are handled correctly for tax purposes, keep on top of business costs, identify the business’s financial position, improve earnings, show areas of weakness, indicate areas for growth, and predict risks to avoid.

Manufacturing ERP Demo

See ERP in Action

Learn More About OptiProERP with SAP Business One’s Financial Management System

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Why Is a Financial Management System Needed?

A good financial management system will provide insight into how a business is performing and provide an understanding of why it is doing well (or not.) With a financial management system in place, you can make informed decisions and strategic plans. It can help a business be more profitable by showing what is happening within the business around key financial issues.

The system can help your business be proactive rather than reactive. It allows you to easily see your profit margins to know how to price goods or services. It helps you monitor all costs so you can keep them low. An FMS helps you plan for such things as taxes and employee benefits. And, it performs cash flow analysis so you can make sure enough cash is on hand to purchase inventory and pay bills.

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Who Needs a Financial Management System?

Any organization that wants to scale up its business operations through improved decision-making and financial performance needs a financial management system. A financial management system helps to make informed business predictions. If you want to grow your business, an FMS will help you strategize to meet your business goals while tracking income and expenses to help with financial planning. As stated earlier, financial management is at the core of your organization and it’s important to have the tools that will allow you to know what’s happening in day-to-day business operations.

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6 Signs You’re Ready for a Financial Management System

5 Signs You’re Ready for ERP
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What Are the Benefits of a Financial Management System?

A modern financial management system helps keep a business on track for meeting its goals.

Greater Accuracy

With a financial management system, parts of the financial process are automated, which reduces errors in tax or payroll calculations, for example. It also keeps control over records and categorizes expenses to help streamline audits and reduce business liabilities. All financial information is kept in one central location and it can be accessible to end-users across departments, business units, and branch offices for greater accuracy and consistency.

Improved Compliance

An FMS helps remove risk by ensuring compliance with the latest accounting standards. It provides an audit trail to capture all changes and you can manage approval limits, set thresholds, and segregate duties to reduce fraud. A financial management system also lets businesses see immediately how changes with finance law will impact their organization.

Better Strategic Planning

With a financial management system you can answer important business questions to help you determine future outcomes. It can create and assess “what if” scenarios, identify new business opportunities, and identify trends that might occur to help you develop a more informed corporate strategy.

Increased Productivity

An FMS allows tasks to be automated which reduces errors and streamlines business processes. Staff can move away from time-consuming spreadsheets and use built-in workflow and process management capabilities to track each step of the close process and complete it much more quickly and accurately.

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What Are the Features and Functionality of a Financial Management System?

Warehouse Design Warehouse Design

Financial Reporting

Financial reports help managers keep control over the organization and monitor if their objectives are being achieved. They can also be used to provide information to outside organizations regarding the company’s financial operations and compliance requirements.

Inventory Tracking Inventory Tracking

General Accounting

This part of a financial management system supports general ledger, accounts payable, and accounts receivable. It reduces records redundancy, creates financial statements, and helps to budget, forecast, and plan. It categorizes expenses and keeps detailed tracking records of assets and liabilities.

Worker Performance Worker Performance

Fixed Asset Management

This function uses capital and operational data with descriptive information related to assets to show the appreciation and depreciation of assets in financial statements.

Picking, Packing, and Shipping Picking, Packing, and Shipping

Revenue, Cash, and Treasury Management

With revenue tools, billing processes are automated and payments can be viewed. It also keeps the business compliant with statutory regulations. The cash and treasury management tools help staff predict cash flow, improve liquidity, and decrease risk. A financial management system can also integrate with banking systems to have up-to-date information on bank balances.

Yard/Dock Management Yard/Dock Management

Governance, Risk, and Compliance

These features help to ensure the organization’s activities correlate with its goals to minimize risk. It helps keep the company compliant with laws and regulations to avoid hurting the business's reputation.

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What Are the Key Types of New Technologies for Financial Management Systems?

Standalone

Cloud

Cloud-based financial management systems are less expensive, can grow with a company, can utilize data from more sources, and provide secure access from anywhere. They can also leverage new technologies such as AI and machine learning.

Supply Chain Module

Advanced Analytics

With the utilization of Artificial Intelligence (AI) and machine learning, more data can be analyzed and sorted through from internal and external resources. This information allows the finance staff to understand how to plan for the future and to try different scenarios to determine outcomes. This data, in turn, helps them to identify trends and opportunities. It can minimize risk by providing the information needed to effectively strategize.

On Premise ERP deployment

Automation

Robotic Process Automation (RPA) and AI assist financial management systems to eliminate many tedious, manual processes, including reports, tax preparation, and payroll. With RPA bots helping the finance team, the staff can do more work in less time, minimize errors, streamline processes, and focus on higher-level tasks.

Standalone

Blockchain

This technology is being used with financial management to provide a ledger that is always current, thus not needing to be reconciled. Blockchain allows for smart contracts with predefined requirements, which once met, activate the contract. It can be used in the same way for such things as processing payments or regulatory compliance.

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What Is the Difference Between a Financial Management System and ERP?

A financial management system is designed to handle the accounting and financial aspects of a business. It’s a stand-alone system that automates financial transactions and supports general ledger, accounts payable, and accounts receivable. It helps to manage cash flow, track fixed assets, reconcile bank statements, and provide financial reporting and analysis.

An ERP system has a financial management system built into it but also extends to all business operations. ERP software modules include Financial Management, Human Resources, Sales and Marketing, Customer Relationship Management, Purchasing, Inventory Management, Business Intelligence, and Production Management. All of the modules are integrated and connect to the same database. Information is updated in real-time so everyone across the company is working off of the same data.

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What Are the Benefits of a Financial Management System Integrated with ERP?

When a financial management system is used by itself, there is a need to enter data from a variety of sources such as production management, logistics, billing, and more. When you use an ERP system, all of these data sources are integrated, making it easy to get accurate information quickly.

A stand-alone accounting system will not offer the reporting capabilities that you’ll find with an ERP system. In place of basic reporting functionality, ERP allows you to easily create new reports and customize existing ones. You can see your business from a variety of perspectives using drag and relate or drill down data. ERP software helps you make better decisions by enhancing reports with powerful visualizations. It allows you to track fixed assets, control budgets, and monitor project costs with greater accuracy and efficiency.

Since ERP is integrated into other areas of the business, workflows can be automated for greater efficiency. That means there is no need to reenter data in multiple systems. In many cases, it eliminates manual data entry, reducing errors and making processes much faster. You can also keep track of who did what, so if an error is made, you can determine who made it.

ERP and financial management integration allow everything to be viewed in real-time, working off of one database for a single version of the truth. An ERP system breaks down departmental silos for greater connectivity and collaboration. You can make better business decisions and have a higher degree of control over your company’s finances and its entire operations.

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How Do You Choose the Right Financial Management System?

When choosing any software, there are important steps to follow. You should consider the pain points you want to solve and what future goals you want to achieve. Make a list of these, which will help you find a system that will work best for you. Determine your budget, and get the right people on board to help you select the software. You may want to involve your IT staff for their technical expertise, as well as capable people in the organization who can oversee the evaluation and selection process.

Begin looking at systems and compare them to see how they fit with your needs. Do your research and see what people have to say about the software you are considering. Make sure the systems are easy to use and will support your company well into the future. When speaking to vendors, you should feel comfortable with their approach and their willingness to answer your questions. They should be able to demonstrate how their software can help solve your problems.

Find out what training is available and what it will cost. You want to ensure that end-users will be fully trained in its use. Narrow down your selections, watch their demonstrations, and get any follow-up questions answered. Then get pricing, check references, and make a final determination.

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A Platform Play for OptiProERP with SAP Business One

OptiProERP chose SAP Business One, the #1 ERP platform for small and midsize businesses, for its ERP platform.

With SAP’s continuous platform innovation, we focused exclusively on innovating and developing our industry-specific manufacturing functionality.

This decision freed OptiProERP from the recurring cycle of platform updates that most ERP providers cannot keep current. Unlike SAP Business One, that invests more in research and development than all of the other ERP providers combined, OptiProERP could focus all of its resources into building advanced manufacturing functionality on a truly modern platform.

Instead of adding a layer of code on top of SAP Business One, OptiProERP is built into the DNA of SAP’s trusted ERP platform. The two perform as one because at the code level, they are one.

The result is a 21st century solution designed to help growing manufacturers gain full visibility and control of their business, reduce production costs, increase profit margins and leverage data to inform intelligent business decisions.

Get a Fully Integrated Financial Management System and Manufacturing ERP Solution with OptiProERP

Manufacturers need full integration between their accounting department and their purchasing and manufacturing operations in order to run a truly efficient organization. OptiProERP, an ERP system specific to the manufacturing industry, has strong accounting and financials as well as shop floor execution, inventory management, and job costing. Get immediate access to both financial and shop floor data to help you have shorter production runs, keep up with product changes, and deliver a personalized customer experience.

OptiProERP is built on SAP Business One, the market-leading platform for small and midsize enterprises. It extends the platform to provide a more advanced, fully integrated, end-to-end solution designed specifically for manufacturers.

ERP for Manufacturing and Distribution
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See OptiProERP’s Financial Management System in Action

Financial Management System Resources

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Solution Page

Solution Page

Financial Management System

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Warehouse Management System

Data Sheet

Financial Management

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ERP Selection Roadmap White Paper

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A Roadmap for ERP Selection in Today’s Digital World

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See More of OptiProERP with SAP Business One in Action

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