What is a financial management software?

A financial management software helps accountants, auditors, and entrepreneurs monitor business transactions. It renders various reports from real-time balances to short- and long-term forecasts which assist in strategic resource planning.

In a nutshell, a financial management software allows users to:

• Track income and expenses
• Make and receive payments
• Manage cash flow
• Generate financial reports

Managing money matters can be tricky, and it needs utmost diligence. Transactions in e-commerce are usually processed online, and a financial management software can help track both receivables and payables. By generating accurate financial reports, entrepreneurs and managers can better sustain business profitability.

Price to get started:

There are a number of software options available online for free. They already offer invoicing solutions and double entry systems for accounting. Fees as low as 1% apply when processing payments. Subscriptions for robust solutions which include bank account integrations, financial reporting, and tax management may be purchased starting at 7.50 USD monthly. Trials are usually available for 30 days.

Benefits of using a financial management software

Presents up to date financial information. A financial management software serves as a platform where all business transactions are tallied. This boosts transparency when it comes to spending and assists in easy auditing. It can also perform calculations to display variances (e.g. budgets versus actuals) and real-time balances (i.e. from multiple bank and credit accounts). With this, decision makers get a clear overview of the company’s financial health.

Limits manual work and errors. Logging of receipts and bills can be automated with a financial management software. It uses technology to capture data from documents and machine learning to categorize entries. By receiving payments in-app, income is also easily monitored. This avoids missed records and other inaccuracies. The complete data in the platform can also aid in filling out of tax forms.

Improves planning and decision-making. Reports generated in a financial management software informs entrepreneurs on ways to optimize cash flow. Such tools provide the capacity to segment data for deeper analysis (e.g. identify effective revenue sources, investments of low returns, and possible overspending). Date filters also help in reviewing performance and trends. Overall, these help businesses create better strategies to meet their financial goals.

Features to check when comparing financial management software

1. Standard features to review

Income and expense tracking. At the very core of a financial management solution is its ability to digitally record sales and expenses. It simplifies the process of accounting for every cent the business earns and owes. Mobile applications and receipt scanners make it easy to update books. Entries can then easily be classified with bulk updating features.

Invoicing and billing. A financial management software allows e-commerce businesses to create custom branded invoices. Sending them out can be done in-app, and recurring charges can be scheduled or paused as it applies. This creates a seamless and efficient process. Additionally, accounting teams can get notified when bills are viewed or become overdue. Reminders and receipts for such can also be automated.

Account integrations. Bank accounts can be linked to a financial management software to automatically import transactions for reconciliation. This reduces manual data entry, freeing up time for solo entrepreneurs and small teams to focus on other aspects of the business. Rules can even be set up so the tool can automatically categorize entries. The user would just then need to approve the system’s work.

Financial reports. Such software displays up to date balances per account, tracking the business’ assets, liabilities and equity. It can generate profit and loss reports per specified period of time (e.g. weekly, monthly, yearly). By listing all unpaid invoices and bills, managers get a good understanding of cash flow. There are also different filters available to review financial data by customer, supplier, or item among others.

B. Additional features for next level financial management

Payment processing. Financial management tools can handle online payments coursed through digital wallets which is commonly used in e-commerce channels. It can also offer a facility to accept credit and debit cards. This feature ultimately provides customers with different payment options. When money reaches the business’ account, notifications are available to facilitate quick withdrawals and ACH transfers.

Tax management. There is a setting in financial management tools which allows businesses to customize tax rates for reuse in invoices and expenses. Some also cover filing of returns by generating forms based on already available data. The service may even include management of employees’ taxable benefits. Such solutions always ensure that businesses are in compliance with updated government regulations.

Budget and forecasts. With financial management solutions, budgets can be set and evaluated. Specific amounts can be defined per project and category to control spending across departments. Later on, this can be contrasted with actual expenses for analysis. This historical data can inform future allotments. Adding it up with revenue information, financial projections may also be modelled in such platforms, helping businesses strategize for growth.

Cost of setting up a financial management software

Financial management tools are typically web-based. They are commonly offered as a subscription product. Pricing may be based on the number of clients for billing or bank accounts to integrate, but there are also options that can cater to unlimited invoices and transactions.

Freemium tools are available for small and even large e-commerce businesses. It should be possible to log sales and expenses with it. Fees as low as 1% of specified amounts are standardly applied instead for processing payments and transfers. Otherwise, a subscription would be necessary to generate custom dashboards, reports, and tax returns. Cost may start at 7.50 USD, with annual discounts amounting to two months worth of savings.

There is a lot to earn from investing in a paid financial management software, especially with the set of automation features it provides. Free trial for such is available, and it would be best to loop in accountants. Software providers also extend bookkeeping services and dedicated account management to help not just in setting up the platform, but in keeping the business compliant and financially secure. Additional charges for such may start at 50 USD.

Considerations when choosing a financial management software

1. Business and process compatibility

Financial management is crucial for any business. Being able to maintain a complete and accurate log of business transactions is critical in safeguarding the company from loss. This data forms knowledge on the company’s financial standing which is prerequisite to making sensible decisions when it comes to utilizing resources.

Running the numbers for e-commerce businesses, especially those that are directly engaging with consumers, can get complicated with the significant volume of data that needs to be processed. In this sense, using a financial management solution helps in keeping things organized for auditing and reporting. It reduces the use of paper which can be hard to manage when it accumulates by pulling all data into a secure and virtual location.

It is very important for such businesses to always know its sales, profits, and expenses. With a financial management tool, it can set up dashboards where it can easily monitor its income. This can inform other operational aspects such as procurement, inventory management, and fulfillment. Ensuring compliance with tax laws can also be more or less guaranteed with software providers staying on top of regulations.

B. Adoption concerns

Technicalities. Most financial management tools are built to fit workflows of accountants. Nonetheless, it makes it easy for hands-on entrepreneurs to generate profit and loss statements, balance sheets, and cash flow reports. User interface is made intuitive, and with certain levels of automation, maintaining the system will not be an issue to anyone.

Integrations. Aside from bank account and other payment channel integrations, e-commerce businesses can connect a financial management software with sales channels for seamless transfer of information. It would also be beneficial to sync with supply chain tools to complete data on costs, assets, and liabilities. Enterprise users may integrate with human resource management solutions to consolidate employee compensation records.

Scalability. A financial management solution’s capability to process big data makes it suitable for growing and enterprise businesses. Those that are or would be doing international transactions can get multi currency support. With it, exchange rate losses and gains can even be evaluated. Reconciliation of foreign bank accounts also becomes possible.

Frequently asked questions

1. Would an e-commerce business need a financial management software?

E-commerce businesses benefit from financial management solutions as it can consolidate all transactions from sales channels and bank accounts for auditing. It generates reports that inform entrepreneurs and managers of the financial state of the business.

2. What can I do with a financial management software?

A financial management software can total sales and expenses for an e-commerce business. It can easily process huge data to provide insights on profitable strategies or cost-cutting solutions. Using historical data, projections are created for financial planning.

3. How can a financial management software help my team?

Automation features are central to financial management tools. It can scan receipts and documents to log transactions, reducing the need to manually enter data into the platform. Other entries may be pulled through bank integrations. Reconciliation can also be done seamlessly with machine learning. These functions free up time for members to focus implementating growth projects.

4. Can a financial management software help increase my sales or cut my costs?

Yes. The software is able to filter data to understand growth drivers and blockers. For instance, it can aggregate expenses by type and sales by product. Data can suggest how much return is generated by certain investments. Undesirable results may be forecasted, and spending can be allocated to strategies that are proven profitable through time.

5. Is there a free forever financial management software?

Freemium financial management tools are available, and they can already help in generating invoices. It works for new businesses with a small number of customers to date. When the company grows, automation and integrations in paid solutions would certainly be of great help.

6. What is the best financial management software?

E-commerce businesses have varying needs. A B2B company would have a different requirement for managing its financials when compared with a direct to consumer brand. To identify the best solution for a specific company, the following factors shall be considered:

• Type and volume of transactions
• Bank integration
• Compatibility with other tools (e.g. e-commerce platform, payroll, purchasing)
• Budget

7. What financial management software subscription should I get?

Financial management tools usually have a tiered subscription model. Feature sets significantly affect pricing. It would be best to determine what additional functions are helpful to the business. It may handle payments, taxes, and financial modeling to name a few.

8. Which features should I prioritize when choosing a financial management software?

It should be easy to enter transactions in the chosen financial management software. May it be through connecting bank accounts, processing payments right in the same app, or scanning receipts, the tool should be able to reduce manual data entry.

9. What reports can I generate using a financial management software?

Profit and loss statements, balance sheets, and cash flow reports are standardly offered in any financial management solution. In custom dashboards, users should be able to filter data by specified date and other company-specific variables.

10. How do I set up a financial management software?

Software providers claim to make financial processes easy even for solo entrepreneurs. They use machine learning to free up time for the user. Instead of manually balancing books and reconciling entries, the tool can automatically import transactions from bank accounts and do categorization on its own. To set up such workflows, online videos and extensive knowledge bases are available as references. Email support is often offered as well.

11. Are financial management softwares secure?

Considering that financial management tools access the user’s bank accounts among other confidential information, software providers are transparent about its physical and digital security measures. Commonly, they have firewalls to block malicious attacks, data encryption to avoid unauthorized access, and automated backups to ensure that no data would be lost.

12. Can financial management tools manage my sales tax?

Yes. Tax management is a paid feature in most financial management tools. By availing of it, e-commerce businesses would no longer need to export and import data to another software. Business owners may be able to get an estimate of their taxes due based on the data that is already existing in the software. Come filing time, forms may also be auto-populated.

13. Are there financial management solutions with a mobile application?

Yes. For e-commerce businesses and entrepreneurs who need to manage transactions on the go, several software providers have launched mobile applications as well. It allows real-time monitoring of balances at the very least and works in tandem with their web-based solution.

14. Can I pay my bills with a financial management software?

With bank integrations, it is possible to schedule and automate payments. Recurring bills can also be set up to save time and effort. Most importantly, all related documents are to be stored in the software for easy reference.

15. Can I receive payments using a financial management software?

E-commerce businesses can accept different payment methods through a financial management software. It can usually support ACH transfers, credit and debit card payments, and various digital wallet options. Subscription billing may also be set up.

Sources and related articles

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The Handbook to Select the Best Finance Management Software

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