Finance is an important part of a business, as every transaction revolves around it. The need for efficient financial management is even more in today’s dynamic business era where organizations have to deal with various complex projects at the same time and with the same resources. With the advent of rising trends in technology, the financial management process has also been transformed like never before with the help of financial management tool.
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Financial management tool and its features
A financial management tool is a software system specially designed to manage the finances of an organization with the help of proper financial planning, effective allocation and application of funds, proper recording of transactions, accurate identification expenses and revenue and more.
The following features of a financial management tool will throw light on its functioning:
- Financial management software tools manage every transaction relating to finance and accounting including management of cash flow, maintaining the ledgers, expense and cost management, recording of purchases and sales, making payments, invoicing, preparation of financial statements, calculation of taxes and more.
- Financial management software system helps in conducting a complete audit of the financial transactions of an organization to keep a track of inconsistencies.
- Besides performing all sorts of financial, accounting, and bookkeeping transactions, financial management tools help in generating comprehensive reports on the financial position of the organization (including balance sheet, profit and loss accounts, etc) for one to have a true and fair view of the financial position. These reports can be customized as per the need of the user.
- Some financial management tools also have in-built features of performing and managing payroll transactions of the employees. Payroll services help in calculating CTC of employees, their taxes, generating salary slips, maintaining attendance, and related functions.
- They help in identifying different sources of acquiring funds and assist in acquiring funds from the identified sources whenever required.
- They help in proper allocation of funds through effective monitoring of every transaction.
How financial management tool improves project management?
Financial management tools are an important part of project management software because no project can be accomplished with finances. Some organizations prefer using project management software tools with in-built financial management tools in place while others go for a separate tool used simultaneously with the project management software. Nevertheless, both help in successful project management in the following ways:
Bring everything under one roof
With the help of financial management software, a centralized server, and database system is created where all the essential financial information/files and folders related to a project are stored, processed, and retrieved. The server can be accessed by every user associated with the project, and with proper authority. This way, all vital information becomes easily locatable in times of need without depending on others to produce the same.
The files and folders can also be modified or edited on the same server thus making available the updated file to everyone. Hence, there is only one source of information reducing the chances of duplicity. As a result, it becomes easier to monitor and there is more transparency in financial transactions.
Minimizes chances of errors
Even a little error committed in any financial management transaction can hamper the end result of the project in various ways. The scope of financial management is wider than any other aspect of project management. It has in its ambit tasks like accounting, book-keeping, computations, generation of invoices, debit/credit notes, vouchers, creation of reports, financial analysis, preparation of future financial projections, preparation of financial statements, and other related tasks, which are not only monotonous in nature but are also prone to human errors. The financial management tool makes the complete process computerized with minimum human intervention. As a result, the errors are minimized.
With a computerized form of data processing and financial management, a considerable amount of effort is saved on the part of the employees. Mundane tasks often tend to decrease the productivity of workers due to the absence of a motivating factor. When employees get to focus their efforts on productive transactions, it increases their morale to work hard towards the projects they are working on. Their productivity increases, thus improving project management and deliveries.
Financial management tools and time management training help in effective time management of an organization. Proper allocation of time is important for the successful delivery of projects. With financial management tools, all financial transactions can be managed and performed in less time. Hence, more time can be assigned to important aspects of a project to ensure its successful completion within assigned deadlines.
Improved security of financial data
One of the most crucial assets of an organization is its business data. Business data comprises customer data, financial data, and all other business-related information. Financial Management software makes use of Internet connectivity and cloud-based storage. Hence, the service providers leave no stones unturned to develop the software with multiple levels of security and encryptions to safeguard your financial data from cyber-security threats.
Moreover, with restricted access to vital information, the same is protected from unwanted infiltrations from people within the organization. Every modification made in the files and folders can be tracked to find out the original source. Hence, your information and financial transactions are secured in the truest sense.
Most financial management software tools are flexibly designed to cater to the needs of every industry and organization. The way of doing work varies from entity to entity, so is the process of financial management. This flexibility allows the businesses to adjust the process in the software according to the needs of the project they are working on. The financial management procedures designed according to one’s needs simplify the processes towards effective financial planning.
Simple to operate
Financial management software developers keep in mind the complexities of the financial management system in an aim to provide a simplified tool to the users. Using computers and digitalized forms of doing work already faces strong resistance from people in an organization. Hence, they keep the interface quite easy to understand and incorporate simple features to perform a task. With a little training, even a person with little understanding of finance would also be able to incorporate the necessary details into the system to perform its functions.
Hence, the work can be delegated to anyone with a basic understanding of computers while the team can effectively concentrate on providing the end results to the clients.
Helps in budget control
Financial management software tools aid in budget control and forecasting. With a record of every financial transaction in one platform, it becomes easier to evaluate the budget allocated to every project. In situations where the actual budget tends to increase the plan one, the same can be controlled by taking appropriate measures. Management can also forecast the need to increase the budget of a project well ahead in time to take necessary actions to increase it and continue working on the project without any disruptions.
Facilitate Regulatory Compliance
A financial management software system acts as a compliance framework and ensures adherence to all applicable regulatory and statutory accounting and financial guidelines. The legal environment of any region is a dynamic one with laws and statutes changing quite often. Such frequent changes make it difficult on the part of the organization to focus on compliances amidst pressures of handling clients’ projects. With a proper financial management system in place, this is taken care of with minimal effort. Software providers incorporate every feature keeping in mind the applicable regulations. Amendments made in these regulations can be incorporated in the system simply with the help of an update. Hence, the management can work freely on achieving its goals without stressing about compliance needs.
The Significance of Financial Management in Project Management
Effective financial management is a critical aspect of successful project management. It involves carefully tracking, managing and controlling the flow of funds related to a project, from start to finish. A robust financial management tool helps project managers keep track of project expenses, revenue, and overall financial health. It helps them to identify areas where they can reduce costs and make informed decisions that positively impact the bottom line.
Additionally, a financial management tool also helps project managers to accurately forecast future expenses, revenue and cash flow. This information can be used to determine if the project is on track to meet its financial goals and make necessary adjustments if needed. By closely monitoring the financial performance of a project, project managers can ensure that they are using their resources efficiently and effectively, and that they are able to meet the project’s financial objectives.
Another benefit of a financial management tool is that it provides greater transparency and accountability, which is essential for ensuring the success of a project. Project stakeholders can access financial data and reports, which helps to build trust and maintain clear lines of communication. This, in turn, can lead to improved collaboration and decision-making, as well as increased productivity.
In conclusion, the importance of financial management in project management cannot be overstated. A financial management tool helps project managers to manage project finances more effectively, improve the financial performance of a project, increase transparency and accountability, and ultimately ensure the success of a project.