Most people's eyes glaze over as they are stricken with visions of balance sheets and accounting records when they hear the term financial management system. However, strategic business managers know that a well-suited system can be one of their strongest tools for success.

There are many benefits of using an financial management system that will assist a company to operate efficiently, thereby helping to keep the company's growing pains to a minimum. The greatest benefit of implementing a financial management system is the fact that it allows all levels of management to adopt a more proactive style, as they have access to pertinent information, when and where they need it, in order to make strategic decisions. And this is a very important attribute for a company to have, as today's market is highly indoctrinated in technology, so the need to access instant information is a critical management tool for making timely decisions and keeping your reputation intact as a viable player in the market.

All aspects of a company's infrastructure will benefit from a financial management system. With a system, a company's invoicing can be done in an accurate and timely fashion. Receivable reports can assist in getting a handle on collections of these invoices, which results in better cashflow management. Payables can be entered with a computerized cheque to pay the bills, which gives even the smallest company a professional image within your market. Marketing and Sales efforts, even customers, can be tracked to calculate a sales lifecycle return on investment, so that sales efforts can be focused in the most efficient methods.

A true financial management system is in fact more than a mere accounting program; it is a financial reporting system that has the capability of providing any and all levels of management with timely and relevant information. This information can be tailored so that it speaks directly to the needs of that management group. The three main information focus areas of a financial management system are planning, control and performance evaluation. A financial management system will provide a company with financial information, as well as non-financial information that is needed to view the 'big picture'.

The flexibility and dual focus of a good financial management system can be illustrated by a scenario that is experienced by any company at one time or another - the hiring of employees. A number of employee hirings may be taking place in various departments simultaneously. The only place that the entirety of this new employee-hiring situation may be felt is in the Human Resources department, as it is usually responsible for compiling the paperwork relating to any new hire. From a financial management perspective the HR department could utilize the system to analyze and track the learning curve and administration costs related to a new hire. These costs could vary from department to department. Departmental managers could calculate the impact a new hire has on the 'production' levels of their areas and adjust delivery timetables accordingly. Senior management could receive reports that allow them to recognize trends such as high employee turnovers: Are they happening in one department more than others? Are these employees leaving because of bad morale, poor management, no incentives, unsafe environment or are there new industry factors that are luring or pushing them away? This sort of information could be gathered at an exit interview and compiled into a report to allow management to fully understand these non-financial issues and how they are impacting the company. It is extremely important for a company to realize the impact on the quality of production, as well as the bottom line cost when employee turnover is taking place. With a financial management system in place, a company is able to be more proactive in its management style because it is making decisions based on relevant facts.

The first decision a company should make when deciding which software package to use in order to retrieve this management information is which package would be best suited for its needs, not just today, but 3 years from now. Always adopt a long-term perspective when making purchasing decisions, otherwise a company may be purchasing a new system every year as it outgrows the old one. This is financially irresponsible; as well as incredible disruptive to the business and infrastructure of a company, as it is continually required to adapt to a new system. It is better to take some time to really evaluate the needs of your company before you make any final purchasing decisions. If you don't know the answers to some of the questions that arise from researching different systems, then ask around within the company to find the answers. If you still are not confident in the answer or comprehensiveness of your knowledge, then bring in a consultant who can make that assessment for you. Be sure to hire a consultant that is not working for a specific brand of financial management system, so you receive an unbiased review and recommendation.

Here are a few issues to get you started on creating your company needs assessment profile for a FMS:

Some FMS packages include multi user capability and some are limited so you have to look at how many people could be using this system down the road.
If you decide to go global, you will want a good multi-currency package to address those unique needs.
Do you have inventory retail or wholesale? If wholesale do you need a price matrix for different quantity levels? If retail do you need to use a system that can operate with a hand scanner?
When invoicing your customers do you email your invoices and do your clients pay their bill online?
Do you need to track job costs versus revenue?
Should your company be issuing Purchase Orders for internal control reasons?

These are only a few of the many questions that need to be asked before beginning a serious quest for a financial management system that will meet your company's unique needs - both now and in the future. Before purchasing a system be sure to fully address the issue of your company's long term growth goals and plans. This way you can compare those to the limitations of systems you are considering and account for this in future budgets so that your are able to purchase more licenses, new hardware and take advantage of training opportunities to ensure you are always getting the most from your system.

As with most things in business, doing your homework in the short-term, always pays off in the long term growth and success of your company.

Courtesy of Kelly Melanson.