Financial Management System

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Financial Management System

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Does your business have a financial management system? Your accounting software by itself is not a financial management system. An accounting software package is necessary for producing accurate, timely financial statements – but is just a piece of the total financial management system, albeit an important piece.

A financial management system is a set of components; one component by itself is not a financial management system. A system is effective because it is a repeatable set of processes that consistently deliver an expected result. Small and medium sized businesses often avoid using any kind of a system because of the time necessary to set up and learn. The time invested initially, however, is more than offset by the time saved by more effective decision making in the future. Your system’s ability to produce quality, timely and valid information depends on its design and structure. (1)

Accurate, timely financial statements do not make up a financial management system. By themselves, financial statements do not provide much understanding. Financial statements typically have the following limitations:

  • An analysis of many elements is required to convert the data to useful knowledge
  • They provide lagging data (they’re always prepared after period end)
  • They are too infrequent

A good financial management system will incorporate the financial statements generated by your accounting software package along with appropriate cash flow forecasting, important performance metrics (trends, ratios, comparisons, break-even, etc.), and updated financial projections to provide you and your executive team timely information so that the decision-makers may react quickly to the current reality.

Having a solid, effective financial management system is essential for business prosperity. If you would like to learn more about developing a financial management system or discussing how the CommonSense System of financial management can improve your decision making and prosperity, email me at info@commonsensecfo.com or call Kirk at 402-658-7340.

(1) “Be diligent to know the state of your flocks, And attend to your herds; For riches are not forever.” Proverbs 27:23-24a (NKJV)

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4 Comments (+add yours?)

  1. Bea Dettmering
    Mar 13, 2011 @ 14:55:02

    Just thought i would comment and say neat design, did you code it yourself? Looks great.

    Reply

  2. compact bathroom furniture
    Mar 17, 2011 @ 19:21:20

    I’ve been around for rather a long time, but at last decided to show my appreciation of your thought!Thumbs up, and keep it going!Cheers.

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  3. compact bathroom furniture
    Apr 02, 2011 @ 00:53:51

    Thanks for the informative post about this issue – most of the things you’ve mentioned I was not aware of before.

    Reply

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