Why use financial management software?

Small Business Guides

7 min read

Accurate financial data is vital for planning the growth of your business. We asked BodeTree, a financial management software company, how small businesses can use accounting data to help them grow and improve.

Crunching the numbers can help your business grow

Whatever type of business you run, success depends on numbers. Revenue, expenses, overheads, inventory, sales figures, profit – all of these numbers are important.

But sometimes it can be hard to put them into context. As Chris Myers, CEO of BodeTree explains, small business owners often have to focus on day-to-day operations, making it hard to see the big picture. After all, if you don't keep a close eye on your business every day, it won't perform at its best.

Yet there are times when you need to step back for a clearer view. If you're thinking of applying for extra financing, or moving into a new market, or even selling your business, you'll need more than just the daily figures.

In fact the bigger financial picture can be helpful whenever your business is ready for the next stage of growth. That's when you might ask yourself, "What are the steps I need to take today in order to be successful tomorrow?"

Financial management software can help here. In this guide we'll take a look at what it could do for your business.

The figures that count

When your business is at a transition point – for example, when you're applying for funding or raising equity – some figures are more important than others.

Anyone thinking about lending you money or investing in your business will want to know that their money is safe. That means they'll want to take a good look at the financial details, such as:

  • Historical financial statements
  • 3-5 year business forecasts
  • Personal financial statements
  • Tax returns
  • Business plan
  • Commercial collateral (including real estate)
  • Guarantor information

Gathering this information can take weeks or even months for a busy small business. And even when you have it all, it still has to be presented in the right way. That's where financial management software comes in.

Learn from big businesses

Financial data can give you useful insights into the way a business is being run. That's why large organizations use financial analysis to help them decide when, where and how to expand.

It's complicated work for big businesses, requiring detailed spreadsheets and powerful software. It's time consuming, too. But the results can be very useful.

When you analyze your financial data, you learn much more about the way your business is operating now. This can tell you where there's room for growth and improvement, and where you should cut back or redeploy some resources.

Many big businesses became that way because they made good decisions on how to manage their growth. And those decisions were based on the right financial information. But how can smaller businesses hope to compete?

Four financial management options for small businesses

  1. Hire a CFO
    A Chief Financial Officer should have the skills and tools necessary to analyze your business and extract the information you need. But hiring someone new involves time, hassle and ongoing expense.
  2. Pay for one-off financial analysis
    If you don't think you'll need a CFO on an ongoing basis, you could hire one temporarily or use an agency. This might be a good choice if you're applying for a loan, because banks will want to see the detailed numbers for your company. It might also be a sensible option when you come to sell your business.
  3. Do it in-house
    If you have a head for numbers, you could try to do financial analysis yourself. It's a complex topic, though, and you'll need to get to grips with the finer details of spreadsheet manipulation. Be prepared to put aside plenty of time to learn, and even more time to do the actual work.
  4. Let software do it for you
    There are software programs available today that can analyze the financial information in your accounting package and give you a clear, useful overview of your business – and a lot more besides.
Financial management software that connects directly to your accounting software will save you entering your accounting data twice.

The benefits of financial management software

For many small businesses, software will be the best way to manage your finances and cash flow. That's because:

  • It's cheaper than hiring a CFO
    Even on a consultancy basis, CFOs don't come cheap. The cost of their skills and knowledge might be more than your business can afford.
  • Software works when you want it to
    You might want to review your financials during a quiet evening or at the weekend. Cloud-connected software will let you do this – and unlike an employee, you don't have to pay any overtime.
  • It turns numbers into something more useful
    Good financial management software will help you visualise your business – as it was, as it is and as it could be. This makes much more sense than reading through endless tables of figures. Strengths, weaknesses and the performance of different parts of your business can all be clearly seen.
  • It contains condensed business knowledge
    Instead of hiring just one CFO, the best software will give you the accumulated knowledge of many. That kind of analysis could be worth its weight in gold.
  • It can help you learn
    Nobody can pick up the details of financial analysis in just a few minutes. It takes time, but good software will help you learn by explaining the terms and output in a way that anyone can understand.

Finding the right software

How do you find the right financial management software for your business? There are several points to consider here:

  • Powerful features
    The ideal package will work for you just like a CFO would. That means it will have powerful analytical features that can explain your business choices in simple terms.
  • Actionable output
    If you put numbers in and get numbers out, that won't be very helpful on its own. You'll want software that can give you options that you can actually carry out. You'll need ideas and goals that you can incorporate into a freshly updated business plan that will help your business succeed.
  • Strategic goals
    Business goals should be aligned with your overall strategy, so you can proceed from one goal to the next in a clear direction. Good software will help with that.
  • Integration with your accounting software
    Nobody wants to type in the figures more than once. Financial management software that connects directly to your accounting software will save you entering your accounting data twice.
  • Ease of use
    All software has a learning curve, and that's especially true of financial software. But the best tools will have you up and running within a few hours, by making the learning process easy. Read online user forums to see what customers say about different products.
  • Customised insights
    Generic messages and reports might not be of much help to you. Detailed reports that are custom-made for your business are likely to be more useful. The best software will take your type and size of company into account, suggesting actions that can really work for you.
  • Links to useful services
    Let's say the software detects that you will need funding to achieve certain business goals. Wouldn't it be great if you could then apply for a loan with the click of a button? Good software will do this for you.

Only you can make it work

It's not enough to import your accounting data into a financial management package and look at the results. You also need to act on those results. Computer software can't tell you exactly how to run your business but it can provide a useful overview and suggest areas for improvement – that's all.

At the end of the day, you still have to sit down and review the data. The right software will help you make informed choices, but the only person qualified to make strategic decisions about your business is you.

Take the guesswork out of growth

Plenty of small businesses lack the insight and understanding they need in order to grow. That's not their fault – it's a consequence of the time pressures of running a small business. But thanks to cloud-based accounting and financial management software, there are ways to see the bigger picture.

With the right tools you'll be able to clearly understand where your business was, where it is now and where it might be in the future. Like a virtual CFO, this can help you make the right decisions to help your business grow and flourish.