What Are the Benefits of a Financial Management

Information System?
by Paul Cole-Ingait, Demand Media

Financial management information systems facilitate greater integration of financial management

functions.
The World Bank defines a Financial Management Information System as the automation of financial
operations. Automation is achieved through the use of financial accounting applications and database
management systems. The use of FMIS applications is designed to simplify the recording of events,
processing of transactions and reporting of financial information in your business.

Quick Decisions
The FMIS application provides timely, accurate, reliable and verifiable information that hasten your
decision-making process. It provides advanced financial reporting and decision-making procedures for
evaluating the merits or shortcomings of your operational and strategic approaches to business. This
reduces uncertainties that may derail your implementation of important business decisions.

Planning
Implementation of FMIS enhances your scheduling and forecasting capacity. This enables you to
allocate your financial resources effectively and set realistic performance targets. Limit the scope of
your plans to your financial resource capabilities. The realistic planning capacity also accelerates the
achievement of your goals within the desired time frame.

Related Reading: What Is a Management Information System?

Efficiency
You stand to achieve greater efficiency in financial operations and reporting procedures when using
FMIS applications. These systems entrench the controls you need to eliminate misuse of financial
resources, but also the mitigation measures you employ to protect your business against the
occurrence of expected and unexpected risks. The control measures also provide the historical
evidence of performance you need to regulate the current and future activities of the business.
Auditors also use this historical evidence to evaluate the progress of your business.

Integration
FMIS provides you with a framework for integrating functional processes and financial resources in
your business. This accelerates the processing of transactions and conveyance of financial information,
in addition to eliminating duplicate activities and responsibilities along the organizations chain of
command. Systems integration also provides you greater leverage for centralizing shared services so
as to reduce operational costs associated with running multiple operational units for the shared
services.

Competition
The adoption of FMIS applications elevates the competitive advantage of the business. Indeed, the
strategic value of information technology is extremely important in the advancement of customer
satisfaction and growth of productivity. It enables the business to respond appropriately to changes in
target markets and stay ahead of its competitors.

The Important Roles Within a Financial Management System

by Brian Bass, Demand Media
An organizations financial management plays a critical role in the financial success of a business.
Therefore, an organization should consider financial management a key component of the general
management of the organization. Financial management includes the tactical and strategic goals
related to the financial resources of the business. Some of the specific roles included in financial
management systems include accounting, bookkeeping, accounts payable and receivable, investment
opportunities and risk.
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Accounting and Bookkeeping

When establishing any financial management system, a business needs to determine if the
management of the system will occur in-house or if it will use an outside entity. Any accounting system
should measure, identify, record and communicate all of the financial information about the
organization. The foundation of an effective accounting system is good bookkeeping. A bookkeeper
gets the complete and accurate financial information to the accountant. While the accounting system

looks at the overall financial picture of the organization, bookkeeping deals with the specific
transactions that take place on a day-to-day basis.

Accounts Payables and Accounts Receivables

Account payables provide an organization with information about accounts with suppliers. This
includes the outstanding sums of money owed to these suppliers. Additionally, account payables will
show the cost of items purchased, how the organization made payments in the past and details about
the transaction. Accounts payable will also show the workflow and allow the business to approve
invoices, update records and maintain an integrated document management system. Account
receivables, on the other hand, records what customers owe the organization for products and services
purchased. An accounts receivables system can keep track of invoices, payments, produce reminder
letters for outstanding payments and calculate interest for balances owed. Additionally, accounts
receivables can help the organization recover past due accounts before they become bad debts.

Financial Management Information Systems

Category: Corporate Management
Contents

1Introduction

2What is Financial Management Information Systems?

3The Ideal FMIS Systems

4FMIS Building Blocks

5Advantages of FMIS

Introduction
Financial Management Information Systems accumulate and analyze financial data in order to make good financial
management decisions in running the business. FMIS is the acronym for the term Financial Management
Information Systems.

The basic objective of the financial information system is to meet the firm's financial obligations as they come due,
using the minimal amount of financial resources consistent with an established margin of safety. Outputs generated
by the system include accounting reports, operating and capital budgets, working capital reports, cash flow forecast,
and various What-If Analysis reports. The evaluation of financial data may be performed through ratio analysis, trend
evaluation, and financial planning modeling. Financial planning and forecasting are facilitated if used in conjunction
with a Decision Support System (DSS).

What is Financial Management Information Systems?

Financial management information system is:

Information system that tracks financial events and summarizes information

supports adequate management reporting, policy decisions, fiduciary responsibilities, and preparation of
auditable financial statements

Should be designed with good relationships between software, hardware, personnel, procedures, controls
and data

Generally, financial management information system refers to automating financial operations.

The Ideal FMIS Systems

An ideal or well-designed system should:

Collect accurate, timely, complete, reliable, consistent information

Provide adequate management reporting

Support government-wide and agency policy decisions

Support budget preparation and execution

Facilitate financial statement preparation

Provide information for central agency budgeting, analysis and government-wide reporting

Provide complete audit trail to facilitate audits.

FMIS Building Blocks

An FMIS will consist of several elements with different functions. In the description that follows, the term module will
imply that the system is a sub-element in a FMIS. The core of an FMIS could be expected to include the following
modules and systems:

General ledger

Budgetary accounting

Accounts payable

Accounts receivable

The noncore or other modules are, inter alia:

Payroll system

Budget development

Procurement

Project ledger

Asset module.

Advantages of FMIS
There are many advantages of implementing an FMIS. A few of them are listed below:

Integrated financial information

Flexibility of reporting and additional control over expenditure

Less administration required within the business

Tighter views of budgets versus actuals.