The finance department in a corporation is in charge of taking accounting data and creating reports that the managers within the company -- all the way up to the CEO -- need for decision making purposes. Information technology or IT refers to the software tools and computer systems the company uses to automate these functions and organize the data flow to improve the management team’s decision making capabilities.
Enterprise Resource Planning
Even very small companies use accounting software packages that generate financial reports such as income statements and cash flow statements. This simple form of IT allows a small business owner to save accounting time and have management reports available on a more timely basis. Mid size and larger companies use more sophisticated IT systems called enterprise resource planning or ERP, which are groups of software modules that serve the needs of all functional areas of the company. As its name suggests, ERP helps the company plan the use of its resources, a process that the finance department oversees.
Faster Flow of Information
IT systems allow a company to link up every department within the organization. Information generated by the manufacturing, marketing and finance divisions can be shared for example. This information is available real-time, meaning as soon as it is created on the system. Accessing it does not require a great deal of research or manual effort. The time finance staff used to devote to “digging” for the numbers they needed can now be devoted to analyzing and interpreting the information -- finance’s primary role in the organization.
The IT systems used by the finance department have a report generating functionality that speeds up the process of producing management reports. The system provides a certain degree of customization -- the reports can be configured based on the specific needs of the management team. Automation of these reporting systems means that routinely generated reports, such as those produced at the end of each month, can be created quickly. With many of the decisions management has to make, time is of the essence. IT systems address this need for rapid, customized reporting capability.
Many organizations take advantage of collaborative effort across departments, the concept of each department benefiting from other departments’ expertise. The finance team acts as in-house consultants to other departments within the organization. When all departments use a centralized IT system, it drops the barriers that formerly blocked the flow of information. The company now has a centralized database that all team members can access -- subject to certain security rules. In the case of a company with multiple offices or international divisions, this ability to access the same information from around the globe saves time and improves efficiency. If finance requires manufacturing cost data to create a report for an upcoming board meeting, operations personnel can quickly transmit the data in the format the finance department requires and understands.
Better forecasting means producing a forecast that is a more accurate prediction of what the company’s financial results are likely to be. Finance staff members need access to in-depth information to create forecasting models that depict how the organization actually works. Having access to information from all segments of the company makes accurate forecasting much easier. Finance has real information and does not have to rely on guesswork when creating assumptions for the forecast.