Financial information systems are the software programs that help businesses manage their money. Systems can be set up to keep track of your banking, accounts payable and accounts receivable; to generate standard financial reports such as a profit-and-loss statement; and to report the information in various formats. It's important to choose a system that suits your business needs.
A sole proprietor with a small home business might do perfectly well with the same type of personal-budget software many individuals use. The next step up in sophistication would be a low-end program that handles basic business accounting but without much capacity for audits or security checks. Then come pricier systems that can carry out more functions. At the high end come "enterprise resource planning" programs with great ability that can be tailored to the exact needs of the user. There are also "vertical" programs specialized for particular industries, such as banking or construction.
When your business grows to the point that you need better financial information systems, it's best to decide what you need before you go shopping for it. Ask yourself what the problems with the current system are -- lack of information about inventory, weak auditing or how complicated it is to use -- and what you'd like to do on the new system that isn't possible now. Tailoring a system to your company will cost money, so make sure to get the features you want.
Like your financial information system, your financial reporting system should meet your specific needs. Emcee Consulting states that at the most basic level, there's a stand-alone spreadsheet. If that doesn't fit your company -- it's easy to alter numbers manually, which can make auditing tougher -- many financial systems provide proprietary software for making reports, some of which are spreadsheet compatible. Alternatively, you can buy a financial system that provides information in many formats and arrangements, though the flexibility will increase your cost.
If your business is subject to any financial reporting laws, such as the federal Sarbanes-Oxley rules, you need to make sure your financial information system will help you meet the rules. If you anticipate growing your business further, you should also get a system that can grow and adapt as your needs change. The software you buy should be reliable, glitch-free and easy to use. The latter requirement will be very important if you're upgrading from a simple system to one that has to accomplish more tasks and manage more information.