Financial systems are a vital component in the delivery of an organizations programs and services. When managed effectively, financial systems improve service quality, enhance productivity and reduce costs.
A financial system is a system used to exercise financial management, control and accountability of an organizations funds or assets. Included are systems used to record, verify, report, generate and/or execute financial transactions, and those used for the management and control of assets, liabilities and assets.
Systems must be put in place to determine methodology to be used in the development of financial systems. The methodology used must be consistent with the company’s information technology.
Organizations must ensure that financial systems have comprehensive controls to prevent and reduce the risk of loss, error, misuse or fraud to an acceptable level. A risk and controls review must be performed and documented for a new financial system, and whenever there are significant modifications to an existing financial system. Qualified, independent and objective parties must carry out the review.
The scope of a risk and controls review depends on the nature and complexity of the financial system. A comprehensive review includes project management, systems development, general controls and application-based controls. Companies that require a financial system to interface with other systems must establish proper and integrated processes to secure financial information.
Financial systems in the corporate world represent the business study department of a company. Large organizations use financial systems to review financial performance. Sometimes, corporate financial system is a conduit to accounting and management. Financial systems goes a step beyond preparing financial information it measures performance and projects forecasts. Various financial activities come under the corporate financial system. Capital structure, profitability measurements, budgets, sales forecasts, cash flow management and financing decisions are just some of them.
The essential purpose of financial systems is to measure the profit generating capability of the company and recommend best finance options for further growth and profitability.