Microsoft Dynamics 365 Business Central Overview Series – Financial Management
What is Financial Management?
Financial management may be defined as the area or function in a Small / Medium Business Enterprises which is concerned with profitability, expenses, cash, and credit. Financial management is generally concerned with short term working capital management, focusing on current assets and current liabilities, and managing fluctuations in foreign currency and product cycles, often through hedging. The function also entails the efficient and effective day-to-day management of funds, and thus overlaps treasury management. It is also involved with long-term strategic financial management, focused on capital structure management, including capital raising, capital budgeting, and dividend policy.
Specific tasks that comes through Financial Management:
- The main objective of Financial Management is profit maximization which happens when marginal cost is equal to marginal revenue.
- Maintaining proper cash flow is a short-run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent, etc. A good cash flow ensures the survival of small/medium scale businesses.
- Minimization on capital cost in financial management can help operations gain more profit.
- Estimating the Requirement of Funds: Businesses make forecasts on funds needed in both the short-run and long-run; hence, they can improve the efficiency of funding. The estimation is based on the budget e.g. sales budget and production budget.
- Determining the Capital Structure: Capital structure is how a firm finances its overall operations and growth by using different sources of funds. Once the requirement of funds has estimated, the financial manager should decide the mix of debt and equity and types of debt.
- Financial Management through Microsoft Dynamics 365 Business Central
Microsoft Dynamics 365 Business Central is designed to help small and midsized businesses to take control of their operations. Offering a familiar interface, easy-to-understand pricing, and a wide range of customizations that can handle your unique business needs, this platform delivers a modern solution for growing businesses. At the core of a business management software functionality, financial management gives business users the power to make informed decisions, improve their close and reporting capabilities, increase forecast accuracy, and much more.
Following are some advantages of Financial Management in Microsoft Dynamics 365 Business Central.
- See the Big Picture: Financial Management in Microsoft Dynamics 365 Business Central delivers the right information to the right people at the right time. Whether it’s by providing at a glance information from the home screen, automatically connecting data with other modules and applications, or giving you new ways to slice and dice data using business intelligence, Financial Management lets you see the whole picture.
- Make Smarter Decisions: Business is king and liquid gold. Break down silos and centralize data from finance, sales, service, and operations to get an accurate, end-to-end view of your business. It shall help further by using real-time updates that help you spot trends or problem areas before they become major issues.
- Work Faster: Streamline accounts receivables and payables, and automatically reconcile accounts to close and report on financials quickly and accurately, while maintaining compliance. Boost efficiency with automated tasks and workflows—all from within familiar Office tools like Outlook, Word, and Excel. With a unified solution, get an end-to-end view of your business, with built-in intelligence when and where you need it.
- Improve forecast accuracy: Refine financial forecasts by modeling and analyzing data across multiple dimensions. Customize reports using seamless Microsoft Excel integration.
- Extend Your Financials: With a wide range of third-party integrations built into the Business Central Financial Management module and many more available from an extensive network of ISVs, you can operate your business on your terms.
- Essentials of Microsoft Dynamics 365 Business Central Financial Management Functionalities
Use account schedules as a powerful financial reporting tool. Accountants and controllers can include essential business data from the chart of accounts, budgets, cash flow accounts and cost types in financial reports. Use the data to efficiently monitor the health of the business and provide valuable input for business decision makers. Define row and column layouts and combinations to generate the report you need. Calculate totals and sub-totals and control the print output, for example, to compare current and historical budget figures.
Consolidate companies from the same Business Central tenant and pull data directly into the consolidation company or use XML files to pull data from other Business Central tenants, databases, or third-party business management application. Use multiple currencies, dimensions, and budgets for the consolidation.
Manage accounting for more than one company in a posting process that includes one or more Business Central tenants or databases. Send sales and purchase documents to partner companies and post journals transactions through a mapping to shared charts of accounts and dimensions. Control the document flow through an Inbox/Outbox feature that automates sending and receipt. Use sales and purchase documents with multiple currencies to reconcile intercompany balances.
Cash Flow Forecast
Predict how your company’s liquidity will evolve over time. Forecast expected cash receipts and disbursements plus available liquid funds. Create basic cash flow forecast set ups that you can extend and adjust. Use an assisted setup guide for help completing tasks and take advantage of automatic daily or weekly data updates. Include data from jobs and taxes as sources for the cash flow forecast. Use Azure ML capabilities to let Business Central generate cashflow predictions.
Track fixed assets such as buildings, machinery, and equipment. Post fixed-asset transactions such as acquisitions, depreciation, write-downs, appreciation, and disposal. Assign one or more depreciation books to define methods and conditions for calculating depreciation. Use depreciation books to meet managerial, internal accounting, and legal reporting requirements. Register maintenance costs, insurance coverage, and cost allocations for assets.
- Fixed Assets Allocations
Use allocation keys to distribute percentages of fixed asset transactions, such as acquisition cost and depreciation, to departments or projects.
- Fixed Assets – Insurance
Track insurance coverage and annual insurance premiums for fixed assets and easily determine whether they are under- or over-insured. Attach assets to one or more insurance policies and index insurance amounts.
- Fixed Assets – Maintenance
Record maintenance and service expenses for fixed assets. Get detailed information to analyze and make decisions about fixed asset renewal and disposal.
Get insight into costs through the visibility of actual and budgeted costs of operations, departments, products, and projects. Combine base data in general ledger transactions with dimensions with known future costs and define a hierarchy of cost centers and cost objects. Allocate costs using allocation runs with different allocation keys and methods. Analyze general ledger actuals and budgets in user-defined scenarios. Explore the scenarios to gain insight into the business that is not immediately reflected in your chart of accounts.
Set up deferral templates that automate the process of deferring revenues and expenses based on a schedule. Recognize revenues and expenses in periods other than the period in which the transaction is posted.
Bank Account Management
Create, operate, and manage multiple bank accounts to cater to diverse business needs and across different currencies.
- Electronic Payments and Direct Debits
Create payment proposals based on vendor documents and generate bank payment files in ISO20022/SEPA format or use the AMC Banking Service to generate electronic payment files in the format your banks require. Create direct debit collections for a bank direct debit file in the ISO20022/SEPA format.
- Easy Payment Process for your customers
Give customers an efficient way to submit payments by adding links to online payment services to invoices in the online version of Business Central. Use the PayPal extension for access to a trustworthy global payment service that offers multiple ways to accept payments, including credit card processing and PayPal accounts.
- Reconciliation of Incoming and Outgoing Bank Transactions
Import bank transaction data from electronic files sent from your bank in ISO20022/SEPA format or other file types. Apply transactions automatically to open customer and vendor ledger entries and create your own matching rules. Review proposed applications and account matches. Change the algorithm behind the record matching by modifying, removing, or adding rules. Reconcile bank payments from the Payment Reconciliation Journal in one step, and in one place.
- Bank Account Reconciliation
Import bank statement data from electronic files sent from you bank in ISO20022/SEPA format or other file types. Reconcile bank statement data automatically to open bank account ledger entries and keep track of all bank statements. Filter bank statement information to view only the transactions that need attention. Summarize outstanding bank information and drill-down to the details of each bank transaction.
- Check Writing
Print checks as automated electronic checks or to write them manual, both with flexible options for voiding, reprinting, using check forms with preprinted stubs, and testing before printing. Consolidate payments to a vendor in a single check.
Export documents in Extensible Business Reporting Language (XBRL) format and import XBRL taxonomies. The XBRL module supports the XBRL 2.1 Specification released by the XBRL Consortium.
Microsoft Dynamics 365 business central is a cloud business application product where Microsoft Teams is an integral part which is supported through a network of partners like VISTAS CLOUD. At VISTAS, we have over 10 years’ experience serving small to medium-size businesses with Financial Management need and many more. We support Furthermore, we understand that each business has unique needs and we have the expertise to help you customize Microsoft Dynamics 365 business central- business management solution to fit your specific needs.
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- Financial Managers, Bureau of Labor Statistics
- Budget Analysts, Bureau of Labor Statistics
- “Capital Structure Definition | Investopedia”. Investopedia. Retrieved 2015-11-04.