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Ultimate Guide 2021 About Financial Management for Small Businesses

4 Mins read

Does managing business finances make you feel like you’re juggling dozens of balls in the air? There are purchase orders that need to be sent, invoices that need to be followed up, budgets that need to be approved, and reports that need to be run. All that in dozens of spreadsheets all over the place. 

Quick fact: according to the U.S. bank, more than 8 out of 10 new businesses fail because of poor cash-flow management. 

There are two roads you can take in a small business financial management: integrating a financial management tool or building a customized software solution that suits your unique needs. 

In this article, we will cover the pros and cons of each option and compare the most popular small business financial management tools. 

Here’s what we will discuss:

  1. What to look for while selecting a small business financial management software
  2. Road #1: integrating a financial management software – tools compared by price and key features
  3. Road #2: building a custom financial management software for small business 
  4. Custom financial management software development VS packaged software
  5. Final Thoughts

What to look for while selecting a small business financial management software

Customizable, cost-effective, secure. This is what most business owners or startup founders are looking for while picking finance management software. 

Two roads of financial management of a small business

Choosing between building your financial management software and integrating an off-the-shelf one is similar to picking trekking shoes. Depending on your journey’s complexity, you either can feel confident in the mass market shoes or need special ones designed considering the obstacles you will encounter and your body features. 

Same with finance management software. 

You can invest in an off-the-shelf solution or develop new products based on your unique business requirements. If you require a unique product, you should choose custom software development for a small business.

Let’s analyze the pros and cons of each option.

Road #1: financial management software integration (H3)

There are many different types of financial management software available for small businesses, with varying capabilities and price tags. But how do you find “the one”? 

We have analyzed the 3 most popular small business financial management software options by cost, and key features to help you choose the right one for your business. 

1. Zoho Finance Plus

Key features: Zoho’s finance suite is an integrated platform for back-office operations: accounting, invoicing, inventory, expense management, and tax compliance. 

Suitable for: small and medium businesses

Cost: There’s a free 14-day trial after which the monthly pricing is at $149/organization.

2. Xero

Key features: Xero is a simple accounting tool that lets you create recurring invoices, reconcile bank and credit card statements. It also helps businesses with purchase and sales orders, contact management, payroll, and inventory management. The tool can be integrated with Xero mobile app. 

However, you might face limited reporting features, fees charged for ACH payments, limited customer service.

Suitable for: small and medium businesses

Cost: The starter plan for small businesses starts at $30/month with optional purchases. 

3. Oracle Financials Cloud

Key features: Oracle Financials Cloud is an ERP system that’s based on the cloud. While on the expensive side, it might be a good choice for growing businesses. 

Suitable for: growing businesses and enterprises

Pricing: $600/user/month with a minimum of 10 users

How to integrate financial management software? 

Usually, such software management tools like Oracle, Zoho, or Hexo provide integration as separate services which causes additional expenses. You can read more about financial management software integration here:

Zoho Integration 

Hero Integration

Oracle Integration 

Road #2: building a custom financial management software for small business

Remember the trekking shoes? While integrating an off-the-shelf small business financial management software might seem like the cheapest option, building custom software is more cost-effective in a long run. 

As the study shows, businesses now tend to choose to build custom software. See 3 main reasons why.

Projected usage of ready-made software and custom software over the period of 5 years

1. More $ now, less later

Being a small business owner, it can be a good idea to invest in financial management software designed for your unique goals, thus saving money in the long run. With custom financial software development for small businesses, you can easily add new functionality, as your business grows. 

2. Make your data secure

Small businesses and startups don’t get hacked. It’s a lie. Almost a third of data breaches in 2020 involved small businesses. Tailor-made financial software solutions not only have aren’t publicly accessible but also use specialized security code and encryption. 

3. Get technical support anytime

With your company changing, the financial software also needs to evolve. Custom financial management software providers are responsible for your project management and change. Having a personal development team to upgrade your financial software is more reasonable than customizing ready-made solutions. 

Custom Financial Management Software Development vs. Packaged Software

CriteriaCustom financial management
Ready-made solution
Available functionalityDepends on the projectLimited by the platform
FlexibilityPerformed by adding more finance management features as your business scalesLow as you get a fixed list of features that are hard to customize and scale
Launch speedDepends on the taskFast, in most cases, even instant, as the approach
suggests already existing options
CostsLower in the long term, but requires an investmentLower in the short term as you can launch in a moment. However, future improvements and
software updates are costly
SecurityHigh-level custom software uses the most secure protocols and encryptionsNot solved to the full, without any extra security standards, making the software more vulnerable
to hackers’ attacks
MaintenanceProvided by the development companyIt may be challenging, as you need to engage
a third-party company to implement
new functionality

Final Thoughts

The choice between a custom financial management solution and a ready-made one depends on your specific business needs. Using packaged solutions is not often the best option as it needs additional customization and limited flexibility. Along with custom financial management solutions, you get a team that will maintain, support, and upgrade your financial software as your business evolves. This long-run investment ensures your finance is in safe hands. 

Get inspired by the success story of our customer HyperJar. Together with KindGeek, HyperJar developed a FinTech platform that reimagines finance management by providing a user with a network of mini-accounts each of which is tailored to the user’s plans, lifestyle, and relationships.

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