Financial accounting systems can be manual systems, but they are usually software programs. Normally, a financial accounting system is a part of a larger software system dedicated to providing overall administrative services for an organization, but they can also be standalone programs. Accounting systems can be classified by the type of organization that uses them, the method used to organize finances, and how the accounting system recognizes transactions including acquiring cash and making payments. Common types of financial accounting system methods include process, account, and transaction analysis systems. These systems can also be catered to the type of organization, whether the organization is a government department, a school, or a retail business.
The processes conducted by these systems are many, but include cash management procedures, payroll procedures, and tax procedures. They can also handle employee expenses, including reimbursements for work expenses like meals and travel. Depending on the organization, a financial accounting system might include additional features to handle other aspects of daily business.
Features vary among systems, which means that no one system is best for all types of organizations. It is important to match the capabilities of an accounting system with the needs of its user. For instance, financial accounting systems for educational institutions generally manage operating finances in addition to handling financial contributions. The finances of a school or university would include educational and general expenses, while an accounting system for a retail business might need to manage categories for raw materials and retail sales.
Getting the right type of accounting system is especially important when dealing with funding for a large organization like a university or public school system. When handling types of funding for an educational organization, categories might include loans, endowments, and funding from government organizations. These sources of funding must often be recorded and processed separately because some funds have restricted purposes or funding terms that change the way an accountant must record their transactions.
Financial accounting systems often differ when they are used for different purposes. Systems to analyze a business's finances for investment purposes by a user outside the company would differ in interface and function from managerial accounting systems that deal with the tasks of inputting financial data and using financial information within the company. This is mainly because an investor looking at financial information for a company requires a different set of information and features than a company manager requires from internal financial management systems.
The software programs that have financial accounting systems generally have features including human resources, planning, and process management functions. Multifunction management software systems are designed to allow an organization to integrate and share information throughout several departments in the company. Using these types of systems, an organization like a school can have administration directly input information that is available to all authorized parties within the system, speeding up operations and potentially increasing the accuracy of information within the system.