What is the Purpose of Financial Management in Tally?

| January 8, 2022

updated on January 11, 2022 at 3:56 pm

Purpose of Financial Management

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Tally is comprehensive accounting software that records, tracks, and retrieves all the financial transactions, maintains compliance, prepares financial statements, and much more. However, there is more for managers and business owners in Tally. It helps business managers in the financial management of the company.

Suggested Read: How to Record Sales & Purchase Entry in Tally with GST

The primary purpose of financial management in Tally is to help businesses make sound financial decisions. It enables business owners to track their expenses, revenue, profits and losses, and other financial data.  Tally helps managers track trends, profitability, and company growth through ratio analysis, charts, etc.  Before we get started with the purpose of financial management in Tally, let’s look into its financial management features. 

Financial Management with Tally

What is Financial Management? 

Financial management refers to the processes involved in planning, organizing, and controlling an organization’s financial resources. Financial management helps organizations optimize limited financial resources for survival, growth, and long-term future positioning.

Financial management aims to ensure that the business has all the financial resources to meet its goals. This includes ensuring that the business has enough cash flow to cover its expenses and investing in long-term assets that will help the business grow. Financial management also involves making decisions regarding managing a business’s financial assets. A business must have a financially sound foundation to meet its long-term goals. Financial management is critical in developing this foundation.

Objectives of Financial Management Feature in Tally 

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Financial management is the process of ensuring a business can meet its expenses and achieve growth targets. Financial management ensures that a business runs with the data-driven approach at optimum efficiency. Here are the objectives of financial management in Tally. 

  • Providing A Plan of Financial Management: Financial analysis helps businesses to determine and plan the core finances of an organization. CFOs need to decide the debt-equity ratio, capital composition, and cash management in the best viable way. 
  • Identifying And Monitoring the State of The Business Finances: Tally provides insights into the vital ratios of a company’s current and historical financial position. It assists TCWG to identify and focus on the company’s financial gaps and pain points. 
  • Creating A Budget and Managing Cash Flow Plan: Tally allows users to analyze previous expenses and overhead, helping them to create competitive budget plans. It also provides in-depth knowledge of the cash flow in the company, allowing managers to rotate working capital more efficiently.  
  • Developing financial statement Analysis and interpretation: The financial report feature in Tally is a part of the financial analysis feature. It assists owners to interpret the exact position of a business at any point in time through financial statements. 
  • Making Informed Decisions About the Business Operations: The figures, ratios, and technical data provided by Tally help managers make data-driven decisions based on technical and fundamental analysis. 

Major Purpose of the Financial Management Feature in Tally   

Financial Management Feature in Tally

Tally is more than just basic accounting software. The primary purpose of financial management in Tally is as follows: 

  • Consolidating Financial Data: Tally consolidates all the business’s financial data into one readable form. As the books are maintained separately, consolidation becomes necessary for data-driven decision making. 
  • Forecasting Financial Position: Tally provides tools for analyzing current data and trends of a business to forecast future financial positions. The purpose of forecasting a business’ financial position is to allow managers and owners to react proactively. 

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  • Budgeting: Tally helps create a budget for financial transactions. This information can help managers stay on track with their financial goals and take corrective actions if they fall behind. 
  • Analysis of Financial Data: Tally helps users analyse financial data based on graphs, charts, and other tools with the ease of making sound business decisions. Appropriate reports can be generated to help users identify problems related to their finances. 
  • Scenario Analysis: Users can perform scenario analysis on different financial data in Tally to predict the future of their business. Scenario analysis enables users to consider various options for achieving specific goals and choose the best possible course of action. 
  • Reporting: Financial reports can be easily generated in Tally for different purposes such as management reporting, statutory reporting, and tax filing. This information is critical for business owners in making informed decisions about their finances. 
  • Real-Time Data Monitoring: Tally allows business owners to keep track of their financial data on a real-time basis. It helps them make quick decisions based on conditions that affect the business. 

Why is Financial Management Important for Small Businesses? 

Small businesses need to consider financial management because it helps them achieve their goals and utilize resources optimally. Here are the benefits of financial management for small businesses:

  1. Helps understand their current financial situation and set future goals.
  2. Provides a tool for making informed business decisions.
  3. Informs business owners of upcoming capital expenses and investments required.
  4. Assists in cash flow forecasting, which is necessary to maintain liquidity in a business.
  5. Encourages better financial decision-making and provides a structure for budgeting.
  6. Aids managers in analysing trends and their effect on business.
  7. Helps make informed decisions about future investment, financing, or expansion.

Suggested Read: How to Create Ledger in Tally ERP 9 (Tally Prime)

Conclusion 

Tally does more than just accounting, it’s a complete ERP software. A well-informed business manager can do wonders with the financial information provided by Tally. Financial management Tally helps business owners to make informed data-driven decisions, identify trends, take proactive actions, and much more. 

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