Accounting software provides digital solutions to banks and other lenders, enabling them accurately and efficiently represent their company’s financial position. The right software will save time, money, and frustration while allowing lenders to access real-time financial data to grow and protect their loan portfolios. In this article, we explore the different types of accounting programs, the advantages of accounting software for banks and lenders, and some great tips on integrating accounting software into your current business.
Types of Accounting Software
Cloud-based or downloaded
Just like any other digital business tool, accounting software can be either cloud-based or downloaded. The major difference is that cloud-based software is hosted on a remote service, where users can access data from any internet-connected device. Downloaded software, on the other hand, must be installed on machines and are only accessible on the computer that hosts the software. Cloud-based accounting solutions are typically more efficient because they can be programmed to automatically update certain financial data and be accessed from anywhere. Another benefit of cloud-based software is its ability to automatically back up data, preventing the likeliness of lost data in the event of damaged, lost, or stolen devices.
Custom accounting software
Most lending and accounting software is customizable, allowing users to set up work flows specific to their business. Software can also be customized depending on access demands or company size. Gather input from all stakeholders when assessing accounting software to ensure that your choice meets all requirements for your organization.
ERP Software
For larger banks with complex investing and loan policies, enterprise resource planning (ERP) software offers a more robust set of tools that can integrate multiple processes like financial planning, inventory tracking, sales and CRM tools, and human resources. Using an ERP application can enhance communication and workflows within departments, making data more accessible throughout your organization.
The Benefits of Accounting Software for Banks and Lenders
Accounting software provides many advantages to banks and lenders when compared to traditional, manual recording methods, but small lending institutions and community banks must consider how the benefits of accounting software compare to the costs and efforts required for implementation.
Automation
The key to success for many financial institutions is efficiency. Implementing adequate accounting software allows banks and lenders to automate processes, like reporting, accounts receivable, bank reconciliations, and scheduling payments. Software that can be enabled with automatic updates also reduce the time and costs associated with license renewals, new hardware, and system maintenance.
Visibility
Cloud-based accounting gives users the advantage of being able to view important sales and inventory data, changes to market rates, client profiles, loan approval statuses, and financial information in real-time. Utilizing an accounting software that is customized for lending allows loan officers and finance managers to view up-to-date data through a user-friendly dashboard, improving decision making.
Security and Compliance
Especially in the banking and lending industries, security and compliance remain a priority when considering software options. Both cloud-based and downloaded software use advanced data encryption techniques to increase security. Up to date software will also create more accurate financial reports and provide guidance on regulatory changes.
Scalability
Lenders that use accounting software can easily scale their products to meet their evolving business needs. Since every bank or small business has unique needs, accounting software can be initially customized with only the features needed. As portfolios grow, the platforms and features can be upgraded easily without having to purchase additional software packages or install new programs.
Tax Planning Advantages of Accounting Software
Financial institutions are not exempt from the headaches of tax season. The right accounting software streamlines tax preparation and filing for banks and lenders. Since receipts, invoices, and transaction records are already kept in one convenient location, providing the required support to a CPA firm or tax preparer can be an automated process completed electronically. Accounting software also simplifies the preparation of necessary financial reporting for income tax filing, like income statements and debt schedules.
Integrating Accounting Software into an Existing Tech Stack
Many banks and lenders utilize a custom-built tech stack that enhances operational efficiency, improves customer satisfaction, ensures regulatory compliance, and streamlines tax planning. Accounting software can be integrated into a comprehensive tech stack along with CRM systems, AI driven data analytics, payment processing, and external compliance management tools. Integrating accounting software with other lending solutions increases productivity, cuts costs, and improves financial reporting and decision-making.
Bottom Line
Accounting software, cloud-based or downloaded, benefits banks and lenders because it automates processes and increases productivity and efficiency. Cloud-based software in particular offers enhanced security features and can be customized and reevaluated frequently to grow with the business’s needs. Income tax planning and filing is also streamlined with the use of accounting software, in that reports and transactions can be easily exported or made digitally available to tax preparers and CPAs. A robust accounting software is a crucial component in a comprehensive tech stack for bankers and lenders.
