Technology in Financial Management


Technology is a critical element in the management of financial resources. Technology includes innovative tools and ideas. Thus, the application of technology in finance is considered as the use of information communication technologies and standards in the planning and control of financial resources. The effects of technology can be positive, as well as negative. The current paper evaluates the effects of technology on the finance department and the overall business performance of a firm.

On the one hand, the advantages of technology include enhancing accuracy, improved speeds, and workloads. On the other hand, technology is challenged by security, know-how and high setup costs. Using qualitative and quantitative research techniques, the studies establish a significant relationship between technology and performance in financial management. The study combines data from both primary and secondary sources, such as journals, books, organization reports, and articles. The choice of data improves their validity since its data is verifiable.

Keywords: technology, finance, department, management, effects, business

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Technology in Finance


The management of finance is a critical function for all organizations. The existence of organizations depends on the successful management of finances. Thus, when a financial department succeeds, an organization is also successful. The effective management of finances relies on various parameters within the organization. The parameters include staff, organizational culture, and technology. Qualified staff inputs the high level of integrity in the work processes of the department. The employees effectively manage the functions of the department that include balancing accounts, internal audits, inventory management, and risk analysis. Each function is significant for the success of the department.

On the one hand, balancing accounts ensure that the assets and liabilities of a firm are clearly recorded. The records are kept in a clear and concise manner. Internal audits, on the other hand, show the financial position of the firm. A firm whose assets exceed the liabilities has a healthy financial position.

However, if liabilities exceed the assets of the firm, then it is in a precarious position. In fact, if a firm cannot meet its financial obligations, it is deemed as bankrupt and ceases to continue with its operations. The extent by which assets and liabilities relate is also a function of risk analysis. Risk analysis advises how funds in a company should be committed to exposing the firms to bankruptcy. Finally, inventory management involves controlling the stock of a firm. These functions require employees with deep financial skills (Safon, 2014; Verbano, 2013).

Organizational culture is the sensitivity of all employees to financial management. Entities either reflect a culture of saving on the cost of production or wastage of resources. The former puts a firm in a healthy position, while the latter sinks a firm. Some of the savings practices include the management of printing, energy, water, raw materials, and waste from production. The increased wastage of resources guarantees high costs of production. Organizational culture is an indirect function of the financial department. The department often faces the task to reflect the true cost of production from which cost-cutting measures are being taken.

However, technology is working as a tool for the financial section. It introduces the effective and efficient management of financial resources. The application of technology in companies exists through the use of software, hardware, and online materials. Technology improves the speed of the company’s operations and reduces human errors. Further, it assists in the maintenance of financial records that are important in decision making. However, investments in technology add to the costs of production. Thus, the right investments payout in the long run (Centre for European Policy Studies, 2015).

Enterprise Resource Planning (ERP) System

According to Bazhenova, Taratukhin, and Becker (2012), the most common technology in financial management is the enterprise resource planning (ERP) system. The system creates an information system that supports business processes in a company. The system is not limited to the use by the department of finance only, but it incorporates other sections of a company as well. The ERP is considerably expensive and preserves large firms with the required financial muscle. Further, big companies have enough capacity to attract and retain professionals that can operate these technologies with the finance departments.

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SaaS Program

The other common technology is a software as a service (SaaS). In order to function, the SaaS program requires a computer and internet connection. Through the system, computers can access the software through the web platform from which they operate the financial functions. The platforms are linked to various business applications that are either free or require some subscriptions. The current paper determines the relevance of technological applications in the financial departments of organizations.

Problem Statement

The introduction of technology in financial management does not fully guarantee success. The success involves the interplay of staff, organizational culture, and technology itself. In other words, the technology must be relevant to the firm’s operations. Therefore, the staff must be qualified in the use and application of the technology, while organization culture should support the cost-saving operations of the finance department. As such, depending on the application of technology, a firm either realizes the benefits or challenges. It is important to establish the extent to which applying technology affects the operations of the financial department of a firm. Nonetheless, the position of technology can be accessed independently by holding staff and organization culture.

According to the Association of Chartered Certified Accountants (2014), entities are increasingly pressured to adopt the financial technologies without assurance on the return of investments. Other scholars argue that technology introduces various benefits to a firm, one of such benefits is reducing errors and employees by 40%. Thus, the basis of the adoption of technology depends on the assessments of the effects of technology.

Research Objective

In line with the research problem, the research objective of the study is outlined, as follows:

  1. To establish whether applying technology improves the operations of a finance department and a firm.

Research Question

The research objective can be expounded into the following research questions for the ease of study:

  1. What are the benefits of applying technology in the finance department?
  2. What are the challenges of applying technology in the finance department?

Justification of the Study

The use of technology has various advantages for a company. The internet, for instance, is a media for communication and all types of financial transactions. It provides networks for secure money transfer and data sharing. Further, it cuts costs, since such transactions and other purchases do not require the involvement of employees in person. At the same time, technology enables stakeholders to keep in touch with the firm. The technology is constantly used in the firm’s day to day operations. These include effectively connecting with buyers, setting the prices, and managing financial records within the firm. Thus, the use of technology assists employees in handling departmental tasks. Rationally, the benefits of technology influence its investment and adoption.

However, these systems are very vulnerable to hackers and spammers, threatening the direct gains for a firm. The breach of security leads to financial losses. The initial investments are also large, while special knowledge is also required to run the technologies. Therefore, the studies are important in establishing the advantages of applying technology in financial management. Equally, it identifies the possible ways through which technology may not guarantee the success of a firm. The study is relevant in advising firms on what to expect from technology and possible ways to avoid failures.

Literature Review

According to Brigham and Ehrhardt (2013), financial management is defined as the planning and control of resources in monetary activities, such as procurement and daily operations of a firm. Financial management includes investment awareness, capital build-up, and revenue distribution. Investment awareness refers to the use of capital in the acquisition of fixed assets and working capital. Fixed assets are mostly used in production, while working capital is used in a firm’s daily operations. Capital build-up refers to the methods financial departments use to raise money for operations of the business.

Revenue distribution refers to the sharing of profits with the source of capital. Technology refers to the use of innovation in a process. Technology can be a tool or an idea. The tools are tangible machinery used in production, while ideas are knowledge-based on techniques applied in a process. Thus, the authors define the use of technology in finance, as the application of innovative ideas and tools in financial management. These include hardware, software, and information-based standards (Goh, 2014).

According to Brigham and Daves (2012), the primary function of a finance department is meant to prevent financial hardships. Financial hardship is a situation when a firm cannot meet its financial obligations. This results from a certain failure in the core functions of the department. The department either fails to estimate the resource requirements for a given project or wrongly invests in the raised capital. As a result, the operations of a firm are halted. Apart from cash flow problems, firms also face legal problems in relation to financial management. This happens because accurate financial reporting is a legal requirement for governmental taxation.

Thus, the department has the mandate to accurately capture and disseminate the financial reports to avoid governmental fines (Brigham and Ehrhardt, 2013). In this case, technology has the ability to streamline financial management. Further, the effective use of technology improves the overall performance of a business. However, the application must be correct for businesses to bring fruitful results. Technology is expensive in acquisition and application. Before adoption, pre-feasibility studies are being carried out. The extensive review conducted by specialists, advice on the best types of technology to adopt.

Lim (2013), notes that information technology is a critical element in the financial management of firms. The study reviews the effect of accounting information systems in financial management. The paper notes that accounting information systems can be manual or automated. On the one hand, manual-based systems rely on paper-based entries for journals and ledgers. However, these systems are being increasingly replaced by computer-based systems. Automated systems, on the other hand, apply information technology in accounting sphere.

Financial information is created and saved on the computer. The study notes that the advantages of information technology in financial management are automated processing, reduced duplication of functions, edit checks, and real-time controls. These functions are enabled through database systems built with software. The study only investigates the relevance of information technology on financial management. However, other technological materials, such as hardware and standards are not reviewed. Thus, there is a need to holistically review the role of technology in financial management.

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In a study conducted by Moghaddam et al. (2012) on the application of technology to financial management, technology has various benefits. The benefits include reduced bookkeeping, reduced costs in information collection, enhanced accuracy, and enriched reporting. The results of the study were gathered from a sample of 74 companies and a mathematical model. The Moghaddam et al. (2012) study falls short by adopting the same research scope as Lim did. The study only focuses on accounting software and completely ignores hardware costs, employees, and standards.

Siahaan (2013), notes that information technology is one example of technology, applicable to accounting. However, the study zeros on information technology in analyzing the benefits of accounting. The study establishes that information technology improves the accuracy of accounting information. The analysis of information technology includes hardware which the author defines as input, output, central processing, telecommunication, and connecting devices. Some examples of the software include word processing and accounting software.

The software runs on an operating system. Siahaan (2013), introduces new components in financial management, such as an application of information technology in financial accounting and accounting management. The studies conclude that information technology eases data sharing in financial accounting. Information technology also improves governance by establishing good accounting management practices. The study is descriptive in its nature, hence it does not show empirically the benefits of information technology on financial management.

According to Raef (2012), the challenges, related to technology, include cost, managing records, achieving real-time, visibility, and accuracy. In an analysis of 10,000 companies, the study reveals 68% of companies understand the use of finance and accounting modules in enterprise resource planning. The studies also report that all companies that use the technology reported more than a 5% increase in efficiency. Bagiyan (2013) in an exploratory study notes that technology systems are very expensive, and the costs are both direct and indirect. The direct costs include licensing and maintenance costs. The indirect costs are related to adding on fees and training for employees. The study concludes that benefits are only reflected through the right of the software.

Ikpefan and Akande, (2012), establish that standards provide a basic outline for designing and managing the financial procedures and reports. The standards also guide the firm’s records management system. As a result, it establishes universality in financial management. The study notes that international standards enable companies to comply with global financial reporting procedures. As such, it enables companies to attract foreign investments. Further, companies can compare themselves with other industry peers.

According to the Association of Chartered Certified Accountants (2014), the new trends in finance technology include mobile devices and cloud technologies. These technologies are the drift from set-up work stations and enable employees to work while being on the move. However, these systems still work with accounting software, especially the Enterprise Resource Systems. The new processes nevertheless must satisfy the financial needs and requirements of organizations.

Studies by Gunasekaran introduce an interesting scope of the study (Gunasekaran et al., 2001). The scholars evaluate investment justification for information technology projects. The aim of the model is to advise whether firms should invest in information technology. However, the studies fail to empirically establish a model through which the return on investments can justify investments in technology. This is because there are numerous intangible benefits related to technology; these benefits cannot be quantified. However, the study concludes that before the technology is adopted, a company’s operation strategy and commitment is required. At the same time, employees should support the introduction of technology. Various studies provide the foundation for the success of the technology. Further, it prods future investigation through which the effects of technology can be operationalized and investments can be justified.


The research employed a qualitative approach to investigate the existing relationship between technology and benefits or challenges in their application. The study is based on secondary sources, such as journals, books, and organizational reports and articles. This choice of data improves their validity since its data is verifiable. The materials used in the study are tested on the basis that they are either peer-reviewed or are produced by the government or reliable institutions. The study is descriptive in its nature and unveils the effects of technological application in finance. It presents details based on question models, like why what and when. The descriptive research model explores the relevance of the study’s objective in qualitative terms.

Data is reviewed to establish the immediate and prolonged effects of technology. The descriptive data is important in providing the validity of empirical data. It subsequently supports the comparisons of the advantages and disadvantages of the application of technology. The study also uses quantitative data from secondary sources. The empirical data increases the validity of descriptive information that is provided therein. The empirical data will show if the study objective can be accepted. That is, it shows using the figures expressed in absolute terms or as percentages of effects of technological applications (Kothari, 2004).

Subsequently, the study also collected primary information with the help of online questionnaires. The questionnaires carried guidelines for questions for discussion. The questionnaire design adopted direct questions on the subject matters. A sample of 500 employees responded from 70 companies. The companies were randomly selected from all the sectors in the various listing categories under the Nasdaq stock market. For the evenness of data analysis, certain variables were attached to the Likert scale as ‘strongly agree’, ‘neutral’, and ‘strongly disagree’ with options for comments in certain instances. 370 questionnaires were used in the analysis. The selected data was based on completeness and positive responses from interviewees. Data were displayed in percentages on a pie chart and were compared with other studies.


From the survey, the study established that almost all of the companies owned a computer. Equally, 99% of companies had internet connections in the finance departments. The internet functions achieved the following rating communication with clients (90%), financial evaluation and software advisory (30%), and online transactions (80%). The forms of online transactions included purchasing an item and paying for an item. The literacy level among staff in the use of internet applications stood at 100%. The employees admitted that the top management made the final decisions on the acquisition and purchasing of the financial management software.

All employees knew how to use a computer and a web browser. However, only 30% sought information related to financial management, as compared to 90% that admitted to visiting the social media platforms. Most employees owned mobile phones. 95% of the employees had sent or received work-related emails. Employees from 80% of the firms performed various online transactions. 50% managed online banking processes. About 30% of the employees had an idea about cloud computing. For firms, 50% used cloud computing in financial management.

Employees admitted they were able to identify accounting software (60%) and word processing software (80%). As shown in the pie chart above, 50% of the employees in a finance department admitted they knew how to use accounting software, while 10% could use the software extensively. However, 85% of the employees could use basic software for word processing and simple math calculations. The employees, however, agreed that with proper training they could use financial software. The findings were distorted by roles. There were employees who did not directly use information technology in their operations. Within the automation process, 65% of the employees agreed to the use of robots and various automation techniques on financial management.

On the benefits of technology in financial management, 70% of the employees strongly agreed that technology improves financial management. 10% disagreed with a relationship, while the rest were neutral, as shown in the pie chart below. The study established a strong relationship between technology and time management. 90% of employees interviewed strongly agreed that technology improves time management. 70% of the employees agreed to use accounting software that greatly simplifies the financial management operations. Employees also strongly believed that the application of technology introduces additional costs in the purchase, maintenance, and staff training. 70% of the employee strongly felt that they should get a raise after training on using the accounting software. Further, the employees agree that the use of standards in financial reporting releases the standardized reports.

Most of the employees sampled agreed to knowing or either producing a financial statement (90%). However, the number of employees applying the standards reduced to 40% in the production of financial statements. Some of the reasons put forth by employees are directly not being linked with the production of financial statements.

Discussion of the Benefits and Challenges


The effects of technology can be classified into benefits and challenges. The benefits and challenges are discussed under the following categories:

  1. Efficiency

According to Monga (2015), corporate budgets reduced to 0.1% from 0.8% in 2014. The companies depend on the known software with multiple functions. As such, preferred software includes those that automate accounting processes. The use of technology increases the efficiency of a firm. The results of studies show the same results as employees claim who agree that technology improves the efficiency of a firm. This is further supported by Moghaddam (2012). The system has the capability of centralizing tasks for the realization of efficiency.

The use of cloud technology further ensures that employees can work from any location. The financial records are easily accessible from any point on earth. Technology increases the speed and precision of reports. Similarly, technology increases the number of transactions that can be addressed at a particular time. Additionally, technology increases the accuracy of computations in accounting. Accounting is a detailed process that requires accurate data input and analysis. Further, increased accuracy improves the validity of a firm. According to the Association of Chartered Certified Accountants (2014), the use of technology reduces the manual transaction processing by 85%.

  1. Cost Saving

The studies established that technology reduces the costs in the financial department. According to Lim (2013), information technology reduces the cost of production. As a result, companies that have deployed technology develop a competitive advantage over other firms. Costs are reduced by increasing productivity and reducing the overhead costs per employee. In other words, the adoption of technology increases the output per employee. Further, it improves the workload per employee, reducing the need for firms to hire many workers. This means that a company spends less money on employees’ salaries.

As a result, accounting costs are also reduced. The internet is a cost-cutting measure that eliminates the basic costs related to administration, traveling and mailing. The high-cost functions are pushed into an online environment. For instance, companies maintain email support systems at a cheaper cost than a normal call center. From the performed survey it is evident that a majority of employees agree that the use of technology improves their workload and deliverables. Apart from cost-cutting measures, the use of technology eliminates or significantly reduces other costs. The need for printing paper, for example, is greatly reduced.

  1. Information Flow

According to Economides (2000), the internet facilitates information flow. As such, it avails the information used to improve financial management and other technologies within the firm. The internet has information that is used in financial evaluation and software for financial management. Further, it increases the sharing of financial information with other stakeholders. Similarly, within the internet, financial transactions are enabled. Firms order and pay suppliers through online orders and cash transfer systems, respectively. Further, the financial reports based on standards enable the companies to comply with the law. Additionally, internal and external auditors are able to examine the extent to which the firms adhere to the law and the financial health of the firm. The observation by Economides is supported by the widespread use of email communication in companies.

  1. Improved Use of Equipment

Technology use comes with the added advantage of side equipment. The equipment helps in realizing the functions of the main software and hardware components. These include scanners, printers, and faxes. The internet is also a component of added advantage. The internet also improves the delivery of materials. The platform is fast and efficient in the distribution of goods and services. According to Lim (2013), 97% of companies interviewed in an earlier study owned at least one computer. The studies are a reflection of the survey that found a similar percentage.

  1. Improved Sales

The use of the internet is important since it facilitates increased sales. According to Lim (2013), the internet facilitates point of sales and online payments. The points of sale work by debiting credit cards, as consumers purchase goods. Further, customers are increasingly relying on credit cards for safety. The internet connects the credit card and the respective banks. This system is faster and automatically updates the inventory records. The study realized an average number of companies in the online banking platform.

  1. 6. Security

Technology has the capability of safeguarding financial management. The system generates passwords that are unique and confidential to users. Accounting software can further be encrypted to enhance protection. Further, the cloud systems are used to back up information guarantee data storage in case a device gets lost or destroyed (Moghaddam et al. 2012).


The existing challenges are discussed under the following categories:

  1. Increased Initial Costs

According to Brigham and Ehrhardt (2013), setting up technology requires large capital outlays. The costs related to software, hardware, and support equipment. As a result, a firm requires a lot of capital to establish a fully functioning financial management system. Further, the continued maintenance of systems increases the costs of production. Additionally, technology is constantly evolving. As a result, improved versions of the existing technologies are often released. The improved versions come with additional costs, but increased functionality. This introduces a trade for firms to pay more while rendering other earlier versions of technologies redundant.

  1. Know-How

Technology requires qualified personnel to run its installation, maintenance, and usage. The acquisition of know-how comes at a cost for the firms. Skilled personnel requires high salaries. Subsequently, constant training costs are required for employees to use the latest versions of financial management technologies. The survey shows that employees need a raise after training on technology. The observation is supported by previous studies by Lim (2013). According to Bazhenova, Taratukhin, and Becker (2012), the adoption of technology in the medium enterprise with access to technology is minimal.

For instance, research established that 80% of employees had access to mobile phones but only 48% used them for business purposes. The usage is linked to literacy levels. For big firms that form the scope of this study, the existence of independent information technology and research and development departments reshape the financial department. The departments offer their support to the financial department.

  1. Unemployment

The use of technology reduces the number of employees in the financial department. Technology enables a few employees to handle a bigger workload. This is a reflection of the capital intensive mode of productions. Further, the use of robots reduces the number of job positions that human beings could fill. The study finds out that managers are willing to automate processes within the finance department to reduce costs, which is a rational point of view. According to Monga (2015), the use of technology resulted in the reduction of employees from 80 clerks to 10 clerks at Pilot Flying J truck. Since 2004, the number of staff in the accounting sections has reduced by 40%. Thus, robots are gradually replacing white-collar employees.

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  1. Exaggeration of Benefits

According to Monga (2015), investments in technology may fail to realize the stated benefits. The efficiency gains may be exaggerated to promote investments in technology. Globally, there has been a decrease in investment in technology. Association of Chartered Certified Accountants (2014), note that there is increased pressure for the adoption of technology without a clear reflection of the actual firm’s needs. The financial departments are yet to be fully integrated in terms of technology. The observation presented concurs with the study, whereby a majority of the employees agree that technology improves the processes in financial management. However, only 10% of the employees can effectively exploit the functionalities of these technologies.

  1. Security

The use of technology, especially information and communication technology, are associated with cybercrime. Data can be intercepted through the internet and, as a result, it affects financial transactions for companies. Online financial transfers depend on the confidence of security measures. Despite various investments in making technology secure, firms are still vulnerable to attacks (David, 2008).


The use of technology bears various benefits and challenges for finance departments. This, however, depends on a number of factors, such as availability of capital, management, and employees. Managers need to audit the relevance of applying a given technology in a firm. The application of technology does not guarantee outright success in an organization. From the study, scholars note that the benefits of technology in finance departments might be skewed in the favor of firms producing technological equipment. Initial set up costs are also very high and, as a result, proper justification must be made for such investments.

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The study proves that the high costs of technology are leveled by benefits. Technology results in various cost-cutting measures. The measures pay out the initial investments. Further, by reducing the number and improving the efficiency of employees, technology provides strong capital gains for the firms. However, the studies find enhancement of accuracy level, as a significant tool for such investment. Finances breathe life into firms. Thus, the correct position of the financial report indicates whether a firm is ailing or healthy.

Therefore, processes that enhance reporting are critical for a financial assessment. The use of global standards in financial reporting increases the exposure of businesses. The use of the internet opens up a firm’s possibilities and eases its work processes. For instance, firms are obligated to send hard copies of their financial reports. However, with the presence of the internet, the firms can send soft copies to shareholders through the mail.

The key findings showed that 99% of the companies had an internet connection in the finance departments. Further, the employees managed the following functions of communication with clients, financial evaluation, and software advisory (30%) and online transactions (80%). The employees admitted to being able to identify the accounting software (60%) and word processing software (80%). Only 50% of the employees in a finance department admitted they actually knew how to use accounting software, while 10% could use the software extensively.

However, 85% of the employees could use the basic software for word processing and simple math calculations. In the long run, the benefits of technology are far superior to the existing disadvantages. The disadvantages are either realized in the short run or in isolated events. Technology is institutionalized in the business processes and employees.


  1. Firms increasingly adopt technology in their finance departments.
  2. Perform further empirical research on the payoff periods of investments of technology in finance for small firms.
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