Use of softwares for financial calculations
What is Financial Software?
Financial software, often known as financial system software, is a type of application software that keeps track of all financial transactions in a company. This system’s basic functions include not only all accounting software modules such as accounts payable, accounts receivable, ledger, reporting modules, and payroll, but also the ability to research alternative investment options and compute statistical associations. The system’s features may differ based on the sort of business it’s being utilised for. The primary purpose of financial software is to record, categorise, analyse, assemble, interpret, and finally provide accurate and up-to-date financial information for each company transaction.
Few Simple Financial Calculation
Taking control of your finances is the first step toward financial stability. Money management is an art that entails setting aside the appropriate quantities of money and investing in the appropriate assets. However, a number of variables, like inflation and time, reduce the value of money. As a result, learning how to determine the value of one’s investments is essential.
On the internet, you may find a number of financial planning calculators. However, knowing some fundamental equations that you may use to conduct your own calculations is also vital. The following are some such formulas that everyone should be familiar with.
Compound Interest
Compounding is the practise of generating interest on both the principal and the interest that has accrued. The higher the potential for profit through compounding, the longer the investment is held, making it a particularly strong instrument in finance.
The formula is as follows:
A = P * (1+r/t) ^ (nt)
Post Tax Return
We invest with the intention of generating potential profits. However, we overlook the fact that these returns will be significantly smaller after taxes are included in.
The foregoing returns are pre-tax, as in the previous case. The absolute figure on your fixed deposit certificate is what you see. According to income tax regulations, all interest earned on a bank deposit is taxed according to one’s tax bracket. As a result, if you are in the 30% tax rate, the interest you earn will be reduced by 30%.
Formula = Interest rate -(Interest rate*tax)
Inflation
Inflation reduces the rupee’s buying power. As a result, while formulating a savings strategy, inflation is one of the aspects that must be considered.
EXAMPLE
It’s crucial to know how much today’s Rs 10,000 will be worth ten years from now assuming inflation remains at 5%.
Formula: Future amount = Present amount * (1+inflation rate) ^number of years
Effective Annual Rate
When compounding happens more than once a year, the annual rate of return on an investment differs from the nominal rate of return (quarterly, half-yearly). Below mentioned formula converts nominal return to effective annual return:
Formula: Effective Annual Rate = (1+(r/n))^n)-1*100
Where
r = nominal return divided by number of times compounding is done in a year
n = number of times compounding is done in a year
Software Programs Used by Financial Advisors
Financial calculators are mainly used to perform complex tasks which normal calculators which are used on a day-to-day basis cannot. The valuations of investments, cashflow quantities, and loan-related charges are some of the tasks that some of the things that the financial calculators can perform easily.
MoneyGuidePro
MoneyGuidePro gains the top place when it come to market share
MoneyGuidePro is used by over 36% of those who polled and claimed that they use financial planning software in their profession on a daily basis.
Launched in 2001 by PIETech as one of the most complete programmes, it swiftly soared to the top of the rankings and shows no indications of losing market share.
MoneyGuidePro’s success may be credited in part to its visually appealing and user-friendly interface. The primary gateway is meant to completely engage the customer, featuring a Play Zone where the client may experiment with various choices and alternatives to see how they might affect the end result.
One critique of the software is that its stock performance estimates may be less credible because it does not employ cash flow analysis.
eMoney Advisor
eMoney is a comprehensive software and is well-known for its cash flow analysis tool. eMoney was used by 29.02 percent of over 1,000 respondents who said they used financial planning software, up from 25 percent in 2017. It also received the highest average user rating (8.0) of all the financial planning tools included in the poll.
eMoney is the #1 software product that advisers are considering adding to their arsenal of financial planning tools, according to the report. Fidelity National Financial acquired eMoney in 2015 which clearly shows how the software has a reputation for being helpful and trustworthy.
RightCapital
RightCapital has a 9.97 percent market share. Despite the fact that it was a relatively new piece of software, it was one of the best (7.97). It also landed in third place for programmes that people are thinking about adding. RightCapital is the market leader for smaller, newer advisors, but it has also made inroads with larger, more established firms.
For millennial consumers who want budgeting guidance, RightCapital was created to bridge the gap between too limited and too comprehensive planning solutions. It goes beyond specialised instruments for a specific purpose, such as retirement projections or college savings.
Simultaneously, the user interface and a great customer experience are never jeopardised.
Money Tree
Money Tree has a total market share of 7.27 percent, with respondents preferring it to all other programmes in a poll. It’s also the most popular software among companies that have been in operation for more than 20 years.
Money Tree’s Silver programme is one of its top offerings. Money Tree’s Financial Planning application is meant for use by bankers and is less expensive than systems like MoneyGuidePro and eMoney Advisor. Its fundamental approach skills are flexible enough to focus on a variety of goals, such as retirement, estate preparation, or school finance plans.
Silver receives excellent marks for simplicity of use, interaction with third-party applications, and a module for analysing insurance policies, while not being as extensive as some other systems.
Conclusion
A daily used calculator won’t be helpful to perform certain complex calculations which these softwares, mentioned in the blog will certainly suffice the needs of any financial advisor or even an enterprise. Complex things, such as amortisation schedules and cashflow analyses, can be done on any of the softwares mentioned in the blog.
