Just about every industry is going through some level of technology-driven change, and organizations in local government, higher education, and healthcare are no exception. For finance teams working tirelessly to operate more efficiently, collaborate more effectively, and make more informed decisions, it’s becoming increasingly necessary to embrace technology and find better tools tailored to meet their specific teams’ needs.
Defining Debt Management Software
Let’s start with debt management – what is it? Debt management encompasses everything an organization must do to maintain, build, and protect one of its most precious resources: its ability to borrow money to fund future capital needs. Steps involved may include making payments on existing debt; budgeting and cash flow forecasting; complying with continuing disclosure and reporting obligations; generating accurate reports, journal entries, and year-end financial statements; and tracking future debt service obligations across multiple funds, functions, and projects. Each step is critical to ensuring the organization is managing its capital effectively and sustainably. To do all this well, organizations need a centralized, secure, and up-to-date data source that can be accessed by internal team members and outside partners and advisors.
Defining “debt management software”, then, becomes rather simple: it is technology that empowers all of those who touch some aspect of an organization’s debt portfolio to perform their specific function with significantly greater ease and confidence, allowing them to save time, reduce errors, and make smart, informed decisions.
As opposed to the typical tools finance teams have historically used to manage their debt, such as spreadsheets, debt management software is tailored to meet a finance team’s specific needs, pain points, and challenges. With the efficiency and insights generated by a tailored debt management software solution, finance teams can expedite financial reporting and access better data to improve their budgets, board decisions, rate and fee setting processes, and financial planning for future projects.
In short, debt management software is powerful, both in its ability to streamline existing workflows and to create new opportunities to drive organizational impact.
Benefits of Using Debt Management Software
Debt management software provides efficiency gains to organizations around one of the largest budget line items in the budget: principal and interest on outstanding debt, which generally account for 5-10% of total expenditures. With these efficiencies, team members can focus on activities that may reduce these costs, likely producing returns far in excess of the cost of software. For example, if a team had more time to identify, evaluate, and implement creative ways to shorten the repayment term of a 20-year, $10 million financing by just two years, it could generate more than $600,000 in cash flow savings – a massive budgetary boost for organizations being asked to do more with less each and every year.
Apart from the potential cost savings, we’ve highlighted other benefits that debt management software may provide for finance teams and the professionals who serve them.
- Centralize and streamline internal processes. Debt management has long been a disjointed, manual process that relies on numerous (often conflicting) spreadsheets that are maintained by multiple internal and external parties. Debt management software enables you to centralize all your data and documentation and automate many of your tasks, streamlining the process and empowering internal team members and external collaborators to do their work faster and more efficiently.
- Improve accuracy and confidence in the data. By now, most people have heard the stat that roughly 9 out of every 10 spreadsheets contain at least one error, which can have very costly repercussions. In one infamous case, investment banking company JP Morgan Chase lost $6 billion partly due to an Excel error. While a spreadsheet error is unlikely to cost your organization $6 billion, relying on spreadsheets increases the opportunities for mistakes and creates data silos that make it difficult to catch errors or determine what file contains the most current data. Poor data accessibility, coupled with human error, can expose your organization to risk of error and noncompliance, impede timely decision-making, and take up time that could be used instead to focus on more valuable activities. Debt management software builds confidence in the underlying data by automating those manual processes, providing accessibility to the team, and creating a single source of truth.
- Collaborate more easily and effectively. When working with various internal departments, accountants, advisors, layers, consultants, bankers, and other team members, you will likely encounter process, data, and even people silos. Especially during audit, there may be confusion about the location and source for the most up-to-date data, miscommunication among internal and external team members, and multiple phone calls and emails to track down, scrub, and refine the required data sets. These types of tasks slowdown your workflow, create room for mistakes, and increases costs. With cloud-based debt management software, your whole team can have anywhere, anytime access to the most current data and get real-time feedback from your external partners. The result? Increased efficiency, collaboration, and alignment that you can apply to one of your organization’s largest expenditures each year.
- Generate actionable reports and insights. Debt management software gives finance teams the ability to generate accurate, up-to-date reports with ease, streamlining mundane tasks like compiling information for Annual Comprehensive Financial Reports. Debt management software functionality, such as seamless reminders, customizable reports, and powerful charting and graphic capabilities, helps your team manage its debt with ease, giving them more time to focus on higher-value, strategic activities.
Pain Points and Challenges Addressed by Debt Management Software
Public sector organizations face unprecedented changes and challenges as they struggle to maintain tactical and strategic effectiveness. As Deloitte found in its study on the potential power of innovation in the public sector, “Disruptive innovation offers a potentially powerful tool [for organizations to drive efficiencies]: a way to reduce costs by upwards of 50-75 percent in some instances while maintaining or improving services.” If one or more of the following indicators rings true, you should consider acquiring debt management software.
- The team has limited access to data and documents. Traditionally, only a handful of people on a finance team have access to important debt information. If, for instance, someone outside that circle makes a request for information, that person must defer to someone with access, creating backlogs and more work. Debt management software offers anytime, anywhere, cloud-based access that empowers more people in an organization with the information they need.
- Teammates don’t have enough bandwidth to focus on high-value work. The manual work of debt management can leave little time for the kind of thoughtful, focused efforts that add valuable impact to an organization and, as a result, the community it serves. When that manual work is systematized and streamlined, however, the potential impact is profound.
- There are errors in your reporting. Manual, archaic processes leave ample room for error, which can impact everything from reporting to an organization’s ability to finance important new projects. Errors are not a reflection on the team but rather on the processes that leave room for inadvertent and sometimes costly mistakes. Debt management software offers an easy and effective solution.
Choosing a Debt Management Solution
A “fintech stack” refers to the group of solutions used together to operate finances more smoothly. Debt management software is one piece of the technology that keeps finance teams on task and on time: payroll software, enterprise resource planning (ERP) software, tax management systems, budget software and accounting programs all fit into this stack.
Implementing the proper technology can eliminate tedious, time-consuming, manual tasks in order to free up personnel to focus on more high-value work. Technology can also help to attract new talent, as many younger professionals want the ability to leverage the latest tech in their work.
Look for the following types of features when evaluating debt management software:
- Cloud-based functionality with unlimited users, which offers anywhere, anytime access
- An intuitive, easy-to-use interface
- Ability to track and manipulate debt obligations across multiple categories, filters, and allocations (e.g. type of debt, source of repayment, project financed, etc.)
- Consolidated calendar reminder functionality to track payment dates, redemption dates, disclosure requirements, tax and rebate compliance, and other items your team deems necessary.
- Robust document storage
- Collaboration functionality and ability to provide access to your internal and external team members (this saves tremendous time during audit and new financings)
- Dashboards, reporting, and automated journal entries and year-end audit note disclosures
- Continuous product development tailored specifically to meet the constantly-evolving needs and challenges of the finance team
- Data security and measures to protect against cybercriminals
In a post-pandemic, digital-first reality, it is perhaps more important than ever to have up-to-date technology when it comes to finance. Investing in the proper tools will mean a smoother overall experience, and debt management software has become an essential part of any organization’s fintech toolbox.
DebtBook is powerful, easy-to-use, cloud-based debt and lease management software for finance teams in local government, higher education, and healthcare. Our software helps these teams effectively manage their debt and leases in the cloud, driving efficiency, collaboration, transparency, and informed decision-making within their organizations.
As the new standard in debt management and the only consolidated solution for debt and lease management, DebtBook is trusted by finance professionals nationwide. Ready to go ahead and take the next step? Schedule a demo with us today to learn more and see the solution in action!
Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.