Financial software

Large businesses use complex database systems, spread-sheets, and other applications for activities such as account-ing, planning/forecasting, and market research (see business applications of computers). Here we will con-sider the variety of consumer and small business software applications that are available to help with the planning and management of financial activities, such as

•  home budgeting and money management

•  investment and retirement planning

•  college financing

•  tax planning and filing

•  home buying or selling

•  basic accounting, inventory, and other activities for small business

Basic home money management programs (such as the pop-ular Quicken) handle the budgeting and recording of daily and monthly expenses. The program can usually also inter-face with on-line banking services (see banking and com-puters) as well as exporting data to tax filing software.

For small or home-based businesses, programs such as QuickBooks can provide basic management of inventory, sales, taxes, expenses, and other functions. There are also niche programs for applications such as managing on-line auctions or Web-based sales.

For financial planning, there are a variety of programs (ranging from small free or shareware utilities available on-line to full commercial packages) that offer special calcula-tors, graphs, and other aids for planning for the future. For example, the future value of a savings account at various points can be calculated given the interest rate, or the full cost of a loan or mortgage similarly calculated. Full-fea-tured programs usually include helpful explanations of the various types of financial instruments. Some programs con-duct an “interview” where the program asks the user about his or her objectives, priorities, or tolerance for risk, and then recommends a course of action. Such programs can be helpful even though they lack the experience and breadth of knowledge available to a human financial planner.

Tax preparation software is perhaps the fastest-growing consumer financial application. Programs normally must be purchased each year to incorporate the latest changes in tax law. An important incentive has been created by the Internal Revenue Service encouraging electronic filing of tax returns by promising speedier refunds to “e-filers.”

Trends

Publishers of respected guidebooks (such as for college admissions and financial aid) are creating electronic ver-sions that can be easier to use and more up to date than the printed counterpart. Meanwhile, many Web sites are offering utilities such as financial calculators, implemented in Java and run on-line without any software having to be downloaded by the user. The services can be offered to attract users for paid services or simply to acquire e-mail addresses for solicitation. Users should be cautious about revealing sensitive identification or financial data to unknown on-line sites.

The growth in small and home-based businesses is likely to continue in an economy that continues to offer new opportunities while reducing job security. While start-ing a small business is always an uncertain enterprise, easy-to-use accounting software offers the budding entrepreneur a better chance of being able to stay on top of expenses dur-ing the crucial first months of business.

The growing complexity of financial choices available to average consumers and the need for more people to take responsibility for their retirement planning is likely to increase the range and capability of financial planning applications in the future.