Here we are, trying to
describe the occupation that allows us to earn our livings for some years now.
What is the role of The Financial Analyst in a company? Without any question I
would say it is to clarify accounts: search for numbers, add and subtract them,
put a bunch of them together in a table or chart that will make our boss happy
to have something to show to his or her superior, when this makes questions about
the financials. It is not a boring and tedious work, as it was once described
to me by the merchandising manager in charge of the book department in the
company I worked some years ago. She wouldn’t be able to spend the day
reviewing numbers – she said. Rather, I would say, it is a noble occupation,
that seeks to give happiness and peace of mind to those leading the company. After
all, they could not sleep well at nights without understanding why the company
accounts are showing those numbers, and what those numbers really mean. How
could they sleep well without knowing whether the company is heading or not in
the right direction?
The Financial Analyst
is a smart person -usually charming and nice looking- sitting for more than
eight hours at a computer, making reports, checking numbers, explaining
changes, analyzing spending accounts, projecting revenues, preparing
presentations, taking coffee and more. In
my experience, those activities could fall into three main groups: reporting,
analysis and planning. The reports are the basis to build the business intelligence
(BI). Their function is to give those who run the company information on the
status of operations and industry. The Financial Analyst is usually responsible
for gathering the information that feeds many of the reports designed by the
company. He or she gets the data, filters it, sorts it, and puts it together in
previously agreed reporting templates. Once the report is ready our hero –or
heroine- reviews and conciliates the numbers and, after assuring that
everything is right, distributes or publishes it in order to guide future
decisions.
Analyzing is more interesting
than reporting. Its goal is to seek and find answers to different situations
that arise in the company: Why are the sales dropping? Why are the operational costs
rising? Why the financial statement of this month shows the rental cost with an
opposite sign? The Financial Analyst must seek answers to different questions,
browsing in the accounting systems, looking at the transactions behind the
numbers, understanding the reasons why the accountants have booked transaction
in one way or another, checking whether the numbers accurately reflect the
operational status of the company. Analyzing requires contacting the people
involved in the activity that is being analyzed, sometimes in both, accounting
and operations, in order to understand what is really going on, and to ensure
that the financial statements and reports accurately reflect the operational
status of the company.
The Financial Analyst not
only looks to the past. He or she needs to understand the operational processes
in order to be able of projecting the future, of building economic models to
estimate incomes and operating costs under certain assumptions and in different
scenarios. How much would the company receive as income if the product is sold
at certain discount? How much would the raw materials cost in a couple of
years? What would be the impact in the cost structure of paying a salary
increase? What would be the return for expanding the plant capacity? Projecting
the future is part of the planning. To do this, our fellow Financial Analysts should
understand how the several operational processes interact with each other,
turning raw materials into inventory, inventory into sales, and sales into cash
to cover operational costs and provide profit.
To carry out the duties
of this job, The Financial Analyst must have the ability to communicate well
with others, so as to maintain good working relationships with colleagues,
accountants, cost analysts, plant operators, managers, and even with people
outside the company. Good communication skills are essential to clarify accounts;
to understand what is behind the numbers in a report, what is happening in the
business, and to project what will happen in the future. The numbers that The Financial Analyst manages
in the solitude of her or his job are not boring and tedious. Those numbers,
which have been obtained from different sources, including communications with operators
and accountants, are instead full of meaning and technical details about the
company and the industry.
Sometimes it will be better
to communicate face to face, or by phone. Others, the analyst will find more
convenient to write an e-mail or letter with tables and charts attached,
referring questions or comments which would be difficult to explain otherwise.
In many cases the analyst will need to use both: submit written information
with tables and charts, formats and templates, and also establish personal contact
to answer questions and to avoid misunderstandings. A good analyst should be
proficient in oral and written communication, should know how to ask the right
questions and find the right answers, to understand the technical jargon and be
able to synthesize the findings, in order to expose and explain them to
decision makers. In her or his position, The Financial Analyst is exposed to
many people from different levels in the company, which I dare say makes the
ability to communicate well almost as important as the ability to deal with
numbers.
The activities of The Financial
Analyst ultimately aim to make the best decisions possible. Reports, financial
statements, analyses, economic models are instruments to understand the
situation of the company and its industry, and to take actions accordingly. Accuracy
and correctness of the numbers, analyses, interpretations and reports are
important to allow good decisions. The better the analyses and reports reflect the
real situation of the company and its industry, the better will be the
decisions of those in charge of taking them.
One of the challenges
facing businesses today is to be able to integrate information from multiple
sources into concise reports and analyses in order to to facilitate
decision-making, that is, turning information into appropriate action to
survive in a highly competitive world. The integration and management of
information, known today as business intelligence, has led to the emergence of
computer systems that integrate data from multiple databases, in various ways and
in relatively simple manner. The problem for companies today is not the access
to information; most of them have abundant information about their customers,
their buying habits, the amounts they spend, their ages and their tastes. Nowadays
companies also have a sea of statistics of their own production processes, productivity, failures of
their machines, the cost of each part, each screw, the time it takes to repair
them, etc. The issue is, rather, how to digest the vast amount of data, how to convert
it into useful information, how to interpret it correctly, and how to take
advantage of it.
