We live in a world governed by money. Accounts and financial transactions are what make the business world what it is. Take out cash from the equation, and the entire system falls flat. In general, trading is an act that depends on currency for the transaction to go through in modern times. With the free-market booming in America, we see how important money is for our economy and how it indirectly affects every one of us in some way or another.
However, when there is money, there needs to be control of said money.
Businesses and government agencies need to keep track of the cash flow and monitor the money’s ins and outs. In particular, companies need to keep track of the cash flow as failure to do so might mean that the management is turning a blind eye to the financial shortcoming. Failure to accurately report financial information can land them in hot water with the government.
A financial analyst could be the solution to an organization’s financial needs. Someone who can watch over the monthly cash and point out any discrepancies. Good news for all the business stakeholders.
If you are interested in a financial analyst’s life, here are six of their roles and responsibilities in an organization.
For a business to have somewhat of an indication as to what its future in the market is going to be, it would be best to look at its internal financial situation first. Financial forecasting gives the company an idea as to what its future will look like. Because business activity depends on money, the financial forecast affects all aspects of the business. From operations to HR, they all have a stake in the financial forecast in some way or another.
If you find yourself wondering how to become a financial analyst and conduct forecasts, it would be best to attain a college education in finance or accounting to conduct findings like these. It is crucial to show these forecasts in each quarter of the year. The only way to do so is to have an education in a related field before assuming a financial analyst role in the organization.
Looking at the Management Through Financial Statements
The income statement and balance sheet are some of the most important documents produced in a business. They contain accounting-related information that gives all business stakeholders an inside look at what is happening in the organization and how they manage the finances. Profits, losses, assets, and liabilities are all looked at, and business activity decisions are established based on these documents.
A financial analyst can use these documents to reorganize the corporate structure, assign accountability for expenses, and even predict a company’s future growth with these financial statements. Exaggerated costs in the income statement could indicate that there may be misappropriations of shortcomings in the management that need looking into.
Help Prevent Issues with the IRS
Suppose a company does not have adequate financial management. In that case, chances are they are going to find themselves in hot water with the IRS. It is reasonable to assume that a company with faulty bookkeeping systems in place may be bailing on tax payments to the government. Let us reiterate; this is not a certainty. However, patterns with incorrect financial management often indicate tax-related issues.
Issues related to tax can lead to criminal charges, fines, and completely shutting down the business altogether for unethical practice. By looking at the accounts and finances, an analyst could help prevent an issue and ensure no misappropriations in the funds, ensuring no run-ins with tax collecting government departments. Preventing problems with the authorities can be one of the essential responsibilities these financial analysts play in an organization.
Prepares the Company for Economic Instability
As we have seen with the current pandemic, businesses worldwide have taken major hits due to economic instability. Companies have gone bankrupt, shut down, or are barely functional because of the effects of COVID-19. Certain economic and political events have significant effects on business activity. Economic slumps such as the one seen during the pandemic can cause chaos to a business in ways one could never imagine.
A financial analyst can look at the economic environment and make predictions about how these will affect an organization. Suppose an analyst sees that revenue will drop shortly due to lack of sales. In that case, they might start cutting costs in the organization to ensure that they see this time through as best possible.
Decisions Related to Business Investment
A financial advisor often gives the go-ahead for a company to start up a new project. Expansion requires a considerable amount of money, and the analysts looking over the accounts need to be reasonably justified. Suppose the company doesn’t have enough money to sustain itself after an expansion. In that case, the analyst may be pulled up and asked why they gave the go-ahead to take such a significant step.
An advisor is responsible for making investment and expansion-related decisions based on its financial positions and the economic state in which the industry is operating. These are often colossal and extremely stressful decisions to make. Hence the reason why financial analysts have some of the highest stress levels across career options.
Making Allowances for Appraisals and Bonuses
Most companies give appraisals or bonuses at the end of the year. In the last year, millions of companies worldwide had halted raises and bonuses due to the negative impact which the pandemic had on the world economy. Suppose companies didn’t generate profits through revenues. In that case, it stands to reason that there would be less room to give the employees appraisals.
The financial analysts need to make sure that there is enough money to give people raises and bonuses at the end of the year. That’s right, the finance department works closely with HR, believe it or not! They decide whether there is enough money to give raises and bonuses at the end of the year.
A financial analyst plays a vital role in an organization. They are responsible for looking at the organization’s future. The day-to-day running of the business also indirectly falls on the analyst. Accounts, in general, is a department on which the entire organization relies.
Suppose you are looking for a job as a financial analyst. In that case, hundreds of companies might hire during this time to predict financial decisions due to the pandemic. Now would be the time to branch out and pursue a career in finance!