Financial data is what allows companies to make informed business decisions. Companies rely on financial data to determine which products, services or corporate policies are right for their organization. Financial data also allows them to determine what role a partner will have in their company as well as their ability to compete with other firms that might be better positioned to serve their needs.
Companies use a variety of financial data sources for a variety of reasons. Examples of financial information that is used by companies to make business decisions include sales revenue, advertising expenses, cost of goods sold, employee compensation and the market value of their assets. Other types of financial data that are important to business decision making are taxes, government regulation and environmental impact. Examples of financial information that are related to environmental impact include the cost of producing an item, the amount of energy required to produce it and its life cycle. All of these types of financial data are important to the production process of any product or service.
The key to finding the best business practices is to first identify the most important nonfinancial factors that affect the company’s bottom line. These factors may include the quality of customer service, profitability, employee retention and the quality of the products or services that they provide. Once the nonfinancial factors are identified, a firm can begin to create methods for improving these areas. In doing so, companies can improve the profitability that they experience. This, in turn, will lead to increased revenue and better gross margin numbers.
The next step is to hire a qualified financial data analyst. A financial data analyst is responsible for providing analysis, recommendations and options that will help improve the financial health of a firm. Most analysts specialize in one or two areas. For example, an individual who has an understanding of sales forecasting and statistics can become an effective revenue forecasting analyst. A pricing or services analysis specialist can become an effective environmental impact (EOI) analyst. All analysts must possess strong mathematical and statistical skills as well as good writing skills.
Many financial data analysts specialize in one or two specific areas. For example, a financial report analyst may specialize in quarterly earnings forecasts. This individual would use past and present trends to make projections about the future of quarterly earnings. This would be done by taking into consideration the consumer spending patterns, profitability, competitive events and other economic factors. A manufacturing unit may choose an analyst to examine their manufacturing process over a time frame. By reviewing this process over a number of quarters, a trained individual can create a report that analyzes the factors that have created the problems and helped to resolve them.
There are also analysts who specialize in financial reports. In these cases, the person would analyze recent events such as political events or natural disasters that have had an impact on business revenues and quarterly earnings. The reports would then help to prepare a report that analyzes all of the changes that have occurred since the quarter was issued. An example might be the following: a business may have lost thousands of dollars in sales because of bad weather. A financial data analyst could examine the sales trends and determine that the loss was not the result of bad weather, but was caused by organizational mismanagement and poor business planning.
One area that is very sensitive and needs to be overseen is internal controls. Internal control refers to the management policies, procedures, controls, and strategies that are put in place in order to ensure that all of the financial information reported by a business is secure. A company cannot rely solely on internal control as there are often outside influences that can affect how the company documents their activities and comes up with an accurate financial statement. For example, there could be wrong calculations and errors made when reporting certain items, or a faulty balance sheet. As a result of these and other potential errors, the income statement and balance sheet could end up being inaccurate.
If you are considering becoming a CPA or a Financial Advisor in the accounting industry, you will want to learn as much about the various accounting topics that are out there so that you are well prepared to answer any accounting questions that you may have regarding a variety of topics ranging from Audited Financial Statements, Business Turnaround Plans, to Income Statement Preparation. These can all be handled better by those who are well trained in accounting. With training and experience, you can become a valuable member of a company’s accounting department. It can make a big difference in your ability to run your own firm, or to provide accounting services for others.