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Were All Financial Analysts Once Mild Mannered Accountants?

 

What professional careers led us to become financial analysts? Did we enter the field of financial analysis right out of college, or did we take some segues, before discovering that we were well suited (pinstripes optional) for intense financial scrutiny, coaxing stories out of numbers? Perhaps long ago we thought we’d like to be magicians, making something appear from out of thin air. We may not be performing in Las Vegas along with David Copperfield, but we definitely are capturing audience attention at a senior management level, transforming innocuous data into actionable information.

 

We do come from different backgrounds. Some of us were from internal or external audit departments, while others have performed stints as accountants in cost or general accounting. We also are represented from areas that appear on first blush to be far from Financial Planning and Analysis (FP&A), in the realm of engineering, mathematics, operations research, or (surprise!) a non-business bachelor’s degree.

 

Since we come from many different backgrounds, what do we have in common, drawing us into the financial analyst profession?

 

6 Common Financial Analyst Attributes

 

1. An Insatiable Curiosity (It Killed the Cat, but Created Our Analyst’s Profession)

We all seem to share a curiosity, bordering on obsession to tear apart numbers, with the interest in understanding its inner workings. Variances are our mainstay, whether they are manufacturing related, financial variances to plan or forecast across a P&L, balance sheet, or cash flow. But it doesn’t stop there. The shifting tides in market share, delays to the completion of key products under development, or quandaries on where to place marketing bets in the digital space have a place for us, often through our own initiative and financial liaison work cutting across functional areas of a business.

 

2. A Deft Ability to Absorb Numbers

As ubiquitous as the financials numbers themselves is Excel, which is the workhorse of most financial analysts. But what sets the analyst apart from the jockey is that we know what to look for and where to go to find the relevant numbers. Those numbers may be related to a known problem, hypothesis to be tested, or area lacking sufficient understanding, with potential exposures. Being efficient in how we gather information has a direct bearing on the speed & quality of our analysis, which will ultimately be appreciated by our customers, supervisor, management, or shareholders.

 

3. Accounting & Related Systems Knowledge

We as analysts have acquired our knowledge from different sources, in varying degrees. Accounting & business administration majors, along with MBA’s have acquired through college a financial principles background, including an understanding of GAAP. A few of us also have either a CPA, CMA, or FP&A credential, rigorously demonstrating our professional breadth of knowledge. Non-accounting & finance majors may have less coursework, but have an understanding of how systems function. The marriage of both theoretical underpinnings and practical understanding of current systems is where we perform at our best and can most readily recommend constructive changes to processes.

 

4. A Desire to Share & Effectively Communicate

While repetitive variance analysis may appear to be the staple of our output, with the sense of a newshound, we’re attracted to any story having a potential to help our organization, or mitigate a disaster waiting to happen. This is not the kind of professional work we want have buried in an addendum, or have mentioned casually, if it’s important. Having validated our analysis, we want to go to press & get the word out. We recognize though that releasing all our reports via email is not at times the best way for an audience unprepared to accept your findings. This involves at times consulting with politically savvy management inside or outside finance, to determine how best to communicate sensitive news.

 

The nature of our work attempts to identify, observe & assess operation anomalies, advancing any corrective action, if needed. However, how we communicate can determine if our message is favorably received. Recognizing the management community as our audience and understanding the individual and collective temperaments of our audience greatly improves our ability to cultivate respect and support for our initiatives. Giving more emphasis within our profession as to how we share information has resulted in new course offerings to financial analysts, offered by Innovation Enterprise

5. A Thick Skin

You won’t likely see having a thick skin (alligator, tortoiseshell, or rawhide?) appearing in job requirements, but for those of us that have seen considerable action, it comes with the territory. We are driven to unravel a business problem and it at times takes us to places where we can encounter resistance. Our experience, work, approach taken & conclusions may be challenged and for good reason. Management wants to feel certain that our analysis is sound and that any recommendations we might advance are constructive. But let’s not sugar coat leading our professional life as financial analysts. As messengers of bad news, we can and do get shot at, particularly when unexpected results are found & shared that appear to not support long-held paradigms. In our profession, it builds character.

 

6 Willingness to Suspend Reality (and Test What Isn’t Readily Perceived)

Our work is at times described as ‘connecting the dots’ of seemingly unrelated data. At times, it may appear our work was worthy of a Sherlock Holmes, or Harry Bosch, except our work isn’t fiction! It takes patience to accumulate facts and dispassionately suggest clues (however improbable) to where to proceed with a piece of analysis, including halting our work altogether. Although making early assumptions may seem expeditious, it can severely limit the scope of our financial analysis and taint our results. Financial ‘bloodstains’ don’t immediately allow us to professionally act and prescribe a remedy for a possible culprit. That’s where our talent for detaching ourselves from reality (i.e. generally accepted perceptions) for however brief a time is possible, comes into play. Yes, we don’t often use or hear the terms, “detective work”, or “investigative work” from our boss. Perhaps though it’s time we do draw that relationship with criminal science, to draw more candidates into our professional careers as financial analysts. We can always use more Watsons.

 

A financial ‘bloodstain’ doesn’t immediately allow us to professionally act and prescribe a remedy for a possible culprit. That’s where our talent for detaching ourselves from reality (i.e. generally accepted perceptions) for however brief a time is possible, comes into play. Yes, we don’t often use or hear the terms, “detective work”, or “investigative work” from our boss. Perhaps though it’s time we do draw that relationship with criminal science, to draw more candidates into our professional careers as financial analysts. We can always use more Watsons.

 

Conclusion

We recognize that our general business and financial knowledge, experience crossing many industries, acquired and practiced skills, as well as time-tested talents are varied. This provides our FP&A community opportunities to share a rich set of perspectives and approaches to use, when tackling the many different challenges of our profession. Thanks for being part of our world!

 

Add any that I may be missing in the comments below.

Kenneth Fick

President, CEO of FPAexperts.com and Senior Manager at MorganFranklin Consulting, Inc, Mr. Fick is senior finance leader that brings ideas from concept to execution. A frequent speaker and author on topics such as budgeting, forecasting planning, technical accounting, business improvement, and optimization.

1 Comment

  1. Machila February 15, 2018

    I really enjoyed reading about financial analysis. Really informative!

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