Even new and smaller businesses have fairly complex financial processes. It’s often not workable for founders and CEOs to track every financial detail. However, without enough financial information, it can be hard to know whether decisions are benefiting the company. That’s where a financial analyst can help.
Financial analysts gather relevant financial information about your company and the wider business landscape to synthesize the data into digestible trends that can inform business decisions. Read on to learn more about what a financial analyst does, when a young business should consider hiring one, and what to consider when hiring an FP&A analyst.
What Does a Financial Analyst Do?
Corporate financial analysts, or FP&A analysts, develop financial models that can help businesses determine:
- key drivers of their business
- core KPIs
- customer LTV
Most importantly, they can also forecast performance and growth. The best FP&A analysts will combine cross-department business data with market conditions, news and competitor behaviors to create financial models that predict future company performance.
These financial models allow executives to determine which areas of the business are driving success and which are bringing the business down. From there, analysts can adjust the model’s variables to get an idea of how various financial and operational strategies will drive growth. The result offers comprehensive business insights to drive strategy, backed by quantitative data.
While financial modeling usually represents the core of what a financial analyst can do for a small business, it’s not the only thing. Some other FP&A projects include:
- Data visualization: Easy-to-digest visuals that help business leaders understand company performance without sifting through immense amounts of business data
- Budgeting: Company-wide and department-level financial targets to guide the business each month
- Pricing analysis: Determine the optimal price for products based on competitor prices, cost of manufacturing, customer purchasing power and more.
- Investment strategy: This can include either an internal resource allocation strategy or a strategy on acquiring outside investors. Many VC funds won’t consider a startup unless they have a financial model, which a qualified financial analyst can build.
Overall, FP&A analysts provide a comprehensive financial overview. This enables better forecasting of cash flow and results so businesses can plan for multiple outcomes and make more strategic decisions.
When Your Company Needs a Financial Analyst
It’s not always clear, especially for startups or small businesses, when your finances are at the point you should engage a corporate financial analyst. To help navigate that uncertainty, here are a few common scenarios that would definitely warrant an engagement with a financial analyst:
You Don’t Have the Numbers
Many small businesses don’t have a finance department constantly aggregating important business data. Financial analysts can organize your numbers so that you don’t have to worry about chasing down mountains of data.
You Have the Numbers, But You Need to Interpret Them
Maybe your business data is all in one place, but you need to turn it into actionable insights to help inform your business decisions. An FP&A analyst can synthesize the data and ensure your business is on the right path.
You Don’t Have Time to Manage the Finances
Founders and CEOs should focus their time on innovating and growing the business, not crunching numbers. Hiring a skilled financial analyst will ensure that your finances are handled accurately and efficiently.
You Need to Attract Investors
Financial analysts can help startups and small businesses gain funding by ensuring the business is:
- spending money efficiently
- setting financial goals and KPIs, and
- identifying risk factors for future business investments.
Plus, analysts can help manage relationships with future investors and provide a sense of professionalism for a younger, less established company.
What to Consider When Hiring a Financial Analyst
For a new company, hiring an extra person just for financial analysis can be a big ask. Before you seek one out, consider first whether your business has the funds to hire a full-time financial analyst. This includes not just the salary, but also the additional HR costs of recruiting and maybe even providing benefits.
Small businesses should also think hard about whether their business needs warrant a full-time analyst. If you can’t fill a full-time FP&A analyst’s time, you could consider working with a freelance financial analyst. This way, your business needs will be met on a project-basis, and you’ll only pay for the forecasts and models delivered to you.
Finally, before hiring a financial analyst, make sure that you have the necessary business data to be aggregated and analyzed. If your company has not set up robust financial and operational records yet, you should look for an accounting solution rather than FP&A.
If you need a more flexible FP&A solution, Paro uses proprietary AI technology to build flexible, focused teams of remote experts that help companies solve problems and drive growth. Our laser focus on finance allows us to quickly identify experts across the U.S. with the right mix of skills, credentials, and experience to achieve each company’s specific goals.
Paro’s financial analysts can help you understand what’s working, what’s not and actions you can take to get the results you want. Request a consultation to match with the best-fit freelance financial analyst for your business.