What is Financial Analytics & Why is it Important?

What Is Financial Analytics & Why Is It Important

In the business world, it has become necessary to have a clear picture of a company’s finances to stay afloat. To assess financial risks and stability, financial analysts are needed. Financial analysts are professionals who create financial reports to determine a company’s profitability, viability and stability. 

But what is financial analytics

In simple terms, it helps company leaders to make the right business decisions. With the use of actual and factual understanding, financial analytics tries to shape corporate strategy rather than applying instincts. 

Apart from that, financial analytics influences all parts of businesses and supports organisations in predicting and preparing for the future. It does so as a subset of enterprise performance management and business intelligence which offer thorough assessments of the financial data with the help of different financial analytics tools. These tools in turn help the analysts to get insights into significant patterns and take action to enhance the performance of the workforce.  If you aspire to be a financial analyst, you must know how to use different financial tools and analytics to get insights into business data. For that, you can enroll in the Advanced Programme in Financial Technologies and Financial Analytics, designed by IIM Ahmedabad, which will provide necessary insights into the Fintech world and help you become a proficient finance professional.

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Importance of Financial Analytics

The importance of financial analytics cannot be understated due to the following reasons:

the importance of financial analytics

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Increases transparency

Financial analytics goes beyond helping business leaders in making smart decisions. It also deals with monitoring financial and business performance, making the process that supports these judgements more transparent. Financial analytics can further assist HR managers and analysts in comprehending employee issues. Based on that, business leaders can take necessary actions to boost productivity while avoiding costly churn.

Helps to understand financial performance

Financial analytics assists businesses in understanding their financial performance. Macroeconomic and financial statistics are also important indicators. These assist company owners in better asset management. Furthermore, it also enables companies to forecast changes in the industries with which they compete.

Offers problem-solving approach

The approach to financial analytics has been upgraded. This has happened as a result of new technological interventions, such as machine learning, data analysis and automation. With these interventions, these days, finance departments have started using financial analytics, especially for business events. 

Identifies and addresses risks

Advanced financial analytics can assist businesses in identifying the dangers they face. It is basically a type of risk management that helps improve the effectiveness of company processes. When businesses are aware of the risks, they can direct their investments in the proper direction. This entails taking resources from non-producing areas. Companies may then place their assets to have the most impact. Furthermore, companies can also assess their revenue statistics using product financial analytics. This pertains to the enterprise’s sales channels, clientele, and market categories. It also indicates which ones may have an impact on future performance and helps to boost a company’s bottom line. 

Provides insights into financial health

The concept of financial analytics is brought about due to business change and technical advancement. This includes everything from big data to consumer analytics tools and data warehouses. Financial analytics gives information about the company’s financial health and helps a company to increase its profitability. It may also assist analysts in enhancing a company’s financial statements if the business leader employs the process. 

Supercharging Businesses: Best Financial Analytics Tools

A financial analytics tool provides an organisation’s analysts and human resource managers with an effective visual representation of its financial data. Some of the top financial analytics tools are as follows: 

RightCapital

Created in 2015, RightCapital is one of the fastest-growing financial planning tools, with financial experts reporting the greatest satisfaction levels. Because of its creative and intuitive functions, financial management has become simple. It simplifies financial planning so everyone can better anticipate the future, from tax-efficient distributions and interactive retirement scenarios to student loan management, insurance evaluation, and estate preparation.

eMoney

eMoney is a complete and scalable application that considers various financial planning requirements and helps businesses achieve them in a given time. 

Asset-Map

It is a SAAP asset management and investing tool. Asset-Map allows analysts to generate highly customised, design-focused presentations that assist them in making better financial judgements. Asset mapping is usually included as part of the financial planning engagement process. This comprehensive and adaptable tool, with its revolutionary planning system, meets a wide range of financial planning needs and contributes to business growth.  

Runway

Runway is a finance management tool that helps businesses better identify, manage, and extend their business-related financial reports. It provides brands with an accurate view of their cash flow. Even if users cannot deal with spreadsheets, they may comprehend how their spending has affected the company’s cash burn using Runway. Furthermore, this tool can be used to make aesthetically stunning charts in a couple of seconds. On these graphs, users may observe expected cash balances, net monthly profits or losses, and variations in burn rates, as well as the most costly months.

Final Thoughts

Financial analytics plays a vital role in helping business leaders make smart corporate decisions. It incorporates tools and systems that provide real-time financial data based on which analysts and managers predict the financial condition of the company, its profitability and stability. 

Since the financial landscape of the world is changing and integrating more advanced setups, financial officers no longer need to depend on historical data to predict a company’s future. Now, financial analysts can use various analytics and tools to get financial data based on which they can determine how profitable or stable an organisation is. 

If becoming a financial analyst is your ambition, consider applying to  IIM Ahmedabad’s  Advanced Programme in Financial Technologies and Financial Analytics. This 5-6 months course includes interactive lectures and real-life case studies on the financial landscape and will help you drive digital transformation and implement impactful digital strategies in your organisation. To know more, contact Jaro Education

FAQs

1. What is the use of  financial analytics?

Financial analytics help evaluate economic trends, assist in making financial policies, aid in building long-term business plans, and identify projects or companies for investments.   

2. What do financial analysts do?

Financial analysts work in different businesses like banks, insurance companies and pension funds. They guide businesses and individuals in decisions about how to spend money to maximise profits. 

3. How does financial analytics help in business?

Financial analytics help businesses by improving financial efficiency, increasing productivity, boosting sales, creating marketing strategies and streamlining processes. 

4. What are the abilities of financial analytics?

Financial analytics helps in rebuilding the financial structure of organisations by focusing on predictability, sustainability, agility, accountability, and extensibility. 

5. What are the types of financial analysis?

Liquidity, leverage, horizontal analysis, vertical analysis, profitability, cash flow, efficiency, and growth are the primary categories of financial analysis. 

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