what makes a great financial analyst?

The role of a financial analyst within a company is to help drive the business (and decision making) through solid analysis. “Analysis” typically takes the form of metrics as its basis and the story that surrounds the metric. However, what differentiates a financial analyst (not just an accountant with solid reporting skills) is the quality of the metrics. Below are questions you should ask of every metric you create - it will help you distinguish between reactive (reporting) and proactive (decision making) thought and whether your key performance indicators (KPI’s) are truly strategic.

1. What is the purpose of the measure?

What are you trying to achieve with this measure?

How does the measure help to improve the department or achieve a corporate goal?

2. Do you know how to evaluate the result?

Is there a benchmark to compare to?

Do you have a target for the measure?

What is a good result? a poor result?

3. Does this measure give us appropriate information?

Is it a leading or lagging measure (e.g. does it help you to be proactive or reactive?)

Is it a key driver or a key performance indicator?

Is there more information you need to make it meaningful?

Is it relational? (e.g. does it need to be linked to time/people/etc.)

What is the level of integrity of the data used to calculate this measure?

4. Does the measure initiate any action?

Have you taken action from this measure to improve the business?

Do you use the measure to manage your business?

Does the measure indicate what action should be taken if it is a poor result? (Does it tell you what needs to be fixed?)

What behaviors does this measure encourage?

What potential negative behavior may result from this measure?

5. What communication happens with this measure?

Who do you share the measure with?

How many times do you review the measure (daily, weekly, monthly)?

Who should be the audience for the measure?

By questioning your metrics you truly evaluate if it will help drive the business or are you reporting a number for the sake of reporting a number (not a good metric).

Good luck!