The ability to quickly and effectively adapt to change can make or break an organization. Indeed, businesses that can keep up with the latest trends thrive while those that can’t, ultimately fail. Enter business analysts and financial analysts. Thanks to them, organizations can revolutionize the way they make business decisions.
Because the two roles often overlap, it’s common to misconstrue both as referring to the same role. But financial analysts and business analysts are two distinct jobs that require different skills and serve a unique purpose. So, what is the difference between a business analyst and a financial analyst?
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Read on to find out how these two roles differ and understand which role fits you.
What Is a Business Analyst?
A business analyst bridges the gap between information technology and business. They are data-driven, meaning they extract value from data and use these to come up with recommendations for leaders to evaluate. This ensures that the decisions business leaders make are sound, actionable, and even cost-effective.
Business models are the top priority of a business analyst. These models analyze the current technological systems of a company and how it impacts their operations. They conduct a cost-benefit analysis to assess new options for improvement.
You need to have a bachelor’s degree in business management for this role. Other related fields that deal with business management are also acceptable.
Business Analyst Salaries and Job Outlook
The US Bureau of Labor and Statistics reports that a business analyst (also known as a management analyst) earns an average of $85,260 as of 2019. The opportunities are abundant, with 876,300 jobs at present and an expected 11 percent growth rate over the next decade.
What Is a Financial Analyst?
A financial analyst deals with specific financial data to look at how a business is performing financially. The job of a financial analyst is to ensure that funds will be used for profitable investments. The financial status of the company is always a necessary factor.
Financial models are the primary tools of a financial analyst. They use financial data to generate these models. These, in turn, are used for budgeting, forecasting, and assessing the cash flow of the company for investment decision-making.
Because you need to deal with numbers and mathematics, a bachelor’s degree in finance is needed to be a financial analyst. Candidates with accounting and economics degrees may also qualify for the job.
Financial Analyst Salaries and Job Outlook
According to the latest data of the US Bureau of Labor and Statistics as of 2019, a financial analyst earns an average salary of $81,590 per year. Though on a smaller scale than that of business analysts, the financial analyst job market is expected to demonstrate a five percent growth rate over the next decade.
Business Analyst vs Financial Analyst: The Most Important Differences and Similarities
Although related, business analysts and financial analysts are very different fields. They share the same goal of improving the way companies do their business. Yet, understanding their differences and similarities helps distinguish the expectations for each role.
Difference: Data Used
A business analyst uses information data from trends and other analytics to come up with business strategies. Meanwhile, a financial analyst uses financial and economic data to assess the worth of investments and expenses.
A business analyst can opt to get a Certified Business Analysts Professional (CBAP) certification. On the other hand, a financial analyst can take the three-level examination to become a Chartered Financial Analysts (CFA).
Difference: Roles and Outputs
A business analyst is responsible for gathering and interpreting data to improve the IT systems and business processes of a company. Financial analysts use financial data to assess the financial performance of the business through financial statements and more.
Similarity: Education Requirements
You need to earn a college degree to become a business analyst or a financial analyst. Both of these jobs require technical skills and proficiency especially in using programs to make models and analysis.
Similarity: Business Goals
The main goal of a business analyst and a financial analyst is to ensure that the business is continuously growing. Stagnation is the first step to a business’ downfall so analysts must come up with new ways to keep things moving.
Similarity: Job Outlook
The future looks good for aspiring financial analysts and business analysts. They are both on track to grow in the next decade as more businesses understand the importance of having research analysts.
Business Analyst vs Financial Analyst: Required Skills and Duties
Like any other role, skills are important to deliver on your duty as a business analyst or a financial analyst. Business analyst skills are your weapon to come up with the perfect strategies for the company. Taking finance degrees online can also help strengthen your financial side.
Business Analyst Required Skills
- Communication Skills. A business analyst must be effective communicators, both when writing and speaking. This will help them properly inform stakeholders of their ideas and agenda.
- Analytical Skills. A business analyst must know how to organize and make sense of the data and information available. This includes knowing how to perform a cost-benefit analysis.
- Business Process Modeling. A business analyst must know how to effectively visualize and analyze business processes through graphs and flowcharts. The main goal of BPM is to ensure a company’s process improvement, if necessary.
Business Analyst Required Job Duties
- Creation of Detailed Business Analysis Reports. A business analyst must draw up a report that clearly shows the company’s present challenges and opportunities. It must also include possible solutions to these problems.
- Planning and Monitoring. A business analyst oversees the proposals and the selection of plans to go for. Once approved, s/he also carries the responsibility of monitoring the success of these projects.
- Communicating with stakeholders. Stakeholder engagement is imperative for successful business analysis. This is why a business analyst must maintain continuous and clear communication with stakeholders.
Financial Analyst Required Skills
- Financial Forecasting and Reporting. A financial analyst must identify the metrics to measure financial performance. These will then be translated into a concise report for the stakeholders.
- Statistical Skills. Financial analysis heavily relies on mathematics and numbers. As such, a financial analyst must know how to use statistical tools like Excel and other statistical programs.
- Financial Modeling. A financial analyst must know how to generate financial models. These models are used to strategize how to go into certain investment ventures. Financial modeling also shows the growth of a business.
Financial Analyst Required Job Duties
- Provide Reports to Management. A financial analyst draws up reports for key management members to assess. The higher-ups are the main decision-makers of the company, so accuracy in these reports must be observed at all times.
- Initiate Budget and Forecasting. A financial analyst is concerned with the financial status and performance of the company. Budgeting and forecasting help alleviate worries for unforeseen circumstances and crises.
- Be In the Know About Investment Practices. A financial analyst works to keep track of investment trends and practices. This job entails knowing the best opportunities for investments that can potentially generate money.
Should You Become a Business Analyst or a Financial Analyst?
Because both roles work to ensure the company’s progress, fulfilling the role of a business analyst or a financial analyst is, overall, a huge responsibility. This is why both paths are replete with opportunities to grow and earn more.
A case in point: entry-level business analysts earn as much as $59,131 while entry-level financial analysts enjoy a pay of $55,243. And that’s without accounting for their bonus. Given this, perhaps the better question then is: which is the right fit for you?
If you have a knack for crunching numbers, then the former may be the better path for you. But if you light up at the idea of overseeing the successful delivery of day-to-day operations, then the latter is your better bet.
Advantages of Becoming a Business Analyst
Having effective communication skills is needed to become a good business analyst. You are responsible for engaging with various stakeholders to lay out plans and strategies. Through this, you also get to cultivate a wide and strong professional network.
If you perform well, you can easily capture the attention of your stakeholders. This means that they will see you as someone who actively comes up with strategies by using different data sources.
Finally, being a business analyst means growth and progress because you constantly seek ways to improve business operations. When your proposals succeed, you get the chance to go up the organizational ladder much faster.
Advantages of Becoming a Financial Analyst
As a financial analyst, you have access to every financial data generated. Senior management is always on the lookout for financial reports. This means that you are always visible to the higher-ups because they rely on your reports and analyses.
Financial modeling is an essential part of being a financial analyst. Because of this, you are exposed to a lot of opportunities for training and certification to be even better at utilizing statistical tools. Being a financial analyst thus has an added perk of acquiring more skills.
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Finally, the demand for financial analysts isn’t going away. Businesses need financial analysts to crunch the numbers for them. As long as you demonstrate integrity and perform well, you can rest assured that your expertise will remain relevant in the market.
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