Why a business needs an economist: Key role in business success

We hear about the state of the economy from the news almost daily. Almost everyone thinks about the economy when it comes to quality of life. At first glance, it seems that the concept of economy and its importance for the development of business, enterprises and the country as a whole is obvious to everyone. However, a reasonable question arises: if it is so, why many graduates of economics faculties cannot find a job in their specialty? Why do enterprises often do without economists?

It is noteworthy that in a country that celebrates professional holidays of representatives of many professions - from recruiters and marketers to ethnographers and realtors - there is no day dedicated to economists. It is even more surprising that topics related to economics are hardly ever raised in forums and Internet discussions. Is no one interested in such key issues as determining the cost of products or services, methods of costing, analyzing business efficiency, creating remuneration systems and other important aspects?

This begs the question: does society really realize the importance of economics? Or, perhaps, it is the lack of attention to these issues that has led to the fact that specialists in this area remain unclaimed, and businesses do not use their potential for their development?

A common mistake of business owners

At many enterprises, the duties of economists are often assumed by accountants or financiers. However, these professions cannot be considered interchangeable - each has its own specifics. Although they do overlap, their tasks are different, which often leads to confusion and substitution of concepts. As a result, individual indicators are taken out of context and there is no holistic approach, from work planning to performance measurement and analysis.

In practice, it is often the case that business performance is assessed only on the basis of cash flow. However, this limited approach can lead to serious losses for the owner of the company. To avoid such risks, a manager or business owner should engage professional economists who are able to implement a system of planning and analysis of business activities based on the principles of economic theory.

Only competently organized planning, careful analysis of indicators and results, as well as access to complete and up-to-date management information allow to manage the business consciously, not at random. This is possible only if there is an economic service staffed by highly qualified specialists.

The first step is the correct statement of task

Nowadays, many enterprises do without economists and economic departments managers of these enterprises, as a rule, in matters of economics use intuition. In fact, it is necessary to understand what kinds of activities engaged in the enterprise volume of production and its specifics level of qualification of the Chief Accountant and whether everything is officially reflected in the accounting. 

If the organization conducts activities in which expenses and income are recorded in one accounting period, for example, providing services and conducting all operations officially, then according to the accounting data can get an objective picture of the results of work. True, access to this information will be delayed by at least a month. If this approach suits you, then the economic department may not be needed, although someone still has to calculate the cost of services.

However, if the company has several lines of business, has commodity balances or has unfinished production, to analyze the profitability of each type of activity will require a qualified specialist or a whole department.

The accounting and economic departments differ in their functions. The main task of the accounting department is to record and systematize information on income, expenses, assets and liabilities, as well as to ensure the calculation of taxes, interact with employees and counterparties. 

It works with business transactions that have already taken place on the basis of relevant documents. Each conducted operation is reflected in the accounting, and the result is the preparation of the balance sheet and statement of financial results for the reporting period. In contrast, the economic department is engaged in analytics, costing, planning and forecasting, helping to better understand the efficiency and profitability of the business.

The job of the economics department is to make the necessary adjustments to the accounting records, ensuring that they are accurate and organized. This involves identifying the items for which income and expense records will be kept and making sure that the accounting department correctly records all transactions related to these items. The economic department must also carefully plan production activities for monthly, quarterly, and annual periods, and forecast expected financial results based on data provided by the production units.

In addition, the economic department monitors production accounting, providing up-to-date information to management on the status of the production process. It exercises constant control over the correctness, completeness and timeliness of the reflection of business transactions in accounting, which is necessary for the accurate calculation of the cost of goods, works and services. Economists develop planned and actual calculations at the end of each reporting period, analyze economic activity, identify deviations from planned indicators, establish the causes of these deviations and provide relevant information to managers, taking into account the reporting forms and deadlines established at the enterprise.

If the enterprise does not have a department of labor and wages, then its functions are transferred to the economic service, which is engaged in determining the payment of labor, setting salaries, tariffs, norms of additional payments and other payments.

Conclusion

The economist is a strategic partner of the enterprise, able not only to ensure the effective allocation of resources, but also to anticipate financial risks, optimize costs and increase overall profitability. In today's competitive economy, his involvement becomes not a luxury, but a necessity for the long-term success and stability of the business.