Corporate Finance Career – Companies need funds to thrive in business, looking into every aspect of funds needed by a company is referred to as Corporate Finance. It can be defined primarily as the optimum utilization of the financial resources of the company, it is that area of finance which deals with arrangement of funds for various projects at minimum possible cost, so as to maintain the capital structure of the company. A career in corporate finance is generally stable, the work culture is of a lot of responsibility and accountability since it involves raising capital crucial for the growth and expansion of business in the form of acquisitions, managing cash resources or charting out the company’s future roadmap by managing cash efficiently.
Professionals in corporate finance deal with lawyers, researchers, finance providers and other key professionals which are the driving force behind any organization, hence there is a lot of learning opportunity available for a corporate finance professional. Good analytical and problem solving skills along with commercial awareness are the key ingredients, companies look for in a candidate planning to make a career in corporate finance.
- Corporate Finance Roles and Responsibilities
- Corporate Finance Organization Structure
- Corporate Finance Career Positions
- Skill set for Careers in Corporate finance
Corporate Finance Roles and Responsibilities
Corporate Finance can be broadly classified into four main components which are mentioned below.
Identifying the requirement
It is the most basic step in corporate finance, it mainly deals with ascertaining the funds requirement of a company from time to time. The fund requirement can be of various nature depending upon the stage of a particular project in the company. There are four basic projects that need attention from corporate finance executives.
- Replacement projects for smooth running of the business such as replacement of obsolete machinery and equipment or for the purpose of cost reduction.
- Expansion projects which are perhaps the complex and difficult ones since they involve making clear cut forecast for the future and act accordingly.
- Mandatory projects which are a necessity and have to be run at all costs which are either required by the government agencies or safety related issues.
- Working capital requirements which are required to fulfil the day to day activities of an organization.
Planning the funds inflow
Planning fund flow is the next logical step in corporate finance functions which involves deciding upon the funding requirement for a particular project and can be decided by fetching answers to simple questions like the ones mentioned below.
- How much finance is needed by the company?
- What would be the nature of funds i.e. whether the required funds would be raised through equity or debt?
- How much fund would be raised through debt and the value of funds to be raised through debt
- How to optimally use the available finance for gaining maximum profitability out of it?
Arranging the funds
- Arranging the Funds is the third step in finding a funding requirement for a project.
- This step needs hitting the ground and taking on the real responsibility of arranging funds through the mode of equity which involves shares, or debt in the form of debentures and borrowings from bank or non-financial institutions or going for a combination of the two which is also known as hybrid debt.
- The key points to consider before finalizing the source of funds is the capital structure of the company, the cost of funds, to find cheaper financing options without compromising upon the capital structure of the company along with the tenure of finance be it long term financing or short term.
Investing the raised capital
- Investing the raised Capital is the fourth and the final step which requires a fine sense of judgement to take informed decisions about funding the project in a phased manner.
- It requires a systematic approach towards fund management and control to reduce costs and maximize returns.
- It is not only about investing the available fund in the right manner but also monitoring the returns generated by the funds and take corrective action where needed.
Corporate Finance is a very challenging and dynamic field where you have to work in teams and handle real time business problems. It involves quite a bit of travel and gives you an opportunity to interact with people from different industries along with being a good platform for making decent money.
Corporate Finance Organization Structure
Let’s understand in detail the areas where you can fit in the structure of corporate finance in an organization. Like any other industry the corporate ladder has entry, mid and senior level positions.
- At the entry level a bachelor’s degree in finance or economics is needed.
- Practical knowledge of MS office along with good communication and analytical skills will give you an edge amongst other candidates.
- The entry level positions generally include, Financial Analyst, Cost Analyst, Business Analyst, Support Analyst and reporting.
- A mid-level professional can be employed in the capacity of a Cash Manager, Strategic Planner, Sr. Financial Analyst, Budgeting and M&A professionals.
- Hence a degree in Masters in Business Administration or a Chartered Accountant is sought after.
- If you have good analytical skills, the ability to pay attention to detail and take quick and informed decisions when needed then you stand a fair chance at a mid-level position in corporate finance.
- As and when you grow in the organization, with further experience you will be exposed to more challenging situations, which would help in developing strong management skills and a solid understanding of macroeconomic factors accompanied by persuasive communication skills along with excellent leadership skills where you won’t waver in taking bold financial decisions involving large sums of money.
- Such capabilities represent the senior level managers who are at the top of the hierarchy in corporate finance, the positions include the Chief Financial Officer(CFO), Chief Executive Officer(CEO), Treasurer, Controller, Special Project and Business Development Managers.
Corporate Finance Career Positions
Let’s take a deeper look into some of the most sought after positions in the field of corporate finance.
Role of Financial Analyst
- The role of a financial analyst can be further classified into capital budgeting which involves estimation of revenue for annual budget and monitoring the same from time to time to investigate any deviations.
- It also involves assessment of capital proposals and decisions regarding buying or leasing of a particular equipment.
- Financial analysts also differentiate between projects depending upon their profitability.
- Every decision has one or more options, to evaluate which option will be better for the company in the long run is taken by financial analyst for example whether it is profitable to manufacture a particular product in house or procure it from some other firm depending upon the comparative cost analysis. (have a look at NPV vs IRR)
Salaries of Financial Analyst
Median salary of Financial Analysts is around $56,928 in United States.
Role of Cost Analyst
- A cost analyst is involved in taking decisions regarding cost of any service or product concerning their pricing.
- He/ She also has the role of identifying any areas which will be helpful in cost reduction of any particular product or service by completely understanding their cost and helping in taking pricing decisions as well.
- Job-order costing, activity based costing are some of the fields especially in manufacturing industry where a cost analyst’s profile is most suitable.
Cost Analyst Salary
Median salary of Cost Analyst is around $57,946 in United States.
Role of Credit Manager
- A credit manager as the name suggests, is involved in the credit decisions of the company, how much credit is to be given to the suppliers, the rate, credit guidelines, collection of receivables and their securitization are all decisions taken by a credit manager.
- This profile requires in depth financial statement analysis and complete knowledge of the customer profile so as to take strong decisions.
Credit Manager Salary
Median salary of Credit Manager is around $61,810 in United States.
Role of Cash Manager
- Cash manager manages all the short term as well as long term cash requirements of a company.
- It involves maintaining healthy relationship with banks for short term credit needs, safeguarding the company’s interest by having adequate working capital and investing the surplus cash in such avenues that can give sufficient interest.
- It also requires managing international fund transfers, hence is a meticulous job and requires you to have excellent negotiation skills.
Cash Manager Salary
Median salary of Cash Manager is around $61,984 in United States.
Role of Benefits Officer
- The job of a benefit officer is that of an intersection between finance and human resource.
- It involves managing pension funds and other health care benefits and plans which are cost effective and at the same time are for the benefit of the employee.
- Knowledge of organizational behaviour along with human resources and finance is an added advantage for a candidate planning for this role.
Benefits Office Salary
Median salary of Benefits Officer is around $46,722 in United States.
Real Estate Officer
Role of Real Estate Officer
- Real estate officer as the name suggests has to deal with the real estate issues of a company, be it purchasing a piece of land, negotiating lease terms and conditions with the opposite party, acquiring real estate properties and valuating them.
- It requires thorough commercial knowledge of real estate along with finance.
Real Estate Officer Salary
Median salary of Real Estate Officer is around $56,344 in United States.
Investor Relations Officer
Role of Investor Relations Officer
- Investor Relations officer is responsible for maintaining good relations with a company’s investors, be it individual or institutional investors.
- This job role comes into the ambit of PR and advertising since it involves maintaining good relations with the top executives, replying to institutional investor queries, organizing investor teleconferences, issuing press release for corporate events and circulating financial information about the company valuable for the investing public.
Investor Relation Officer Salary
Median salary of Investor Relation Officer is around $86,770 in United States.
Role of Treasurer
Treasury Management is an all-encompassing function of any company, it gives a holistic view of all the duties and functions performed by the other departments, by keeping a check on their activities. A treasurer’s job role involves supervising the treasury department which is involved in the following processes.
- Financing involves analysing the funding needs of a company and arranging for the requisite capital either through the bank for short term funding or through internal or external sources which involve equity, debt, bonds, commercial papers et al.
- Cash Management involves sorting out the company’s working capital requirement or daily cash needs by negotiating with the banks for favourable credit terms and keeping enough cash for it along with parking the surplus cash in short term investment options.
- Risk Management involves managing the risk of each and every aspect of running a company be it through investing in insurance policies or currency hedges for the company’s assets or safeguarding the company’s foreign currency and commodity exposure by regularly checking it.
- Pensions Management involves managing a company’s pension fund pool, investing the funds in the right avenues, managing a particular employee’s payment schedule after duly considering the pension payment periodicity. It basically involves taking decisions regarding every aspect of smooth pension fund investment and disbursement.
Median salary of Treasurer is around $87,435 in United States.
Role of Controller
- This is a managerial position which involves duties pertaining to financial planning, accounting, reporting, and cost analysis.
- It also requires financial reengineering and transfer pricing knowledge along with developing forecasting models for projection of revenues and costs.
- The work arena involves property, revenue, benefits, derivatives, lease and joint interest accounting of a company.
- The controller is an experienced professional who is called upon to sort out complex costing issues and even be the company’s representative in front of the auditors.
Median salary of Controller is around $76,344 in United States.
Skill set for Careers in Corporate finance
The corporate finance setup requires an individual to have an analytical mind with the ability to think on his toes and take decisions based upon careful analysis and research. The skill set needed for a career in corporate finance include the following
- Problem solving ability
- Leadership skills
- Communication skills and persuasion ability
- Interpersonal and Intrapersonal skills
- Team cohesion and management
- Commercial Awareness
- Research based thinking
- Data driven and financial modelling skills
- Networking ability
- Comfortable with ambiguities and constantly changing scenarios
Do you like taking challenges head on? Then a career in corporate finance is the place for you. Studies conducted by Robert Half and Arthur Anderson suggest that there is a steady demand for finance professionals across the world. CEO’s across the world were polled by CFO magazine regarding the qualities they seek in finance professionals and they unanimously stated that “Strategic thinking, fresh perspective and candour” are the most sought after qualities accompanied by excellent interpersonal and communication skills because it is a team effort after all.
Corporate finance professionals don’t have any targets to pursue like their marketing counterparts but their job is a lot more exciting and challenging because the employees have to take decisions regarding the long term benefit of the organization rather than achieving sort term goals. Undoubtedly, corporate finance jobs are the most sought after and desired in the entire financial industry worldwide.