The Chief Financial Officer (CFO): Within the corporate finance department, the Chief Financial Officer (CFO) is considered the “King.” Although one may contend that the CEO dictates to the CFO, if one works in finance, one must ultimately comply with any requests made by the CFO.
The CFO and the group that reports to him will be our primary priority. The specific team will vary depending on the organization, the size of the division, the industry, and many other factors. This is because every corporate finance department is unique.
However, the majority of corporate finance departments found in big businesses are comparable.
The corporate finance positions listed below immediately report to the CFO:
- The management accounting division is led by the FP&A Manager.
- The Controller is in charge of the financial accounting division.
- Heads the Treasury Department, says the Treasurer.
Financial Planning & Analysis (FP&A)
The acronym FP&A stands for “Financial Planning & Analysis,” while some businesses also call it management accounting. This department is in charge of the firm’s profit and loss statement (P&L) and projects net income, which is the literal bottom line of any P&L for any company or division.
As an FP&A professional, your primary responsibility is to provide the CFO with a comprehensive outlook on the various P&L line items for the upcoming quarter, year, and five years. For instance:
- Will Net Sales grow faster or slower than predicted based on your projections?
- Do rising costs for sales and marketing or the cost of goods sold (COGS) not correspond with rising income over a given period?
- Will any anticipated “one-time” costs affect the bottom line after a specific amount of time?
You also assign a revenue and expense target to each operational department, such as production or sales. After that, you gather data along the route to determine the departments’ distance from their goals.
To find out what went well or poorly in the previous quarter, corporate finance roles in FP&A sometimes entail variance analysis and data consolidation (for more, read our lesson on the breakeven formula).
Additionally, you generate on-demand reports on important indicators like sales volume in comparison to the budget or the cost of staff remuneration in comparison to estimates. This department holds great strategic importance as it helps establish the company’s five-year plan.
Organization
A Senior Analyst overseeing a particular product leads a team of three or four Analysts. On each of their various products, the Senior Analyst then reports to the FP&A Manager.
At the summit of the pyramid, the FP&A Manager answers directly to the CFO.
Lifestyle
You should budget about 60 hours of work each week during regular workweeks, with the weekends off.
Your busiest weeks are around planning sessions and quarter/year end closing; at particularly busy times, it may even approach investment banking hours.
FP&A Salary and Compensation
The size of the company and the P&L have a significant impact on compensation, however at each level, the following are possible expectations:
- Entry-Level Analyst: Base pay of $70,00 USD.
- Senior Analyst: base pay between $100,000 and $130,000 USD, plus a bonus of 10% in a successful year.
- FP&A Manager: up to a seven-figure compensation for a global position; $200K USD for a smaller P&L (such as the German branch of a multinational corporation).
The health of the business and the managers’ ability to accurately estimate performance are key factors that influence bonuses. It could take you four to five years to advance to the position of Senior Analyst, and a further four to five years to become a local FP&A Manager.
Going beyond that is difficult and unpredictable, and the time it takes will greatly depend on how well you execute and how quickly the firm grows.
Controllership
The worst reputation in the finance industry is typically held by controllerships and financial accounting, as many people associate these positions with tedious, routine accounting tasks including the constant inspection of journal entries.
That is, however, just one side of the tale. You are in control of the Balance Sheet’s integrity on the opposite side, which is the more interesting one.
In order for your financial statements to accurately and clearly depict the state of the company, you must make a decision whenever an accounting issue occurs. Being a liaison between the accounting community and other financial departments is what an analyst does.
Organization
Conventional accountants are grouped by area or product, and you have to manage their job to ensure accurate entry booking.
Three to four analysts under the direction of a senior analyst comprise the “finance-oriented” side, where non-accountant profiles are employed. In addition to handling all of the duties and obligations covered above, financial accountants are in charge of creating the financial statements.
The CFO receives direct reports from the Controller, who is in charge of this division.
Controller Salary and Lifestyle
Good for you if you fall into the typical accounting category! You embody “work/life balance” in its purest form. You get compensated for working 40 hours per week, no more, no less: For an entry-level role, $40–50K USD.
However, if you are reading this piece, you are probably more interested in the controllership’s “dynamic” side that is, the regal route to becoming a CFO. In that scenario, your work schedule, pay, and advancement prospects will resemble those of the FP&A roles mentioned above.
But an annual closing can become a nightmare and investment banking hours appear to be similar to those of a primary school teacher!
Treasury
Everything pertaining to money and cash flow is handled by treasury. If accounting is your thing, you are aware that there are numerous ways to manipulate Net Income, including reclassifying charges as capital expenditures and altering the reporting of revenue and expenses.
But the amount of money you make or lose is unfakeable. Your business is dead if you eventually run out of cash and have no credit line accessible. Treasury is crucial because of this.
As a Treasury Analyst, you project how much cash flow your business will require moving forward. The next step is to ensure that this sum of money is on hand when needed.
Organization
The industry has a significant impact on the size of the Treasury staff. A bank’s ability to manage capital ratios, liquidity, and stringent requirements makes having a larger Treasury team more crucial. However, because their cash and liquidity issues are not as critical on a daily basis, an industrial corporation would have a significantly smaller Treasury team.
The Treasurer oversees all of the Analysts, each of whom specializes in something different, from anticipating cash positions to emitting bonds. For investors and investment banks, the treasurer serves as the primary point of contact.
Treasury Salary
As a result of their frequent interactions with banks and investors, Treasury department employees typically hold higher positions and are paid accordingly. In brief, here is what happened:
- $70–90K USD for analysts
- Senior Analysts: $100–170,000 USD including a possible 15% bonus
- Chief Financial Officer:His salary often ranges from $200K to $4MM USD, making him one of the better-paid members of the “corporate finance jobs” team. He frequently earns the highest salary after the CFO.
What About Other Corporate Finance Jobs?
Numerous “core” functions that I haven’t included here exist since the CFO’s team doesn’t always include them.
For example, pricing may have a financial or marketing function, depending on the business. The CEO’s obligation to prevent conflicts of interest often includes internal audit and risk. Tax is a pretty specialized job, and I have never seen someone go from a tax position to another role in corporate finance, which is why I didn’t bring it up.
So, How Do You Become a CFO?
Nice query! An organization with a moderate size can have a chief financial officer (CFO) who oversees 25 to 200 employees and makes $300,000 USD and more. Generally speaking, larger companies and divisions pay more.
Eighty percent of corporate finance professionals ultimately aspire to be CFOs. And very few do, naturally. Wide-ranging expertise and extensive internal networking are necessary for a CFO. Simply being performing “a great job” does not translate into a promotion to the CFO position at a Fortune 500 business.
In order to be trusted with a P&L, you must also ensure that you have the necessary contacts and are skilled at office politics. That makes it very, very different from what it takes to succeed in an environment where progression is more merit-based at hedge funds, asset management firms, prop trading, and so forth; in fact, it’s probably even extremely different from investment banking.
The “standard path” to becoming a CFO was working as an FP&A Manager for a period to gain experience in meeting targets for net income and managing teams, back in the day.
Regulators are now the CFO’s primary responsibility, though, as things have drastically changed. CFOs who certify false financial statements risk jail time as a result of the Sarbanes-Oxley Act in the US and comparable laws in other nations.
Corporate Finance Career Path: The Exit Opportunities
Within corporate finance, exit opportunities are a topic of great “controversy.” From my observations in real life, these are the most typical routes:
10% go to investment banking or venture capital; 20% go to consultancy; 10% go to sales & marketing or risk; and 60% stay in corporate finance but shift to another company. It is possible to move into investment banking or private equity. However, compared to if you had started off in one of those, it’s also far harder.
You will learn a lot about modeling income and spending for a company by participating in planning sessions in FP&A; this will give you a better grounded understanding of the subject than bankers who have never understood the meaning of all their beautiful spreadsheets. The Balance Sheet will become crystal clear to you thanks to Controllership. It will take exceptional talent and strong connections to succeed in a challenging economic climate.
Rebranding yourself with a top MBA degree and making the transfer afterward is nearly easier if that’s the path you want to take.
Although Financial Planning & Analysis teaches you a lot about strategy, you’ll probably be better off in operational consulting, where you can showcase your “execution and implementation skills.” However, you can also move into management consulting.
You should absolutely think about sales and marketing in a large group if you’re more of a sales guy or lady. Relish the world in which profits are the only thing that count, and forget about the headaches associated with audits and regulations. Although sales teams frequently struggle to comprehend the financial effect of their actions, having a background in finance won’t harm and might even give you an advantage!