The budgeting and control function generally exists at each divisional level of the corporation, with a central budgeting and control function at corporate headquarters. An entry-level position in this area is usually given the title of financial analyst. As a financial analyst you would review
- divisional budgets,
- strategic plans and product line strategies,
- monthly, quarterly, and yearly operating results
A large amount of your time will be spent gathering information, which requires communication between you and operating unit personnel. Often it will be necessary for you to go to the operating unit to obtain an accurate picture of events. Only after you have discussed operating expenditures with operating unit management will you be able to write an accurate review of the unit's performance with respect to the corporate budget.
Reviewing strategic plans and product-line strategies is another area in which you may be involved. When strategic plans are made by the financial planning department, which is often positioned under the treasurer or vice president of finance, it becomes your job as financial analyst within the controller's unit to ascertain whether predicted results are occurring. You would need to prepare scheduled progress reports for senior management with thorough explanations of results.
Reviewing monthly, quarterly, and yearly performance is the final function of financial analyst under the controller. Like the budget review function, periodic review of performance would involve contact between you and personnel of the division being reviewed. As with the strategic-plan review function, detailed industry or division reviews must be prepared for senior managers. Usually, review of periodic performance of operations is done by comparing actual operating results to predicted results. In addition, comparison is made to industry-wide performance. This requires that you be aware of performance and innovations within the industry as a whole as well as within your company.
In this review function, operating results are compared with the predictions of the previous year. Unlike strategic or long-range planning, short-term planning is rarely concerned with time frames greater than twelve months. The one-year forecast and plan consists of pro forma financial statements, capital expenditure and business strategy, and financing plans.
The pro forma balance sheets and income statements reflect both the forecasts and the goals management hopes to achieve for the coming year or quarter. Unless the pro forma balance sheet and income sheet ratios are subject to drastic change, the balance sheet usually is expressed as a percentage of sales.
The second aspect of the short-term plan that you would be responsible for is the description of planned capital expenditures. You provide a narrative description of planned expenditures, explain why the specified amounts are necessary, and state the strategy to reach set goals. Other areas of discussion that may be included involve research and development efforts, steps to improve productivity, design and marketing of new products, and pricing.
Finally, there is often a section which summarizes planned financing for the following period. Financial need is based on the pro forma financial statements, or more commonly a cash flow budget. The latter is usually prepared by a financial analyst and is designed to determine the firm's short-term cash needs. Once this estimate of cash needs is completed, the financing plan can be developed. This portion of the plan may also be handled by members of the cash management department, who are familiar with methods of raising short-term capital.
As a financial analyst under the controller, you would write often and therefore need excellent written communication skills. There is a substantial amount of calculation to be performed in an analysis, although less than in capital budgeting.
While working under the controller, you often will have close contact with high-level executives, affording excellent opportunities for career growth. The exposure to various aspects of company operations will offer you the opportunity to develop an understanding of corporate operations. While you will seldom make the financial decisions at this stage, senior financial managers will in all likelihood frequently encourage you to participate in discussions at corporate strategy meetings.
You may travel up to one-third of the time, depending on the geographic location of operating units. The feeling of being worked hard and needing assistance for data analysis is sometimes reported by analysts in the controller's area, who may experience long work hours (from fifty to fifty-five hours per week) because of heavy workloads and deadlines set by senior management.
Required Skills and Educational Background
In today's increasingly complex world of corporate finance, it is important to have formal training in finance. Most individuals employed in the corporate finance function have an MBA or BA in business. In the latter case, an employee will often be encouraged by the company to get an MBA over a period of several years by attending classes at night.
In some cases, individuals received a BA in business prior to their MBA, although there is no clear advantage to this once an MBA is obtained. In some instances, companies in high technology industries prefer individuals with technical or engineering backgrounds who are already familiar with the products and their applications. Overall, individuals in corporate finance come from a wide variety of undergraduate programs.
There is no one career path within the corporation leading to a top position in corporate finance. If you desire an eventual executive position, it is essential to acquire a wide range of experience in both the controller and treasury areas. Often an individual will spend from two to five years in the treasury and then transfer to the controller function.
Later, he or she may move back to the treasury or into a staff position under the vice president of finance. There are varied paths up the corporate ranks. However, movement into the treasury or controller areas from other departments, such as marketing, sales, manufacturing, or R&D, is rare after two to four years of employment, due to lack of applicable experience.
The desire to succeed and assume responsibility are important characteristics for a financial manager. You must be tolerant of the structured environment and current company policies, which may conflict with more effective practices learned in business school or previous work. Without this tolerance you will feel frustrated, which perhaps will make it difficult to adapt to the company's environment. On the other hand, frustrated financial managers often improve the practices within their company. The most successful financial managers are those who can initiate changes subtly and at the same time endure present company policies.
Finally, financial managers tend to be devoted to, but not obsessed with, their jobs. Although positions in the corporate finance function normally consist of forty-to-fifty hour weeks, you will on occasion have to spend more time at work to meet deadlines. Since these occurrences are infrequent, you will be able to devote reasonable time to your personal life. Unlike an investment banker, who spends much more time on the job, a financial manager can typically balance work and personal life demands.
In addition to the specialized skills and abilities needed to be a successful financial manager discussed above, there are several common skills and abilities required in most financial positions. Oral and written communication skills are of prime importance; at any entry-level position, it may be your task to examine various proposals and make a written analysis or oral presentation to senior management.
Another needed skill is the ability to interpret financial statements and anticipate the effects various strategy changes can have on future financial performance. Most financial managers agree that an understanding of accounting is needed here, and that courses in financial management and accounting principles, while necessary, are not sufficient background.
As with many positions in business, administrative skills are important in financial management. Usually several projects are going on concurrently, and much paperwork is involved. Good administrative skills allow you to spend more time on relevant matters rather than waste time relocating information.
You should also have leadership ability. As your career progresses, you will have to delegate more responsibility-meaning more need for coordination and less for actual financial analysis.
