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Corporate Finance
Career Overview

If you work in private enterprise, your company measures its success at the end of the year by comparing how much money it made to how much it spent. If it made more than it spent, it was a good year. If it made less than it spent, it was a bad yearóor the company was in an investment phase. (In other words, like Amazon.com, it spent more than it made because the company and its investors believed it would realize a profit in the near future.)

People who work in corporate finance and accounting are responsible for managing the moneyóforecasting where it will come from, knowing where it is, and helping managers decide how to spend it in ways that will ensure the greatest return.

Every company has a corporate finance function. The responsibilities that fall under finance and accounting range from basic activities, such as bill paying, to very sophisticated ones, such as forecasting the value of a potential acquisition. The stakes can amount to hundreds of millionsósometimes billionsóof dollars and thousands of jobs. Careful assessment of the financial implications of particular strategic decisions can be critical to a company's success or failure.

Of course, a company's size, complexity, economic sector, and stage of development (e.g., start-up or established business) influence what tasks the corporate finance team undertakes every day. All companies need to balance their books. Some large technology companies, for example, hire financial experts to valuate potential acquisitions. Others (e.g., insurance companies) have hundreds of millions of dollars to invest and need financial wizards to manage it.

Corporate finance includes two key functions: accounting and finance.
Accounting concerns itself with day-to-day operations. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all the financial data needed to issue a company's financial statements in accordance with government regulations.

Finance pros analyze revenue and expenses to ensure effective use of capital. They also advise businesses about project costs, make capital investments, and structure deals to help companies grow.

In spite of their different roles, finance and accounting are joined at the hip: The higher levels of accounting (budgeting and analysis) blend with financial functions (analysis and projections). Thus, finance and accounting are often treated as one, with different divisions undertaking particular tasks, such as cash management or taxes.

Although conditions vary at different companies, people going into corporate finance generally start their careers either as staff accountants (for the corporate-reporting function) or as financial analysts (for a business group or function). In both roles, you'll supply management with the information it needs to make smart, opportune decisions.

Staff accountants consolidate information for the official corporate financial reportsóprimarily comparing the present to the past. Financial analysts, on the other hand, are assigned to either a product line or business unit. They help management set up profit objectives, analyze current unit results, and anticipate future financial performance. Over time, financial analysts and staff accountants eventually specialize in one of the areas described below.

General accountants are responsible for producing all of the financial records a corporation uses to track its progress internally and to meet government regulations. Such workers also gather all the information needed to compute a company's balance sheet, profit and loss statements, and income statements.

They also track the corporate budget, cash flow, and pay all the bills.
Usually, your first job in general accounting will be in accounts payable or accounts receivable. Success in accounting might lead you to a position as a controller, overseeing a larger group, aggregating information, or working on portions of the corporate budget.

When most people think of an audit, they think of an outside auditóa large accounting firm like Ernst & Young checking the corporate books on behalf of the shareholders. However, most large companies have an internal-audit group that regularly visits individual company branches and checks the company's accounting systems.

Internal auditors perform the investigative and corrective work that ensures the external auditors don't find anything. The internal-audit group reviews the quality of the data, making sure it's both accurate and complete. Internal auditors also evaluate whether the corporate-accounting procedures are effective and universally followed. Finally, internal auditors introduce or revise procedures to improve efficiency and reduce costs.

In this area, you work with each division's business team to prepare financial plans, make forecasts, and compare actual financial results to forecasts. You may also evaluate the financial consequences of alternative strategies.

Responsibilities include everything from analyzing new business opportunities to restructuring a business or developing a capital-spending program. The primary concerns are to find better ways of using company assets, reduce costs, and research ways to develop better forecasts. Financial services evaluates the risks versus potential return of any course of action and develops recommendations so that managers can pick the most profitable strategies, depending on their goals.

Activities in this area involve administering taxes (i.e., paying taxes on timeóor finding loopholes to avoid paying them) and determining how to decrease the company's tax burden. Responsibilities include working with attorneys on tax litigation, researching tax laws and reporting requirements by nation (if the company is international), and keeping up with new government rules and regulations.

Large companies have an entire department dedicated to recommending methods to minimize the tax impact of any business decision such as a new division launch, a capital-spending plan, or purchasing a new company. Investments and pensions also need to be managed with an eye toward minimizing taxes. The tax department helps structure transactions, makes recommendations on the timing of acquisitions or sales based on what else will be written off that year, and can decide what corporate-reporting structure reduces taxesófor example, creating a wholly owned subsidiary versus having an internal division.

The treasury department is responsible for all of a company's financing and investing activities. This department works with investment bankers who help the corporation raise capital with stock or bond sales or expand through mergers and acquisitions. Treasury also manages the pension fund and the corporation's investments in other companies. The department also handles risk management, making sure that the right steps are taken to safeguard corporate assets by using insurance policies or currency hedges.

This is a company's piggy bank. The cash-management group makes sure the company has enough cash on hand to meet its daily needs. The group also sees to it that any excess cash is invested overnight by picking the best short-term investment options. And it negotiates with local banks to get regional business units the banking services they need at the best price.

Corporate development involves both corporate finance and business development. Finance experts in corporate development study acquisition targets, investment options, and licensing deals. Often they assess the best firms to buy or invest in, such as pre-IPO cutting-edge technology companies with complementary products that could either extend the company's product line or mitigate competition. Corporate development jobs require planning and analysis know-how and the kind of skills that investment bankers working merger-and-acquisition deals put to use.

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