What is Corporate Finance

Technically, all finance jobs at any corporation is could be called corporate finance. You could say investment banking, financial planning, and anything related to finance is “corporate finance”. But when we talk about corporate finance here, and when most people talk about “corporate finance jobs”, we are talking about the finance department that runs the end to end finances of most companies.

Real Corporate Finance / Financial Management

Sometimes you will hear the term “financial management” more broadly, which does make sense because entities beyond corporations also have finance departments (governments, schools and universities, non-profits, and more). But here we mostly focus on the jobs at public and private for-profit companies. We will get to more details a bit further down about what corporate finance is, but first I want to talk about the lack of love and information on corporate finance careers.

The finance career paths and where corporate finance fits

There are several different career paths in finance (LINK TO THAT ARTICLE). But a big part of the reason I have created Corporate Finance Career is that the Corporate Finance path is because it doesn’t get the attention it deserves. Especially given there are a very large number of jobs, and many of them are very high paying!

I really didn’t even know what a career in corporate finance was until I got toward the end of my finance degree. Sure, I had completed a “corporate finance” class and I obviously knew most companies had a CFO that ran finance for the organization, but there was nothing steering me toward corporate finance. I had no one telling me this was a potential path.

If you spend some time on different finance sites looking at career paths, you will have a similar experience. Look at finance sites, the finance careers reddit, or other finance career sites and the focuses on:

• Investment Banking
• Equity Research (CFA) / Portfolio Management (CFA)
• Financial Planning (CFP)
• Financial Sales / Trading (think series 7, series 63, etc)
• Consulting
• Private Equity / Venture Capital
• On some of them you might see something about corporate finance or FP&A (financial planning & analysis), controller jobs, or maybe broad “financial analyst” bucket

If you think about those jobs, most of them are financial firms (Investment Bankers, Equity Researchers, Portfolio Managers, Traders all basically work for banks or large financial institutions. What the list is missing is the fact that almost every company has a finance division… the employees in that finance division… THAT is corporate finance. There are a huge number of jobs within that world with the head of finance in that company being the Chief Financial Officer.

Why the lack of attention?

It’s hard to say why Corporate Finance doesn’t get the same attention that other career paths receive.

It doesn’t have its own certification. Equity Research and Portfolio Management employees often pursue or have a Chartered Financial Analyst certification. Financial Planners pursue a CFP track. Financial Sales and Traders are required to get a Series 7, 63, and sometimes others. Mainly because of the requirements of a CFA or CFP, many Universities have programs to prepare you to go into those fields.

The structure varies company to company. Corporate finance is present in every company, but it can be a giant division in a fortune 50 company, or it can be just a couple people at a small company (it could also be at a university, a government, or a non-profit)

There isn’t usually an “up or out” culture. Careers at investment banks and consulting have a culture where you either get promoted up the chain or you “exit” to another job. Whereas, in corporate finance you could climb the ladder all the way to CFO, you could be a low-level analyst for 40 years, or you could do something in between. Some areas of corporate finance have “up or out” niches, but

Corporate finance is a middle ground. Investment banks (and sometimes consulting) are praised for very high compensation and knocked for the 80-100-hour work weeks. CFAs make great money once they earn their charter. Corporate finance finds a middle ground, or rather gives you the choice to find the right compensation vs. effort balance. You can make pretty good money without crazy hours. Or you can dive in and grind hard to make your way toward the C-suite where there is very high compensation.

So, what is Corporate Finance

As mentioned earlier, almost every company has a finance department. The Chief Financial Officer (or CFO) is the top-ranking employee in the finance division. In large publicly traded company’s CFOs have made over $100MM in a year (As was the case in 2018 for Safra Catz, the CFO of Oracle).

The finance division of a company is tasked with all financial related activities of a firm. If you look up definitions you will see things like “optimize shareholder wealth” as the technical definition, but let’s talk in more real-world terminology about what the finance team does:

• make sure all transactions at the company are recorded and accurate (and follow applicable rules and regulations)
• report and analyze the financial results and monitor the financial health of the company … communicate those results to investors
• optimize the financial performance of the business … this is done by deciding what assets or projects to invest in, what products to develop, etc (capital allocation)
• forecast and predict how the company will perform financially
• understand the costs the business will incur and assure effective utilization of the budget and minimizing unnecessary spend
• ensure adequate cash positions (understanding cash inflows and outflows as well as raising capital)
• model and underwrite deals and , potential mergers and acquisitions (business / corporate development)
• balance business decisions with the risk appetite of the organization

Corporate Finance as a career path has much more breadth than any other area of finance. At large companies there can be well over 1,000 finance employees. That means more than 1,000 different finance jobs at one company alone. With that many jobs the subject matter of each job, as well as the levels of hierarchy in that organization, will vary drastically! At a big company you could be four, five, six, or more levels beneath the CFO. Whereas at a small company, an entry level employee might work for the CFO.

Variation really is the key in corporate finance.

There are jobs ranging from the biggest companies in the world like Apple, Microsoft, Toyota, or Exxon Mobil to jobs at very small companies where they just have one finance employee.

A company like Oracle has a CFO that made $108MM last year also likely has entry-level financial analysts that made closer to $40,000. There are many levels of senior analysts, directors, divisional CFOs and more in-between those two ends of the spectrum at Oracle.
Job categories vary greatly with positions in true finance jobs, accounting jobs, or controllership cutting across jobs in the supply chain, in commercial finance, in corporate / business development, in various business units or in the “headquarters”, and much more
Work hours also has a lot of variability. Depending on the category of corporate finance that you work in, your level, and the business unit you work you might work 40 hours a week or you could work as much as 80+ hours a week as a CFO

Just to give an idea of what type of things a finance person might find themselves working on:
At the highest level, corporate finance is the organization within a company that assures the financial success of the business. They drive business and operational decision making, ensure accurate financial reporting. This is actually very far reaching. Depending on the company and the job, a corporate

• Deciding the most efficient use of capital / cash for the company
• Developing a business case to decide whether to launch a new product or service
• Reviewing financial results to determine what is driving growth or decline in numbers (price, productivity, volume, mix, etc..)
• Modeling a new deal to be entered into with a potential customer
• Making accounting & controllership decisions for the correct treatment of a transaction
• Managing foreign exchange risk through hedging
• Working with the sales or commercial team to model the financials and negotiate a deal with a client or customer
• Optimizing working capital (driving collections, terms with suppliers, analyzing inventory, etc.)
• Working with investors via investor relations jobs (writing the scripts, etc.)
• Partnering with business development to acquire or dispose of a business… modeling, negotiating, etc.
• Driving cost and productivity of a business
• Securing funding for a company
• Locking up a deal with a supplier to drive cost-deflation to your business
• Creating a short-term or long-term forecast for a company or business unit
• Creating budgets and managing expenses
• Working with engineering team on getting outside entity or government funding
• Setting price to optimize profitability or to drive market share
• Managing a team of analysts overseeing many different areas of finance
• Partnering with accounting and controllership teams

Corporate finance is a great area to have a career.  There is the ability to move into dynamic roles, work at companies of all different sizes, and it can be very rewarding financially.