An expert who is a CA and an alumnus of IIM Kolkata, working in a Fortune 500 Company shares his thoughts on what finance is all about and why it could be a rewarding career choice for you.
Finance as a career option is linked to great earning potential and rewarding career opportunities in a wide range of industries. With economies flourishing at a tremendous rate and India eyeing large amounts of investments by global markets, there is a continuous requirement for skilled professionals in the sector which promises to be both exciting and innovative.
“What gets measured gets managed” is considered as a commonly accepted wisdom in management. While certain aspects of business are qualitative (quality of human resources, passion for work, trust etc.), some aspects of business have always been “objective”/ measurable like revenue, profit, and profit margin to name a few. However, few more aspects hitherto subjective like brand value, value of human capital have just started becoming objective.
It is the finance function of a company which is responsible for a significant part of these data points and is therefore critical for any company.
Enterprises (for profit or non-profit) get managed around key parameters or performance indicators, and an understanding of finance allows one to appreciate these metrics well and highlight the interconnectedness of the various parts of the whole.
Who should be considering it?
Anybody who has appreciation for the big picture (in terms of various building blocks of the business, its broad processes/ information flow), with attention to detail (specifics, numbers) can consider taking up finance as a career option.
It would also presuppose certain subject matter knowledge (a good understanding of accounting and basic understanding of commercial laws) acquired through specialised technical/professional course (CA/MBA etc.).
What are the broadly distinctive roles within Finance?
Finance in most companies is a supporting function and therefore, plays the proverbial second fiddle, though there are roles where finance actively partners the business.
Controllership function is one of the basic building blocks for managing any business. The finance professional is expected to keep the books of account and generate the financials (profit and loss account, balance sheet, cash flow and other supporting documents), following the relevant GAAP (Generally Accepted Accounting Principles). It also includes managing compliances (computing and settling statutory liabilities and filing necessary documents with government authorities); through adherence to agreed processes.
Controllership function needs clockwork efficiency, meticulous attention to detail, and adherence of process guidelines all the time. It produces the database and paves way for the FP&A roles. Success in controllership requires technical expertise (i.e., deep understanding of accounting policies, relevant tax laws, GAAP etc.) which is to be kept updated (as GAAP, tax laws keep undergoing continuous updation). Controllership makes for the most of the headcount of a finance function.
Financial Planning and Analysis - Often known as MIS/ Budgeting/ Planning function, in its true sense, this role is about “business partnering”, i.e., Finance partnering other functions (Business, HR, Marketing etc.) to work cohesively from making plans/ budgets to the implementation of these plans. In FP&A role, finance professional is expected to have developed deep understanding of the value chain of the company, of identifying and tracking relevant metrics to measure performance of various sub-segments of the value chain and coming up with ideas to solve the challenges facing the value chain. As the name FP&A suggests, it requires more of analytical and big picture thinking. It is the FP&A role which is generally tasked with “number crunching” (i.e., preparing budgets, forecasts, revised forecasts, what if analyses, impact on sales if price of product x is changed by y% etc.). Given most companies use spreadsheets (MS Excel) as their main tool of reporting, an advanced knowledge of Excel would be very useful in this role.
Depending upon the context, a full-fledged FP&A function could also have a dedicated Business Finance function where finance partners the client facing business teams in preparing for bids for prospective clients.
In some companies, FP&A function also evolves into Strategic Planning function, where Mergers and Acquisitions (M&A) get done, in very close collaboration with top leadership of the company.
Treasury Function looks after the funding needs (both short term and long term) of the business (in line with business plans/ budgets) mainly through debt (borrowing from bank, FI), equity, and earning the optimal return by investing the surplus in appropriate securities. Treasury function tends to get specialised as one grows into it.
Corporate Tax- In a large enterprise doing business across various countries, Corporate Tax becomes a separate function within finance, which partners business in all the key aspects. This ranges from how/ when to set up a subsidiary company in respective countries to how to fund those subsidiaries to factoring cost of doing business in that country etc. By definition, corporate tax remains a highly specialised subject.
Skills/traits needed for a rewarding career
Top three skills would be Leadership, Communication, and Execution along with subject matter knowledge. What finally matters is getting the job done proactively within the current constraints like time, human resources, technological tools, and also anticipating the deliverables for the near future and staying prepared.
While it may be contentious to say it, more extroversion along with strong ability to deal with ambiguity/ unstructured situations could well be the two defining traits for a successful career in finance (given excellence in current job).
Conventionally, epitome of finance professional would be taking up role of a CFO (Chief Financial Officer) of the enterprise, while the top job of being the CEO (Chief Executive Officer) would generally be taken up by person from Sales/Marketing function. But then conventions evolve! These days, some of the CFOs do get to become CEOs. Indra Nooyi of PepsiCo is an example.
Finance, therefore, is an emerging field and is sure to attract a large number of young talents in the time to come. Some of the best financial services providers in the world include GE Capital, Goldman Sachs, American Express, Standard Chartered, Bank of America- Merrill Lynch, JP Morgan Chase, PwC etc. The career path in the financial services industry consists of commercial banking, corporate finance, investment banking, financial planning, public accounting, insurance, private equity and venture capital, financial advisory etc.
*The author of the article is a CA and an alumnus of IIM Kolkata, working in a Fortune 500 Company. The classification/ definitions presented above are subjective.