Corporate finance FDs and CFOs focus on overseeing the structuring, funding, accounting, and future investment decisions of their companies. Many of these companies are public entities or privately funded with the FD or CFO striving to achieve maximum shareholder value through strategy implementation and financial planning.
Every FD and CFO will deal with corporate finance as part of their day-to-day operations, from overseeing cash flow to ensuring regulatory compliance and preparing financial statements.
Our CFO and FD talent portfolio are specialists in financial planning, cash flow forecasting, and raising finance debt and equity. These financial executives are responsible for making capital investment decisions and managing the company’s financial activities.
We’re covering the aspects of corporate finance that our FDs and CFOs specialise in. Explore the value that senior financial executives can bring to companies of all sizes, whether on a full-time, part-time, or interim basis.
3 Aspects of Corporate Finance
There are three main sub-categories within corporate finance, including capital budgeting, capital financing, and working capital management. While FDs and CFOs will have responsibilities across these three categories, many senior financial professionals will specialise within a sub-section of corporate finance.
1. Corporate budgeting
Corporate budgeting focuses on investing in company operations and projects.
2. Capital financing
Capital financing involves FDs and CFOs determining how to fund the company’s projects and operations.
3. Working capital management
FDs and CFOs will oversee working capital management within their company by managing its assets and liabilities to ensure efficient operations.
Capital finance involves FDs and CFOs fundraising capital either private equity or debt. A company may decide to fundraise by borrowing from traditional financial institutions, including banks, or by issuing debt securities through investment banks in capital markets.
Larger companies may choose to issue stocks to equity investors as their form of capital financing. This type of fundraising is usually chosen when the company requires a large amount of capital for expansion and growth.
A CFO will form your company’s capital financing strategy and develop investor relations while providing the company with financial credibility. They will work with the CEO to determine the best debt-to-equity ratio.
Companies will avoid taking on too much debt due to the increased default risk that comes with it. Likewise, relying too much on equity can dilute a company’s earnings and produce a less valuable investor story for early investors. A CFO will identify the most effective capital financing strategy to realise the company’s forward-looking strategy.
CFOs will play a delicate balancing act with equity and debt, implementing financial structures that allow for both to be closely managed to maintain the company’s financial health and maximise value for investors. They will want to keep the company’s weighted average cost of capital (WACC) as low as possible.
A CFO’s corporate finance responsibilities also include making capital investments and utilising the organisation’s long-term capital. They’ll develop a capital budgeting strategy to streamline the decision process for utilising capital investment.
Capital budgeting enables the company to identify its expenditures to estimate its future cash flow from future projects and determine which projects require more capital. This budgeting enables CFOs to make better decisions by allowing them to compare planned investments with the company’s current financial position.
A CFO must exceed at developing a company’s capital budgeting as failing to implement an accurate system can lead to underfunded projects and excessive investment in projects that are unlikely to produce a return on investment.
A company’s CFO will also be responsible for overseeing the company’s short-term financial management. They need to oversee cash flow management to ensure there is enough liquidity to ensure the company’s operations can be maintained, including during times of economic instability.
The CFO will manage the company’s current assets and liabilities by ensuring it has the necessary working capital and cash flow. Establishing good relationships with financial institutions can enable CFOs to access additional credit or commercial paper in times when liquidity is low.
Monitoring Cash Flows
A CFO will want to implement cash flow management data transparency throughout their company, ensuring that their organisation is operating as a well-oiled financial machine with every penny accounted for.
Data forecasting can ensure that the CFO can accurately translate the company’s value and potential to venture capital firms to secure the best investment terms possible. Monitoring cash flow enables CFOs to identify potential investment and growth opportunities while ensuring it maintains enough liquidity to support their operations. Start-ups and SMEs may recruit a part-time CFO to establish and implement a cash flow management system.
The first responsibility of any CFO is to conduct an internal audit of the company’s accounting when they take up their position. This audit will enable the CFO to identify any weak points within the company’s existing system and implement any necessary changes.
Today’s CFOs are digital natives, investing in AI and automation to utilise real-time data insights and making use of technology such as Power BI to make the company more efficient and leaner. A CFO’s day-to-day corporate finance responsibilities will also include overseeing cash flow projections, budget forecasting, and modelling.
Preparing Financial Statements
CFOs are responsible for preparing the company’s financial statements as part of their corporate finance role.
Cash and cash flow forecasting is the main financial statement that any senior financial executive will produce. These financial statements will include both a short and medium-term view of the company’s cash flow and its expected future cash position.
Risk reporting is an area of financial statements that is increasingly falling within the remit of CFOs. Risk management is one of the largest responsibilities of a CFO with risk reporting enabling them to identify and factor in risks to their forward-thinking strategy. This financial statement will include data on potential business risks and propose appropriate mitigating responses for each risk identified.
Other financial statements that a CFO will prepare include sales forecasting, customer behaviour reports, and internal productivity reviews.
CFOs are forward-looking and proactive, ensuring that the company is ready to adapt to changes, particularly with rules around taxation. A well-positioned CFO will integrate processes, people, and technology to establish a tax strategy that unlocks opportunities for the company.
Tax and finance functions are two of the biggest responsibilities for today’s CFOs, requiring them to navigate changing markets, new risk factors, and growing uncertainty. CFOs will invest in human capital and processes to plan for regulatory changes and ensure corporate governance is met.
Taxation requires CFOs to invest in technology that enables real-time trend analysis and data analytics to allow them to identify corrective actions proactively to reduce liability.
When a company goes public, it faces a new array of regulatory requirements and oversight that it must abide by. Investing in a CFO to oversee your company’s corporate finance will ensure that a strong reporting and governance infrastructure is put in place during the pre-IPO stage.
Most CFOs and companies will work with financial institutions to identify risks and ensure regulatory compliance with the rights reports and data gathered and produced. A CFO will typically be responsible for overseeing governance, risk management, and internal auditing.
Regulatory compliance requires a CFO to be across all aspects of corporate finance and implement systems and structures that facilitate transparency.
CEOs who lack fundraising experience can benefit from a corporate finance CEO with experience in spearheading funding projects. Our portfolio of financial executives includes CFOs with a proven track record of securing private fundraising, including private equity houses, venture capitalists, and traditional financial institutions.
Corporate finance CFOs are leading the way with digital innovation, investing in AI and automation to enhance real-time forecasting and data insights to maximise the company’s fundraising potential. Corporate finance CFOs and FDs will identify ways to invest funds in the best way to meet the company’s long-term goals, including potential M&As and expansions.
CFOs are constantly considering their company’s financing options. They may decide to seek better equity and debt terms to support their forward-looking strategy by implementing new systems. Debt refinancing is an option for CFOs who are seeking new ways of funding their company’s profit goals or expansion plans.
There are three main forms of debt financing that a corporate finance CFO can explore, including cash flow loans, instalment loans, and revolving loans.
Cash flow loans provide companies with a lump sum from the lender with payments being made in line with the company earning revenue through investment made by the loan. Two common forms of cash flow loans include invoice financing and merchant cash advances.
Instalment loans operate on repayment terms with monthly payments. The lump sum payment is made up front with the loan either being secured or unsecured. By comparison, a revolving loan provides the company with an ongoing line of credit that it can utilise and repay at any time. The most common example of revolving loans is credit cards.
CFOs are strategists who play a vital role in determining a company’s long-term growth through financial leadership. They’ll invest in technology that provides real-time data to enhance forecasting and provide more accurate accounting for better corporate finance.
A CFO is uniquely positioned to provide the data-driven insights that ground the company’s decision-making process, while also having a high-level view of the company’s financial health.
As a strategist, a CFO will play several roles within the organisation. They’ll be a leader within the company’s c-suite team as the CEO’s second-in-command, taking the lead on strategic alignment within the organisation’s financial strategy.
CFOs must also be analysts to pull together and translate their data and forecasting to create the best strategic options, particularly in competitive environments. As a C-suite leader, a CFO will also have to contribute towards creating an environment that enables innovation to flourish by investing in technology, such as AI and automation.
Corporate finance CFOs are critical thinkers who implement rigorous evaluation processes throughout their decision-making and when considering KPIs. They’re an adjudicator, orchestrator, and implementor of strategy decisions across corporate budgeting, company culture, and KPIs.
While a corporate finance CFO is a strategist, they’re also a communicator that translates the company’s financial position to stakeholders and investors.
Corporate finance CFOs are operators who start their role at a new company by examining its systems and infrastructure. Many will choose to overhaul existing infrastructure by investing in technology to streamline it. The operational systems that a CFO puts in place as part of their corporate finance responsibilities enable financial planning, forecasting, and performance analysis in line with KPIs.
As an operator, a CFO will also conduct tax audits as part of their corporate governance and ensure that the company is meetings its regulatory compliance requirements.
Managing the company’s cash flow is a bedrock of the CFO’s day-to-day responsibilities. Treasury management involves overseeing the company’s assets, debts, and liquidity – including exploring options for increased capital liquidity through credit lines or other forms of debt financing. A financial service CFO will manage the company’s incoming revenues and outgoing payments, including its short and long-term liabilities.
It’s not uncommon for a corporate finance CFO to also take on the role of financial controller within their organisation. They’ll implement a risk management framework to mitigate potential fraud, including unauthorised user access. A corporate finance CFO will invest in risk management software to ensure regulatory compliance, including meeting GDPR responsibilities.
Dividends & Return of Capital
CFOs are also responsible for overseeing dividends and return of capital as part of their corporate finance role. They’ll be responsible for distributing the earnings to shareholders through dividends or share buybacks, while alternatively deciding whether to retain excess earnings for future investment.
Companies that don’t have shareholders will typically retain their excess earnings to fund company expansion. A CFO may decide that internal investment is a better use of excess earnings rather than diluting the company’s value of equity through additional shares.
A CFO will have to determine whether the company can earn a rate of return on a capital investment higher than the company’s cost of capital. If this equation works, the company should pursue the proposed plan.
If you are looking for a Corporate Finance specialist then talk to the FD Capital Recruitment team today, we offer Corporate Finance Experts on a Part-time / Fractional, interim and permanent basis, call our team on 020 3287 9501.