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Nature of the Work | Working Conditions | Employment | Training, Other Qualifications, and Advancement | Job Outlook | Earnings | Related Occupations | Sources of Additional Information
Almost every firm, government agency, and organization has one or more financial managers who oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. As computers are increasingly used to record and organize data, many financial managers are spending more time developing strategies and implementing the long-term goals of their organization.
The duties of financial managers vary with their specific titles, which include chief financial officer, vice president of finance, controller, treasurer, credit manager, and cash manager. Chief financial officers (CFOs), for example, are the top financial executives of an organization. They oversee all financial and accounting functions and formulate and administer the organizations overall financial plans and policies. In small firms, CFOs usually handle all financial management functions. In large firms, they direct these activities through other financial managers who head each financial department.
Controllers direct the preparation of financial reports that summarize and forecast the organizations financial position, such as income statements, balance sheets, and analysis of future earnings or expenses. Controllers are also in charge of preparing special reports required by regulatory authorities. Often, controllers oversee the accounting, audit, and budget departments. Treasurers and finance officers direct the organizations financial goals, objectives, and budgets. They oversee the investment of funds and manage associated risks, supervise cash management activities, execute capital-raising strategies to support a firms expansion, and deal with mergers and acquisitions.
Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example, cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments. Risk and insurance managers oversee programs to minimize risks and losses that may arise from financial transactions and business operations undertaken by the institution. They also manage the organizations insurance budget. Credit managers oversee the firms issuance of credit. They establish credit rating criteria, determine credit ceilings, and monitor the collections of past due accounts. Managers specializing in international finance develop financial and accounting systems for the banking transactions of multinational organizations.
Financial institutions, such as commercial banks, savings and loan associations, credit unions, and mortgage and finance companies, employ additional financial managers, often with the title Vice President. These executives oversee various functions, such as lending, trusts, mortgages, and investments, or programs, including sales, operations, or electronic financial services. They may be required to solicit business, authorize loans, and direct the investment of funds, always adhering to Federal and State laws and regulations.
Branch managers of financial institutions administer and manage all the functions of a branch office, which may include hiring personnel, approving loans and lines of credit, establishing a rapport with the community to attract business, and assisting customers with account problems. Financial managers who work for financial institutions must keep abreast of the rapidly growing array of financial services and products.
In addition to the general duties described above, all financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes, whereas health care financial managers must be knowledgeable about issues surrounding health care financing. Moreover, financial managers must be aware of special tax laws and regulations that affect their industry.
Areas in which financial managers are playing an increasingly important role involve mergers and consolidations and global expansion and financing. These developments require extensive specialized knowledge on the part of the financial manager to reduce risks and maximize profit. Financial managers are increasingly hired on a temporary basis to advise senior managers on these and other matters. In fact, some firms contract out all accounting and financial functions to companies that provide these services.
The role of financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer ideas to senior managers on how to maximize profits. They often work on teams acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency of their firms financial operations.
Financial managers work in comfortable offices, often close to top managers and to departments that develop the financial data these managers need. They typically have direct access to state-of-the-art computer systems and information services. Financial managers commonly work long hours, often up to 50 or 60 per week. They are generally required to attend meetings of financial and economic associations and may travel to visit subsidiary firms or meet customers.
Financial managers held about 693,000 jobs in 1998. Although these managers are found in virtually every industry, more than a third were employed by services industries, including business, health, social, and management services. Nearly 3 out of 10 were employed by financial institutions, such as banks, savings institutions, finance companies, credit unions, insurance companies, securities dealers, and real estate firms.
A bachelors degree in finance, accounting, economics, or business administration is the minimum academic preparation for financial managers. However, many employers increasingly seek graduates with a masters degree, preferably in business administration, economics, finance, or risk management. These academic programs develop analytical skills and provide knowledge of the latest financial analysis methods and technology.
Experience may be more important than formal education for some financial manager positionsnotably branch managers in banks. Banks typically fill branch manager positions by promoting experienced loan officers and other professionals who excel at their jobs. Other financial managers may enter the profession through formal management trainee programs offered by the company.
Continuing education is vital for financial managers, reflecting the growing complexity of global trade, shifting Federal and State laws and regulations, and a proliferation of new, complex financial instruments. Firms often provide opportunities for workers to broaden their knowledge and skills by encouraging employees to take graduate courses at colleges and universities or attending conferences related to their specialty. Financial management, banking, and credit union associations, often in cooperation with colleges and universities, sponsor numerous national and local training programs. Persons enrolled prepare extensively at home, then attend sessions on subjects such as accounting management, budget management, corporate cash management, financial analysis, international banking, and information systems. Many firms pay all or part of the costs for those who successfully complete courses. Although experience, ability, and leadership are emphasized for promotion, advancement may be accelerated by this type of special study.
In some cases, financial managers may also broaden their skills and exhibit their competency in specialized fields by attaining professional certification. For example, the Association for Investment Management and Research confers the Chartered Financial Analyst designation on investment professionals who have a bachelors degree, pass three test levels, and meet work experience requirements. The National Association of Credit Management administers a three-part certification program for business credit professionals. Through a combination of experience and examinations, these financial managers pass through the level of Credit Business Associate, to Credit Business Fellow, and finally to Certified Credit Executive. The Treasury Management Association confers the Certified Cash Manager credential on those who have 2 years of relevant experience and pass an exam, and the Certified Treasury Executive designation on those who meet more extensive experience and continuing education requirements. More recently, the Association of Government Accountants has begun to offer the Certified Government Financial Manager certification to those who have the appropriate education and experience and who pass three examinations. Financial managers who specialize in accounting may earn the Certified Public Accountant (CPA) or Certified Management Accountant (CMA) designations. (See the Handbook statement on accountants and auditors.)
Candidates for financial management positions need a broad range of skills. Interpersonal skills are increasingly important because these jobs involve managing people and working as part of a team to solve problems. Financial managers must have excellent communication skills to explain complex financial data. Because financial managers work extensively with various departments in their firm, a broad overview of the business is essential.
Financial managers should be creative thinkers and problem solvers, applying their analytical skills to business. They must be comfortable with computer technology. As financial operations are increasingly affected by the global economy, they must have knowledge of international finance; even a foreign language may be important.
Because financial management is critical for efficient business operations, well-trained, experienced financial managers who display a strong grasp of the operations of various departments within their organization are prime candidates for promotion to top management positions. Some financial managers transfer to closely related positions in other industries. Those with extensive experience and access to sufficient capital may start their own consulting firms.
The outlook for financial managers is good for those with the right skills. Expertise in accounting and finance is fundamental, and a masters degree enhances ones job prospects. Strong computer skills and knowledge of international finance are important, as are excellent communication skills as the job increasingly involves working on strategic planning teams. Mergers, acquisitions, and corporate downsizing will continue to adversely affect employment of financial managers, but growth of the economy and the need for financial expertise will keep the profession growing about as fast as the average for all occupations through 2008.
The banking industry, which employs the most financial managers, is expected to continue to consolidate and reduce the number of financial managers. Employment of bank branch managers, in particular, will grow very little or not at all as banks open fewer branches and promote electronic and Internet banking to cut costs. In contrast, the securities and commodities industry will hire more financial managers to handle increasingly complex financial transactions and manage investments. Financial managers are being hired throughout industry to manage assets and investments, handle mergers and acquisitions, raise capital, and assess global financial transactions. Risk managers, who assess risks for insurance and investment purposes, are in especially great demand.
Some financial managers may be hired on a temporary basis to see a company through a short-term crisis or to offer suggestions for boosting profits. Other companies may contract out all accounting and financial operations. Even in these cases, however, financial managers may be needed to oversee the contracts.
Computer technology has reduced the time and staff required to produce financial reports. As a result, forecasting earnings, profits, and costs, and generating ideas and creative ways to increase profitability will become the major role of corporate financial managers over the next decade. Financial managers who are familiar with computer software and applications that can assist them in this role will be needed.
Median annual earnings of financial managers were $55,070 in 1998. The middle 50 percent earned between $38,240 and $83,800. The lowest 10 percent had earnings of less than $27,680, while the top 10 percent earned over $118,950. Median annual earnings in the industries employing the largest number of financial managers in 1997 are shown below.
According to a 1999 survey by Robert Half International, a staffing services firm specializing in accounting and finance, salaries of assistant controllers and treasurers varied from $42,700 in the smallest firms to $84,000 in the largest firms; corporate controllers earned between $47,500 and $141,000; and chief financial officers and treasurers earned from $65,000 to $319,200. Salaries are generally 10 percent higher for those with a graduate degree or Certified Public Accountant or Certified Management Accountant designation.
The results of the Treasury Management Associations 1999 compensation survey are presented in table 1. The earnings listed in the table represent total compensation, including bonuses and deferred compensation.
Table 1. Average earnings for selected financial managers, 1999
SOURCE: Treasury Management Association
Large organizations often pay more than small ones, and salary levels can also vary by the type of industry and location. Many financial managers in private industry receive additional compensation in the form of bonuses, which also vary substantially by size of firm. Deferred compensation in the form of stock options is also becoming more common.
Financial managers combine formal education with experience in one or more areas of finance, such as asset management, lending, credit operations, securities investment, or insurance risk and loss control. Workers in other occupations requiring similar training and skills include accountants and auditors, budget officers, credit analysts, loan officers, insurance consultants, portfolio managers, pension consultants, real estate advisors, securities analysts, and underwriters.
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For information about financial management careers, contact:
For information about financial careers in business credit management; the Credit Business Associate, Credit Business Fellow, and Certified Credit Executive programs; and institutions offering graduate courses in credit and financial management, contact:
For information about careers in treasury and financial management and the Certified Cash Manager and Certified Treasury Executive programs, contact:
For information about the Chartered Financial Analyst program, contact:
For information about the Certified Government Financial Manager designation, contact:
An industry employing financial managers that appears in the 2000-01 Career Guide to Industries: Banking
Last Updated: March 30, 2000
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