Simi Nehra, Head of Corporate Finance at Grant Thornton UAE, shares his thoughts on the three-dimensional financial universe
THE JOURNEY to become a financial professional can be exceptionally rewarding, however it takes hard work and years of experience in practice and industry, and even then, you continually need to sharpen the axe.
Whether you have just graduated, are an accountant looking for a new challenge or even looking for a career change, it is established that professional accounting and financial qualifications not only help bolster your technical knowledge which positively improves your on-the-job experience, but it also enhances your career prospects and salary.
In this ever competitive market place for young talent, employers today look for candidates who are self-starters, and what better way to demonstrate this by enrolling in a professional programme or becoming part qualified using your own initiative.
The professional qualification route
Professional institutes over the past decade have improved their accessibility and allow you to enroll and sit exams in your city. Accredited tuition programmes are also widely available from local financial training partners such as the Genesis Institute.
Professional qualifications in this era have already benefited from decades of experience evolving due to reporting, financial and legislative changes driven by accounting scandals, financial and economic bubbles as well as periods of recession.
The best practice accounting and financial qualifications originate from institutes based in the UK and USA, broadly other countries have their own derivatives based on similar syllabuses.
Three-dimensional financial universe
Generally, unless you are from the same gene pool as “Good Will Hunting”, without a formal professional qualification, over time there remains large gaps in your technical knowledge which simply do not get bridged from on-the-job experience.
This may leave the individual struggling to get ahead as a horse with blinkers or as a finance professional seeing the world in only one dimension. A professional qualification dramatically improves your ability to see through the financial and commercial effects of a transaction, also the qualification enables the individual to quickly grasp complex concepts which otherwise would be difficult to understand.
This is usually when technical and on-the-job experience converges and the individual begins to view in 3D. At this point, the individual will experience rapid progression and begin to add tremendous value to clients and internal management. Professional qualifications also give you a broad understanding of the international money markets, economics and the value chain in business.
One qualification could achieve this euphoric capability, however if you go on to specialise in a certain area of finance then one should consider the available options for a second qualification. One size does not fit all, there are many options and you need to seek advice to be sure which one suits your personal circumstances and your careers aspirations.
Accounting is fundamental to any business, large or small; whilst management forge ahead in sales and operations they need access to up-to-date financial information to ensure their decisions are backed up by financial fact. If the quality of financial information is poor, not comparable or timely, clearly management runs the risk of neglecting important financial indicators such as;
1. Which products contribute the greatest gross profit margins
2. Which costs are escalating out of control
3. How much cash is on hand and what are the likely short and long term cash flows effects on a potential deal.
For example, a big contract is great news for a business; however the cash flow impacts in the early months of the contract may require an overdraft or simply more equity funding from the shareholders to allow the business to meet its commitments and stay solvent in the short term.
The Association of Certified Chartered Accountants (ACCA) and Chartered Institute of Management Accountants (CIMA) are both 10-14 paper UK qualifications which in my opinion guarantee to provide you with a concrete platform to ensure, at the minimum, the 1D view is gained.
ACCA has the benefit of including audit and assurance modules which allows you to work as an external auditor. CIMA’s main focus is for candidates who look to work internal management accounting and financial control. Other qualifications include the US 4 paper qualification known as Certified Management Accountant (CMA).
Entry requirements for all qualifications usually start with a graduate degree however, should you not have a graduate degree you can apply based on your experience or indeed opt for a starter or conversion professional qualification such as the AAT. This route will provide you with basic accounting and financial knowledge which then will allow you to progress to the more rigorous qualifications outlined above. All the qualifications at this level do not require a training contract hence they can be undertaken as self-study programmes.
Financial reporting and financial control is key to the success of any business with the responsibility resting on the organisations financial department headed by a Chief Financial Officer (CFO).
Audit broadly is the review of historical financial information and is split between external audit and internal audit. External auditors seek to provide an opinion on whether an entity’s financial statements provide a true and fair view of a period’s trading activities. Internal auditors seek to control and monitor a business and its operations.
Auditors should be independent and should report directly to a company’s audit committee. The respected qualification for external auditors is the Chartered Accountancy route (ACA). When training to be an ACA you have to join an audit firm and gain three years practical experience before you can be admitted to the institute.
Founded in the USA, the highly regarded Certified Public Accountant (CPA), is a four-paper examination which also requires on-the-job experience. An audit qualification allows you to benefit from a broad understanding of International Financial Reporting Standards (IFRS), and the key areas of professional scepticism, ethics and good corporate governance which in recent times have been an issue with some members of our profession.
The path for internal auditors usually means you would be working in the internal audit department for an organisation to monitor, improve and enhance operating and financial control across the business.
For internal auditors respected US qualifications include Certified Internal Auditor (CIA) and Certification in Control Self-Assessment (CCSA) which enables you to take a view of internal financial and operating risk and control. Also, the UK’s Chartered Internal Auditors (IIA) is also a fantastic option.
Currently, qualified internal auditors are in high demand across the region, therefore you would be smart to consider specialising in this growth area.
Corporate finance broadly includes transactional due diligence and valuation, mergers and acquisition advisory and fundraising. Typically these services are required by investors or companies considering investing or divesting.
In simple terms, transactional advisors have to protect investors interests on the deal and advise on whether they are paying a fair price. In such transactions, whilst historical data is important as can form the basis for future projections, however, advisors have to build sophisticated financial models and perform various financial scenario analyses to advise on the varying outcomes on the feasibility and viability of the proposed deal or venture.
The key here is the forward view on earnings rather than that of the first or second dimension which is looking back at historical data. Advisors are required to fully comprehend the impact of non-financial matters such as, commercial, operating, legal and compliance considerations.
The US qualification known as the Chartered Financial Analyst (CFA) best approaches the detail required for the third dimension, although the ICAEW’s Corporate Finance Qualification (CF) has powerful practical application as it covers vast deal concepts. Both qualifications have the potential to launch your career into investment banking or private equity.
Binod Shanker and Mohit Malhotra, Directors at the Genesis Institute, maintain that the CFA programme is widely recognised as the gold standard in financial and investment education with more than 90,000 charter holders worldwide.
Funding your qualification
Funding your programme is not easy when starting out, it can be expensive, ranging from USD7,000, however your financial returns will reappear later in the way of improved salary and notoriety within your organisation or firm. Most firms in the UAE will sponsor your examination and tuition fees by 50% or more and also most banks provide education loans which can also help.
The accountant stereotype
Being a financial professional does not have to be a final career, in fact it opens several other doors, noting that 51% of CEOs in FTSE 100 are Chartered Accountants (February 2011). Also, several entrepreneurs including the richest man in history, John D. Rockefeller had started life as a humble bookkeeper!