By Bob Wang.
Do your clients need a controller, a CFO, or both? Every business, at some point, reaches a stage where financial management becomes too complex and just getting the bookkeeping done is no longer enough. Whether your clients are navigating growth, preparing for an acquisition, or just trying to stay afloat during challenging times, having the right financial leadership is key. Understanding the distinct roles these professionals play can help you make an informed decision that best supports your clients’ business needs.
Overview of Roles
What is a Controller?
A controller is the financial executive responsible for managing the day-to-day accounting functions of a company. Think of the controller as the head of the accounting department. Their primary job is to ensure that all financial reports are accurate, comply with generally accepted accounting principles (GAAP), and are prepared in a timely manner. Controllers oversee the work of accountants and bookkeepers, ensuring that every transaction is recorded correctly and that the financial data reflects the true financial position of the company. Modern controllers try to leverage as much automation as possible, such as bank feeds and other reconciliation tools, to close the books as quickly as possible.
What is a CFO?
A CFO, on the other hand, is the top financial executive in a company. While the controller is focused on accuracy and compliance, the CFO is focused on strategy and growth. A CFO’s responsibilities extend beyond managing finances—they are also involved in forecasting, budgeting, investment decisions, risk management, and strategic planning. The CFO advises the CEO and the board of directors on financial matters, helping to shape the company’s future direction.
Key Differences Between a Controller and a CFO
Past vs. Future Focus
- Controller: The controller’s focus is on the past and present financial health of the company. They ensure that all financial records are accurate, compliant with regulations, and that internal controls are in place to prevent fraud. Controllers are deeply involved in the day-to-day operations of the accounting department, overseeing everything from payroll to accounts payable and receivable.
- CFO: The CFO, however, is more concerned with the future. They take the financial data provided by the controller and use it to forecast future performance, guide investment decisions, and develop strategies for growth. The CFO’s role is to look at the big picture, ensuring that the company’s financial practices align with its long-term goals.
Hierarchy and Reporting
- Controller: Typically, the controller reports to the CFO. They are responsible for implementing the financial strategies developed by the CFO and ensuring that all accounting practices are in line with those strategies. In smaller companies, the controller may report directly to the CEO, especially if there isn’t a CFO in place.
- CFO: The CFO reports directly to the CEO and is often a key member of the executive team. The CFO is responsible for all financial functions within the company, including those managed by the controller. In addition to overseeing the accounting department, the CFO is also responsible for financial planning, risk management, and investor relations.
Strategic Involvement
- Controller: The controller’s role is more operational. They implement the financial strategies set by the CFO and focus on the execution of those strategies. Their primary concern is ensuring that the company’s financial data is accurate and that all financial operations run smoothly.
- CFO: The CFO is involved in setting the financial strategy of the company. They are responsible for developing long-term financial plans, setting budgets, and determining the best ways to allocate resources. The CFO’s role is to guide the company’s financial strategy, ensuring that it supports the company’s overall business objectives.
Risk Management
- Controller: The controller manages risk by maintaining internal controls, ensuring compliance with financial regulations, and preparing accurate financial reports. Their role is to minimize risk by ensuring that the company’s financial practices are sound and compliant.
- CFO: The CFO takes a broader approach to risk management. In addition to ensuring compliance and accuracy, the CFO also manages market and operational risks. This includes everything from managing interest rate risks to ensuring that the company is prepared for potential economic downturns. The CFO’s role is to ensure that the company is financially resilient and capable of weathering external threats.
Financial Reporting and Analysis
- Controller: The controller is responsible for producing financial reports that provide a snapshot of the company’s financial health. These reports are used by management to make operational decisions and ensure that the company is meeting its financial goals.
- CFO: The CFO uses these reports to make strategic decisions. They analyze the financial data provided by the controller to identify trends, forecast future performance, and guide the company’s financial strategy. The CFO’s role is to turn financial data into actionable insights that drive business growth.
Communication and External Relations
- Controller: The controller primarily communicates with internal stakeholders, including the CFO and other members of the management team. Their role is to ensure that the company’s financial data is accurate and that all financial operations run smoothly.
- CFO: The CFO, on the other hand, communicates with external stakeholders, including investors, analysts, and the board of directors. The CFO is responsible for presenting the company’s financial performance to the outside world and managing investor relations. Their role is to ensure that the company’s financial strategy is aligned with the expectations of external stakeholders.
When to Hire a Controller vs. a CFO
- Low-complexity environments: Regardless of size, if your business is in a stable industry, with predictable revenues, and you don’t have lenders, investors and don’t plan to grow by more than 5%/year, you might start with a controller to handle your day-to-day financial operations. A controller can ensure that your financial records are accurate and compliant, providing you with the financial stability you need to sleep well at night.
- High-complexity environments: As your business grows, you may find that you need more than just accurate financial records—you need a strategic plan for the future. This is when it’s time to bring on a CFO. A CFO can help you navigate complex financial challenges, manage risks, and guide your company’s growth.
Here are signs you need a CFO.
What about a Fractional CFO?
A fractional CFO is a part-time CFO who provides high-level financial oversight without the full-time commitment. This is an excellent option for growing businesses that need strategic financial guidance but don’t yet have the resources or need for a full-time CFO.
A typical CFO would cost anywhere from $200,000 – $500,000. A fractional CFO would cost anywhere from $50,000 – $125,000. Despite the lower investment, you’ll still be able to get a majority of what you need, especially if you already have a controller.
How Controllers and CFOs are Complementary Roles
Controllers and CFOs work together to ensure the financial success of a company. While the controller focuses on accuracy and compliance, the CFO uses that data to make strategic decisions. Together, they ensure that the company’s financial practices support its business goals and long-term growth.
Conclusion
Understanding the differences between a controller and a CFO is crucial for any business looking to grow and succeed. While both roles are essential, they serve different purposes and are necessary at different stages of a company’s development. By assessing your current needs and future goals, you can determine whether you need a controller, a CFO, or both. And if your business is growing but not yet ready for a full-time CFO, a fractional CFO might be the perfect solution.
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Bob Wang is owner and CEO at Tee Up Advisors, a Fractional CFO firm based in the Greater Sacramento area serving small businesses with $2-$20M in revenues. Tee Up Advisors is passionate about partnering with entrepreneurs to build enduringly profitable companies. Prior to founding Tee Up Advisors, Bob was an operating partner at a private equity firm, CFO at a VC-backed enterprise software company, and CEO and founder of Legacy Advantage, a leading CAS firm that was acquired by Deloitte.
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Tags: Accounting, Advisory, CAS, Small Business
