Controller vs. CFO: Which Does Your Company Need?

Controller vs. CFO: Which Does Your Company Need?

Controller vs. CFO: Which Does Your Company Need?

As a company grows, things can get more complicated. At some point, you need to hire experts to handle specific business tasks. As you keep growing, you’ll need to create entire departments for these different areas.

For example, the Controllers and Chief Financial Officers (β€œCFO”) are both important in managing a company’s finances, especially in medium to large companies. Even though their roles can overlap and they share some skills, they are very different jobs.

So, how do you decide if your business needs a CFO or a Controller? Let’s talk about it.

What Is a CFO?

A CFO is like the head coach for a company’s financial organization. Their job is to manage a team of personnel performing a variety of accounting and financial functions. They use the information from their team to develop forward-looking planning and forecasting processes as well as strategic decisions regarding the company’s finances.

The controller and their financial planning team usually work under and report to the CFO.

While a CFO has many duties, three main responsibilities are the most important for the company:

1. Financial Strategy and Forecasting: The CFO helps the company earn the most money possible from its assets and capital. They work with their team to predict future finances and use this information to make smart business decisions.

2. Cash Flow: The CFO makes sure the company has enough money to potentially reward its shareholders after paying its bills, compensating its employees and satisfying its tax requirements.

3. Reporting: The CFO and their team prepare all the financial reports that need to be provided to shareholders, lenders, employees, and regulators. This includes making sure the profit and loss statements, cash flow reports, and balance sheets are correct and completed on time.

In a company, the CFO reports to the CEO and the board of directors, serving as the main financial spokesperson.

What Is a Controller? 

A Controller is usually the head of the accounting team, focusing on accurately recording the daily financial tasks of the organization.

In larger companies, the Controller might have several accountants working under them to handle things like recording financial transactions, keeping track of cash, and managing invoices and payments. The Controller also verifies their work to make sure the financial reports are accurate.

One of the main jobs of the Controller is overseeing key processes to ensure compliance with existing laws and regulations. They provide a critical compliance function to protect the company’s shareholders from adverse financial consequences.

The Controller typically also manages cash flow, which is essential because it ensures the business can run smoothly. This means making sure there is enough money to pay employees, suppliers, and creditors on time, which is critical for keeping the business profitable.

The controller and their financial planning team usually work under and report to the CFO.

How the CFO and Controller Work Together?

The collaboration between the Chief Financial Officer (CFO) and the Controller is a strategic alliance essential for financial management within an organization. While the CFO focuses on high-level financial strategy, forecasting, and decision-making to drive the company’s financial health and growth, the Controller ensures the accuracy of financial records, compliance with regulations, and day-to-day financial operations run smoothly. Together, they form a cohesive partnership where the CFO’s strategic vision is supported by the Controller’s meticulous financial oversight, leading to informed decision-making, financial stability, and sustainable growth for the business.

What Are the Primary Differences Between CFOs and Controllers? 

When it comes to hiring, there are notable similarities and differences between the two jobs. But there are three primary areas where the roles diverge, including:

  • Hierarchy: CFOs typically hold a higher position in the organizational hierarchy compared to Controllers. CFOs often report directly to the CEO and play a vital role in shaping the company’s overall financial strategy, while Controllers usually report to the CFO and focus more on day-to-day financial operations.
  • Job Scope: CFOs are more involved in strategic financial decision-making, such as capital allocation, risk management, and investor relations. On the other hand, Controllers are primarily responsible for generating financial reports, and ensuring compliance with regulations and internal policies.
  • Daily Tasks: CFOs spend a significant amount of time analyzing financial data, forecasting future financial performance, and communicating financial insights to key stakeholders. In contrast, Controllers are more focused on overseeing accounting processes, preparing financial statements, and monitoring internal controls on a daily basis.

CFO vs. Controller: Which One Do You Need?

If this is your first significant accounting and finance team hire, which role should you focus on filling first: Controller vs. CFO?

It really depends on your needs.

When Do You Need a Controller?

Although you can hire a controller at any point, most businesses wait until their company produces enough transactions that it needs to record accurate financials based on Generally Accepted Accounting Principles (GAAP). 

Here are some reasons why small business owners might hire a controller:

  • Supervising the bookkeeper: If there’s no CFO and the owner can’t keep an eye on bookkeeping, a controller can step in to manage this.
  • Ensuring accurate financial reports: Bookkeepers sometimes struggle to find and fix mistakes in financial reports. A controller can identify the problems and solve them.
  • Speeding up financial report completion: Bookkeepers often take weeks or months to finish financial reports. While many businesses do this quarterly or yearly, it’s best to do it monthly for up-to-date information. A controller can help speed up this process.
  • Preventing mistakes and fraud: Bookkeepers might lack the training to establish effective internal controls, potentially leading to errors, fraud, and security breaches. A controller can put these controls in place.
  • Supporting the CPA: During tax season or audits, bookkeepers might not be able to provide enough help to the CPA. A controller can offer better support.
  • Managing the accounting process: As a business grows, its accounting becomes more complex. Bookkeepers might not have enough experience to handle this complexity and make necessary changes. A controller can take charge and manage these processes effectively.

When Do You Need a CFO? 

Some reasons you might want to engage a CFO or Fractional CFO include:

  • Management of the Finance Team: Hiring a CFO can bring strong leadership to your finance team. CFOs are experienced in managing and mentoring finance professionals, ensuring that the team operates efficiently and effectively. They can streamline processes, set clear goals, and drive performance within the finance department.
  • Sophisticated Reporting and Analysis: It is often said that when a non-financially-minded person sees numbers, numbers are all that person sees. But when a financially-minded person sees numbers, that person sees the story behind the numbers. CEOs, controllers, and bookkeepers may not be financially savvy enough to determine which metrics matter most and what those numbers mean. This is typically the “wheelhouse” of the CFO. A top-notch CFO can find and interpret the numbers (such as financial metrics for SaaS companies) and decide which actions to take to leverage them to drive positive impact.
  • Help with Fundraising or Growth Efforts: If the CEO isn’t able to handle creating and presenting the financial story needed for fundraising, a CFO is often brought in to help with these tasks and to add to the company’s executive team.
  • Financial Strategy Guidance: CFOs play a crucial role in developing and executing financial strategies that align with the company’s goals. They can assess risks, identify opportunities for revenue growth, optimize capital structure, and ensure financial sustainability. Having a CFO on board provides strategic direction and stability in navigating financial challenges.
  • Stakeholder Reporting: CFOs are responsible for communicating financial performance and strategies to various stakeholders, including board members, investors, and regulatory bodies. They ensure transparency, compliance, and accuracy in financial reporting, building trust and credibility with stakeholders. A CFO’s ability to articulate complex financial information in a clear and concise manner is essential for stakeholder engagement.

When Do You Need Both CFO & Controller?

When a company reaches a certain size or complexity, having both a CFO and a Controller becomes essential. While the CFO focuses on strategic financial decisions, fundraising, and overall financial strategy, the Controller ensures accurate financial reporting, compliance, and day-to-day financial operations run smoothly. The combination of a CFO and a Controller provides a strong financial leadership team that covers a wide range of responsibilities, from high-level strategic planning to detailed financial management, ensuring the company’s financial health and growth are well-supported at all levels.

An Outsourced Solution?

Finding the right CFO or controller to help your company grow is easier than ever. Unfortunately, many companies delay hiring a CFO or Controller, which can harm their progress. In the past, this was understandable because hiring a full-time senior executive was often too expensive, especially for young companies.

Here at Full Velocity Consulting, we shift this paradigm by providing a range of outsourced and Fractional CFO, Controller, and accounting services. No matter your professional growth stage, we can provide an experienced controller or CFO tailored to your specific needs. From there, you can scale your team up or down.
Interested? Reach out today to learn how we can help guide your enterprise.

Read More: Reverse Merger: The Complete Guide

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Picture of Carl Long

Carl Long

Carl Long, with over 20 years of experience in accounting and finance, has excelled in roles covering tax, treasury, facilities, procurement, and financial management. He has successfully led teams of varying sizes across North America, APAC, and EMEA, and has been integral in numerous M&A transactions, including a Silicon Valley semiconductor IPO and the go-private acquisition of a Colorado software company.

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