Knowing the role of a Controller vs. a CFO
Controllers primarily focus on reporting and compliance in the finance and accounting areas. They manage and maintain accounting controls and related systems (the debits and the credits). Controllers also manage and/or produce monthly financial reports, year-end reports, and other financial reporting. Their responsibilities often extend to handling tax compliance for federal, state, and local income taxes, as well as payroll, state sales, and property taxes. These are essential components to strong financial controls, which are critical for the growth and success of a business.
A Chief Financial Officer, on the other hand, is primarily focused on the future of the company. They’ll use financial, operational, and sales information to plan and forecast, allowing them to provide the company leadership with the information necessary to make decisions around direction and strategy. Additionally, the CFO should be spending a lot of time ensuring that the business has excellent financial controls in place so the information that is created is timely, relevant, and accurate. Because of this focus on the business at a high level, the CFO becomes a powerful strategic partner to the owner and other business leaders.
Another important role for a CFO is to spend significant time on external relationships in an effort to provide the business with the best information and resources available. These can be relationships with professional service providers like the company’s Certified Public Accounting (CPA) firm, banks, legal advisors, and risk/insurance providers. These could also be relationships with specialty providers like outsourced IT firms, software programmers, HR management firms, or consultants. CFOs are also often asked to develop relationships with key community partners.
Knowing when to bring on a CFO
“When should we consider a Chief Financial Officer for our business?” is a question we are frequently asked by clients. For every company, it can be different, and our firm does a very thorough analysis of a company before making a recommendation, but here are some scenarios where adding a CFO can be incredibly advantageous.
Scenario #1 – When leverage is increasing
Having just a controller makes sense when a company has a strong balance sheet and low leverage. As the leverage increases, more care needs to be given to the balance sheet, forecasting, cash management, and external relationship management. This is where a CFO can help.
Scenario #2 – When business complexity or risk is growing
Perhaps your company is looking to acquire a business, implement a new ERP system, take on an equity partner. All of these events create complexity and risk for the business and require someone with strong financial and analytical skills to properly plan for the events, forecast the impact of the event, solicit the appropriate outside advice, and support the business. This is the role of a CFO.
Scenario #3 – When financial information is lacking
Often, as a business grows, the financial information does not keep up. Larger businesses often need very specific information or forecasts in order to make strategic decisions. Sometimes the business doesn’t even know what information it needs! Having a qualified CFO to anticipate and create timely, accurate, and relevant information to support decision-making is critical for businesses to grow.
If you still have questions and would like to talk, please feel free to contact us.