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Controller Vs. CFO: Differences That Define An Organization

Controller Vs. CFO: Which Does Your Business Need?

When businesses think about the roles involved in financial leadership, they often refer to the titles of Controller and Chief Financial Officer (CFO). In some companies, particularly the smaller ones, these roles are merged into one or managed by a single individual, maybe even shouldered completely by the owner. But the truth is they are two very distinct positions with different financial focuses and areas of responsibility.

It’s not surprising that many businesses have come to blur the distinctions of controller versus CFO, as both are integral to the financial goals and outcomes of a company. However, they each require specific skill sets and bring separate perspectives to the table. By recognizing the value inherent in each one and understanding the unique aspects of the controller versus the CFO, a business is better poised to achieve financial success.

Let’s talk about each of these titles in greater detail to gain a better understanding of the significant differences that often define an organization.

Controller

A controller, also sometimes referred to as an accounting manager, approaches financial matters through a very tactical or technical lens. This is a senior-level accountant position that requires a strong grasp of accounting principles and includes general management responsibilities for overseeing the department.

Here’s a fundamental breakdown of the functions and duties a controller is generally expected to perform within their organization:

  • Accounting Operations & Supervision: Controllers are charged with applying proper accounting policies and procedures, as well as monitoring internal controls in order to prevent mistakes and fraud. They must ensure that the operations of the accounting department run efficiently, consistently and accurately, and many even identify the technology best suited to meet the company’s accounting and financial reporting needs. A controller is responsible for overseeing accountants and bookkeepers, verifying their work, reviewing general ledger entries, making adjustments where needed and managing the full cycle of accounting duties. They also process and/or approve timesheets and payroll.
  • Financial Reporting: A business’s controller works to issue necessary financial statements and reports, ensuring an accurate reflection of the company’s historical performance. They prepare documents such as income statements and balance sheets, always with an eye toward completeness, accuracy and compliance with GAAP guidelines. As such, controllers must stay current on applicable accounting standards and pronouncements. They are tasked with making records of complex transactions, overseeing the close of each financial period and reporting results to high-level management so that financial analysis, budgeting, forecasting and decision-making by leadership members are well informed.
  • Auditing & Compliance: Many controllers are Certified Public Accountants (CPAs) or Certified Management Accountants (CMAs), though this is not necessarily a requirement for the position. Regardless of licensing, a controller must be skilled with GAAP in order to maintain the business’s compliance and meet company objectives. Controllers typically lead and manage any efforts related to compliance audits and prepare tax returns or coordinate with CPAs during tax season.

Chief Financial Officer

When it comes to understanding the role of a CFO versus that of a controller, there’s a major distinction in specialty and focus. The CFO approaches financial management from more of a strategic and planning lens. They zero in on metrics, bringing meaning to the numbers and translating business goals into financial models.

Following are some of the most characteristic responsibilities of a CFO within an organization:

  • Financial Strategy: A CFO is relied upon to create effective financial strategies designed to reach the company’s business objectives. It’s all about supporting leadership in increasing the value of the business, which is ultimately achieved through profitable growth, good returns on invested capital and risk management. CFOs provide the strategic financial oversight to guide key business decisions, particularly as they pertain to expenses, financing and capital considerations. They must understand how the business’s financial system relates to operations and have a strong grasp of financial risks.
  • Metrics Administration: CFOs are charged with defining a set of metrics for the company and its various internal groups, and ensuring those metrics align with business objectives. They are expected to implement systems and reporting to track metrics, and they must be able to interpret the financial data those systems produce in order to inform business decisions and improve profitability. This aspect of a CFO’s responsibilities requires the skills to analyze strengths and weaknesses within the business, measure growth and capital, and leverage the numbers to drive action.
  • Cash Flow, Budgeting & Forecasting: Whereas the controller is focused on accounting and GAAP, a CFO should be thinking in terms of finance and return on investment. That means managing financial responsibilities including cash flow, budgeting and forecasting, as well as working to make strong financial plans and predictions that enable other leadership members to focus on running the business. CFOs make educated prognoses about the financial future of the company, which are especially relevant to investors and business lenders. They utilize reporting to budget effectively, anticipate future expenses, manage spending and make decisions that positively affect the bottom line.

Controller Vs. CFO: Which Does Your Business Need?

Many small businesses find themselves challenged to support multiple financial leadership roles with limited administrative costs. Sometimes that means choosing one financial hire over another or merging the two into one. But even if the costs of keeping both a full-time controller and CFO on staff are simply impractical, your business may still require the benefit of both functions. Depending on your company’s specific objectives and current financial performance, you may be lacking in one area or another.

For this very reason, many companies look to outsource controller and/or CFO responsibilities. Doing so enables a business to minimize employment costs while maximizing their financial and accounting capabilities:

  • The right outsourced controller services enable small businesses to acquire a high level of skill and a comprehensive array of functions, all at a fractional cost. From setting up a revenue recognition schedule aligned with your business’s operations and generating meaningful reports, to managing equity accounting, preparing for audits and getting GAAP compliant, this option affords you the benefit of dedicated experts without the hassles or overhead of internal hiring.
  • With the help of an outsourced or fractional CFO, you have access to the deep financial insight and strategic direction necessary to take your business to the next level. Without retaining a full-time hire, you can still access the knowledge and support to set up the kind of processes and reporting that ensure better financial results, or the ongoing thought leadership to help improve cash flow, better understand profitability and guide key financial decisions.

It is important for companies to keep these options in mind as they work to maintain the financial health of their organization and adopt smart approaches to achieving business success.

Learn more about the CFO’s role, along with the other roles and responsibilities, in the finance stack by downloading our free infographic.

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