businessBusiness Coachingbusiness growthconsultantFinanceProcess Improvementsmall-businessCFO vs. Financial Controller: Key Differences to Understand

February 8, 2022by mcdaccginc0
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Ignorance is bliss…

Until it runs you into the ground.

Chances are, whether you are a business owner, founder, entrepreneur, CEO, etc. (or just a human being for that matter) you prefer to spend your time on the more “fun” side of things. 

We all do.

However, this is no excuse to have anything less than a complete understanding of your company’s financial position. Numbers are an important part of any business, and if you are growing or looking to grow, you will find that you need the dedicated support and guidance of a financial professional. 

“Do I need a CFO or a financial Controller?”

Chief financial officers (CFOs) and financial controllers have a lot in common — and some significant differences, too. While many budding companies tend to lean towards on role over the other, understanding the two roles will help you determine the best direction for your company. 

What is A Controller?

A financial controller is a company’s lead accountant. The controller is responsible for maintaining clean books and records while managing the daily activities of the accounting department.

Typically, the controller has a sharp acumen for numbers and formal training in accounting. The controller reports to either a CFO or CEO and supervises staff accountants and bookkeepers.

Financial controller Responsibilities

From the highest level, financial controllers are senior accounting experts who have ownership of the financial close process, producing financial statements and reports to guide decision-making. Responsibilities include:

  • Manage AP and AR functions
  • Approve invoices.
  • Maintain chart of accounts.
  • Manage external audits.
  • Develop and monitor internal controls and company policies.
  • Debt management and collection.
  • Compliance with legal, financial and tax regulation.
  • Internal financial reporting/analysis
  • Processing payroll
  • Managing accounting personnel
  • Primary user contact for accounting technology systems
  • Set up bank accounts.
  • Supervise bank reconciliations.
  • External reporting, including tax and GAAP financial statements
What Is a CFO?

A CFO is the top financial executive in a firm and is therefore responsible for its overall financial strategy. A CFO’s knowledge covers overall market conditions, competitive analysis in some cases and the company’s equity structure. The CFO leads all financial areas, including the historical accounting processes managed by the financial controller, if there is one, and prospective financial activities, such as budgeting, forecasting, cash flow, mergers and investments.

Because CFOs are the only other corporate executive with a companywide focus, they are primary advisers to their CEOs.

That broad view of the business means only a small fraction of CFOs are focused solely on dollars and cents. The vast majority juggle responsibilities beyond finance and accounting, such as identifying strategic partnerships, evaluating technology and representing the company in public forums.

CFO Responsibilities

The CFO role has broadened significantly beyond its core responsibilities to also encompass corporate portfolio management and capital structure. Responsibilities include:

  • Advise the CEO, board of directors and executive team on all financial and operational matters
  • Attest to all financial reporting
  • Lead all financial operations, usually through the controller and finance directors
  • Manage treasury activities
  • Plan revenue growth
  • Contribute to the conversation around corporate culture
  • Change management to capture efficiencies and incremental revenue
  • Oversee risk management, including insurance, fraud and cybersecurity
  • Lead hiring and training programs for finance department staff
  • Automation and other technology efforts
  • Drive scenario-planning
  • Represent the company in external financial matters
Key Differences Between a Controller and a CFO

Controllers and CFOs have similar but different skill sets that pertain to their individual roles.

Here are some key differences between a controller and a CFO.

Accounting vs. overall finance: Controllers are experts in all things accounting – staying current on Generally Accepted Accounting Principles (GAAP) and tax rules. Controllers are almost always CPAs or hold similar professional licenses, whereas CFOs operate in the broader discipline of finance, such as financial planning, capital markets and investing. While CFOs need to understand accounting, they don’t necessarily need to be CPAs, they come from a variety of backgrounds, from investment banking to managing a line of business.

Calculated vs. innovative: Controllers are tactical operators, adhering to procedures and deadlines and focused on complete accuracy. Their duties generally involve running weekly payroll or the monthly accounting close process. CFOs have a longer line of sight, working on strategies that are based on the company’s direction. They advise CEOs and other executives on how to keep the company economically healthy and how growth might happen in the short, medium and long terms.

Historical vs. forward thinking: Controllers spend most of their time following an orderly routine – working to keep ledgers accurate and accounting systems working smoothly while analyzing variances and balancing debits and credits. The focus is mostly on historical data and ensuring results are accurately reflected. It’s an essential role, guaranteeing that data and reporting remain accurate for decision-makers.

In contrast, CFOs utilize a forward-thinking approach: scanning markets, economic forecasts and the competitive landscape for opportunities and threats. They also identify areas of inefficiency, make recommendations and develop action plans. In addition, CFOs generate forecasts and run scenario analyses, so the company can be predictive and proactive for the future.

Internal controls vs. external trends: Controllers are responsible for developing, distributing and monitoring the internal controls that protect a company’s assets while preventing (and detecting) errors and fraud. On the other hand, CFOs must attest to the adequacy of those internal controls so that they can spend more of their time looking externally; CFOs investigate partnerships, investment opportunities and acquisitions.

Direct tone vs. large scale tone: The controller and CFO are both responsible for managing financial personnel. The controller has direct responsibility for the accounting team and, in turn, reports to the CFO, who directly or indirectly manages the rest of the financial staff. The CFO sets the tone for the entire financial team and shapes its culture. The controller translates that vision into day-to-day management of direct reports.

Face of accounting vs. face of the company: Controllers are the face of the accounting function to all the other department managers in the company. They collaborate within the company to educate and enforce accounting policies. The CFO is the face of the company to outside parties. Examples of a CFO’s tasks include leading quarterly earnings conference calls and liaising with banks or large suppliers.

Final Thoughts

Now that you know the key differences between a company CFO and financial Controller, their general responsibilities and particular set of skills, the next step is to identify the financial gaps you need to address in your company. This should come as no surprise, but the cost of paying a full-time chief financial officer and accounting staff can weigh you down.

Here at MCDA CCG, Inc., we provide a range of consultants, accountants, and financial professionals who will ensure your needs are met at a competitive price.

Whatever your current needs. your organization should not have to pay the rate of a fractional CFO or Controller for time spent on less important tasks. Our unique outsourcing structure provides access to an entire team with financial consultants at flexible costs.

Give our office (headquartered in Placentia, Orange County, California) a call today for a free, no obligation discussion to learn more about how our services can meet your needs.

 

 

 

Other Resources you may like…

7 Benefits of Outsourcing Your Business Financial Functions

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8 Common Business Bookkeeping and Accounting Weaknesses

6 Financial Tips for Clean Business Books All Year

How A Year-Round CPA Can Help Your Business Beyond Tax Filing

Is Your Business Outgrowing Your Accounting Software? 7 Telltale Signs

 

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