Do You Need a Controller or a CFO?


Controller Vs. Chief Financial Officer

Just like a company’s financial strategies evolve at every stage of growth, its requirements for financial oversight and controls evolve as well. We’ve already touched on what you can expect from a bookkeeper vs. an accountant and an accountant vs. a controller, so today we’re looking at what you can expect from a controller vs. a chief financial officer (CFO).

The Evolution of a Company

Before we really pick apart the role of a controller and the role of a CFO, I find it helpful to walk through the evolution of a typical company as it can shed light on how and when a controller or CFO would enter the picture and why the lines between the roles within a smaller company can often become blurred.

A Boulder Tech Company Example

Imagine you start a tech company in Boulder – a great place to do so – and because your company is small, a micro-business really, you manage your accounting on your own. Soon you start generating consistent revenue so you hire a contract bookkeeper from Craigslist. But very quickly your little tech startup grows even more and the volume of work required to support your company outstrips your contract bookkeeper. Further still, you’re considering an investor pitch and need access to cleaner and more accurate accounting that your bookkeeper can’t provide or keep up with.

So you commit to hiring a contract accountant in Boulder through Upwork or Craigslist again to improve the quality of your financial records and ensure your reporting is more accurate. This accountant fulfills your financial needs for a period of time, but your company is growing (and growing) and the quality of accounting work your contractor claimed they could provide is still not on par with your expectations and the financial control is definitely not where it should be. Your business is becoming more and more complex and the demands on your contract accountant are similarly becoming more sophisticated (too sophisticated for their level of accounting expertise). 

You realize your hastily hired contract accountant can no longer meet your financial requirements (and expectations) and you know you need to hire someone else, but who do you hire? A controller? A CFO? Someone else? 

It’s All a Balancing Act

As a young, growing business you still have to balance your financial resources with the growing demands of your business, but hiring for two high salary financial roles is simply too expensive (learn the real cost of hiring an in-house CFO). Ultimately, a blend of the controller and CFO role is what you need – a controller that can do some financial analysis or maybe a CFO that can also oversee accounting functions.

From $0 to generating $1M to $2M in revenue and beyond, this is a typical evolution of a young company and a big reason why clients often ask us, “Do I need a controller or a CFO?”

When you look at a big company (think Google for reference) the technicality of the role of a controller versus a CFO is very clear, it is HUGELY different. But when you look at the role of a CFO or a controller in a small / younger company ($1M -$5M in revenue), the lines can become very blurry especially when the budget for hiring executives is limited.

To answer the question of need, let’s first begin by revisiting what it means to be a controller and then by elaborating on the CFO role.

Revisiting the Role of a Controller

A controller fully owns the accounting functions of a business. They not only have a great background in accounting but also have financial and operational expertise. They use this expertise to influence the financial strategy of a company and keep its financial data in tip-top shape.

A CFO Has a Hand in Every Financial Function

The CFO has a much larger role in an organization than a controller. While the controller is the head of accounting, the CFO is the head of (and responsible for) all financial operations including future investments. To keep up with this role they have to be aware of all business operations in a company, understand the interrelation of the financial systems, and not only be able to identify financial risk but also mitigate and minimize it. 

Where the Difference Lies

A controller is still an accountant (at heart), meaning they have the educational background and still do perform some Pexels-pixabay-164686accounting functions like helping a bookkeeper identify the root cause of inaccurate numbers, supporting the CPA during tax season, or coordinating a financial audit. 

They will support a company by preventing errors and fraud and implementing internal controls to prevent these types of situations in the first place. They will make sure your books are in perfect order so you have accurate numbers to make great decisions.

TOP TIP: Think of a controller as rooted in the past, managing financial data that has already occurred, so the business owners and founders have clear visibility into their numbers.

Chief in Charge

A CFO is the senior executive responsible for managing the financial actions of a company including Pexels-pixabay-259091the entire operation’s finances as well as oversight of the accounting department. The CFO’s duties include tracking cash flow and financial planning such as managing pricing decisions or proposing corrective actions to fortify against any financial weaknesses.

A CFO also plays a major role in stakeholder – board, bank, investor – interactions by building and explaining the financial story of the organization. Similarly, they will support fundraising and pitch initiatives by describing the financial needs of the company and making a case for their funding initiatives as well as negotiating and closing those deals

TOP TIP: Think of a CFO as rooted in the future, managing and thinking through financial information, risks, and events that have yet to occur, so business executives can build strategy and financial forecasts.

Do You Need a Controller or a CFO?

As we mentioned, there are clear distinctions between a controller and a CFO in a much larger company, like Ball Aerospace, but this can be less clear for earlier stage companies. If you’re a younger, startup-like company that is trying to decide if they need a controller or a CFO, it really depends on which of the following two objectives you’re trying to accomplish:

  1. Do you have a stronger desire for clean financials, sound financial controls and to be audit-ready? OR
  2. Do you want financial analysis and guidance on forward-thinking strategy?

If number one is your major objective, then a controller can help you manage your accounting team, pull together and translate financial books and records, essentially organizing / collecting data from the past, producing financial reporting, and ensuring tight financial control together with solid audit preparedness.

If number two is your greater objective, then a CFO is going to help you accomplish this because they’re looking forward and asking ‘how is X going to impact us in the future?’ or ‘how are these accounting trends pointing us toward corrective actions that need to be taken?’

A CFO will get more involved in company investments (deal flow) and will act more as a right-hand person to the CEO helping them to make decisions (rather than understanding the past as a controller would do).

The Jack Conundrum

Now you may be thinking, “BUT I want both – can’t I find one person that can do both?” The answer is yes, technically you can find someone to do both. However, in practice, when you try to find a finance professional who can do many things you ultimately get someone that can’t do anything with sincere expertise. It is the old ‘jack of all trades master of none’ adage.

Also, when your company grows further still you are going to be looking for a master of accounting AND a master of finance, and will be left with an even greater task of finding a new home for ‘Jack.’

We have seen instances where hiring ‘Jack’ can also create further difficulties down the road if your newly hired controller or CFO is unhappy with how ‘Jack’ has been operating. So I ask you to be wary of hiring someone to do too much, because at the end of the day if the role is blurred, the performance expectations will be blurry too.

Given the roles a controller and a CFO play, I imagine you can now see how in a younger company, where salary expenditures are limited, the lines between the two roles’ financial responsibilities become blurred. So identifying your overarching financial objectives can help you choose a financial professional with the best experience for your company goals.

But Wait! There is a Third Option

You don’t have to answer to your salary spending limits! Because it sounds like what you truly need is a team of people that can wear multiple hats for your company without breaking the bank. Helping you manage your accounting team one day and helping you build a forward-thinking financial strategy the very next.

At Simple Startup, we don’t make you choose between a controller and a CFO, our service offering allows you to access a team of people who can deliver on an array of fractional finance services at one affordable rate. Simple Startup provides the best of both worlds (you really can have it all!).

Simply give us a call and we’ll help you determine the fractional finance package that’s the best fit for your company whether you’re a Boulder tech company or an Ohio granola bar business (OR anything in between), we’re ready to help you simplify your finances, truly understand your numbers and make smart, informed business decisions.

About Teri Scott, CPA

Teri was born and raised in Tulsa, Oklahoma. She received her BS in Business Administration with emphasis in Finance at Oklahoma State University (Go Pokes!). Teri landed her first accounting role after a short stint in the banking industry. She spent over a decade with that same company gaining knowledge and experience to work her way up through the ranks to become the Director of Accounting & Finance and working closely with the CFO. She earned her CPA in 2018, recently earned her QuickBooks Online certification, and has 15 years of experience in all levels of accounting including consolidation and multi-currency transactions. Outside the office, Teri still lives in Oklahoma with her husband, 3 kids, and 2 dogs.

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