Do You Need a Controller or a CFO?

difference between controller and cfo

Many people often think that the Chief Financial Officer (CFO) and controller are the same. However, these two roles have different expectations and responsibilities.

Financial controllers and financial executives tend to work with similar types of companies. However, smaller businesses often will only hire one of these roles. To determine if your company would benefit from a controller, CFO, or both, here are a few things to consider.

Let’s start by taking a look at exactly what the different roles entail with a brief, high-level overview.

A CFO’s role includes:

  • Predicting future scenarios and identifying risks
  • Finding areas where money can be saved
  • Sourcing the best investments for the company
  • Overseeing the company’s treasury responsibilities
  • Forecasting the company’s financial future

A controller’s role includes:

  • Implementing and supervising all accounting operations
  • Supervising payroll
  • Managing bank reconciliations and company budgets
  • Preparing financial reports

When is it Time to Hire a Controller?

It’s a good idea to bring a controller to your team if your company is expanding quickly. This rapid growth likely means you have reached the level where your business requires accounting records based on Generally Accepted Accounting Principles (GAAP).

Hiring a controller is usually necessary when your company has a revenue of $10 million and above. At this point, you need more advanced accounting strategies than basic bookkeeping. As your company continues to grow, it’s worth maintaining the controller function because he or she will be an invaluable asset for reporting to the CEO.

The complexity of your company may have increased due to expanded lines of business or from opening new locations. Despite the reason, your operations are likely to become more isolated, but a controller can prevent this from happening.

They will be able to generate data and interpret it so you have a clear understanding of how and why business changes have occurred over time. The controller can also help you make decisions on saving money and using capital.

When do you need a CFO?

There will come a time when you need better accounting records which are based on past actions and previous cash flow. At this point, you should consider hiring a CFO.

You will benefit from a CFO because they will be able to analyze past accounting reports and use this data to forecast future revenue and cash flow.

If you are in a transitory growth stage, such as mergers and acquisitions or managing debt covenants, a CFO can provide a deeper understanding of capital structure management and financial statements. They will also play a valuable role in liaising with banks and investors to make your company public.

When you are making the transition from a small or medium-sized business to a large organization, you need a financial professional who has the experience of a CFO. However, you may not have the budget to hire one full-time.

This situation is when a fractional CFO makes sense. Before hiring a part-time executive, make sure you complete your due diligence. As the demand for CFOs has become increasingly popular, it has created a market in which many people have entered without any authentic experience. This common scenario is possible as individuals do not need a degree or license to call themselves a CFO.

To avoid pitfalls such as these, we recommend hiring a fractional CFO from a reputable company – such as Signature Analytics. As a service provider, we only employ qualified and experienced CFOs and Controllers as well as other financial and accounting services.

What are the Benefits of Outsourcing Financial Experts?

It’s easy to see that there are numerous benefits to outsourcing a controller or CFO. These include:

  • Saving money: Hiring new staff members can be expensive, and your company budget may not have the room for a full-time controller or CFO. Regardless of your budget, your company still needs financial expertise. Hiring a fractional controller or CFO gives you much more flexibility with costs. You can hire a financial expert for as much time as required, without having to worry about paying a full-time salary or the additional costs of benefits and vacation time.
  • Reducing complexity: Don’t underestimate the complexity of in-house financial management as most CEOs are not financial experts. Furthermore, a business owner who tries to take on these financial tasks may simply be wasting time and money. You are much better off hiring a fractional CFO or Controller and spending your valuable time doing what you do best – such as growing your business. Outsourcing financial experts can reduce the complexity of your internal finances and giving you back the time you once spent worrying.
  • Accessing professional services: One of the benefits of outsourcing your financial services is that you can feel confident your candidate is qualified, professional, and experienced. Fractional CFOs, Controllers, and supporting staff have already been vetted, and their credentials have been checked. Meaning they can efficiently take care of your financial needs. Not only that, these financial experts keep their fingers on the pulse of the latest financial industry trends, so you are getting experts in the field.
  • Improving internal controls: By outsourcing, you will have professionals on your team who are equipped to improve internal controls by applying better practices. Doing this is important because if you have in-house financial procedures that are less than 100% effective, you are putting yourself at financial risks for costly errors and employee fraud. Outsourced professionals can look at a company with fresh eyes and train your existing employees to do their jobs effectively and efficiently.

What are the Qualities to Look for in a CFO?

If you’re going to outsource a CFO, here are some of the key qualities you should look for:

  • Strong communication skills: Your CFO needs to be able to communicate with people on all levels, from in-house employees to investors. This skill is essential so that they can supervise and negotiate as needed.
  • Flexibility and versatility: A top-notch CFO is always prepared to push for change that will boost company growth. This skill will prevent you from missing out on opportunities for expansion, growth, or change.
  • The ability to influence: A CFO must be both a team player and an enforcer to help everyone understand the implications of their decisions for the company. This skill will prevent any animosity or reluctance towards changes within the company.
  • Financial strategies: Your CFO must be an expert financial strategist who can create a vision for your company. Without the ability to strategize, your CFO will be unable to help you plan for the future of your business.
  • A good cultural fit: Even if you found the most proficient CFO in the world, but they do not match the company culture, they won’t work out. Like any employee, a CFO must be able to adopt the company culture to avoid clashes with other staff members.

What are the Qualities to Look for in a Controller?

If you’re going to outsource a controller, here are a few key qualities you should look for:

  • Industry experience: It may seem obvious, but it can be essential to find a controller who has experience within your specific industry. Reason being, is some verticals experience unique challenges. For example, if your company is in the healthcare industry, you will have to deal with particular accounting rules. If your controller does not have healthcare experience, they may not be aware of all these nuances.
  • Technical accounting: Your controller will be managing your accounting team. To do this adequately, they need a strong background in technical accounting and a firm grounding in GAAP.
  • Functional knowledge: Your controller has to be more than just a number cruncher. They must have expertise in all functions of finance. These include insurance policies, financial contracts, invoicing, as well as tax and auditing.
  • A passion for detail: A successful controller must have the ability to stay organized. They are responsible for keeping up-to-date with a lot of information and must be able to live and breathe the financial details of your company. Your controller must also be able to relay complex information to upper management in an easy-to-understand way.
  • An amenable personality: While it’s important to consider all of the technical skills don’t discount personality requirements. If your controller is unable to work with a team and get along with the rest of your staff, then likely they will not last long. Your controller has a lot of responsibility, and they must be able to collaborate with many departments throughout the company, including employees of all levels and upper management.

When it’s time to look for a quality controller or CFO, you don’t have to compromise your budget. You can have the benefit of this type of financial expertise by hiring outsourced staff. Doing so will save you time and money. You can also rest assured you will have authentic financial experts on your team that have access to a wider network of knowledge when necessary.

Contact Signature Analytics today to find out more about our fractional financial services. Our fractional CFOs and controllers are talented and experienced and can complement your existing accounting team or be your F&A team.