Are you torn between choosing a CFO or a controller for the increasing financial needs of your business? You sure must be aware of how important these leaders are for companies but if you’re unclear about how both these roles differ, the decision can make you feel overwhelmed.
Research by the American Institute of CPAs (AICPA) suggests that businesses aiming to excel in financial management benefit from combining human expertise with predictive analytics. This approach offers a winning formula for achieving superior business outcomes. Much of that human expertise will come into your company with experienced finance management professionals like CFOs and controllers, who can identify and correct weaknesses promptly and support you in making informed data-driven decisions and perfecting your financial strategy.
Now the question is, how is a CFO different from a controller? Read along to build a clear understanding and find which of the two can support your company’s needs.
Definition and scope of roles of a CFO and controller
The CFO simply acts as the strategic leader of your finance team who’s responsible for the overall financial health of your organization. This includes long-term financial planning, investor relations, and aligning financial strategies with business goals. The CFO collaborates with your board of directors, providing insights into financial performance and future projections, and simply sets the face of the company.
On the other hand, the financial controller focuses on the day-to-day accounting processes that keep your business running smoothly and act as the face of accounting. They ensure that your financial records are accurate and compliant with regulations set forth by organizations like the Financial Accounting Standards Board (FASB) and the Internal Revenue Service (IRS) and manage internal controls, oversee your accounting department, and prepare controller reports that inform the CFO’s broader financial plans.
While these were just the basics of it, let’s proceed to understand how the two are different.
4 key differences between CFOs and controllers
Here are some key differences between CFOs and controllers that you must understand to pick one or both for your business:
1. Strategic approach vs. tactical approach
When you hire a CFO for your business, that person will take a strategic approach to finance. Your CFO will set long-term financial goals for your company, analyze market trends, and forecast future performance. For example, if your company is looking to expand into a new market, the CFO will evaluate potential risks and rewards so you can allocate resources effectively.
On the other hand, the controller uses more of a tactical approach, focusing on daily accounting operations. They’ll ensure that the accounts payable processes of your business run efficiently and maintain accurate financial records. Research shows that the strong internal controls that your controllers will implement can reduce the risk of material misstatements in your business’s financial reporting significantly. It’s vital for protecting your company’s assets.
2. Accounting vs. finance
While both roles deal with financial data, they operate in different realms. The controller is primarily concerned with accounting processes such as maintaining ledgers and ensuring compliance with Generally Accepted Accounting Principles (GAAP). They’re the backbone of your accounting department, ensuring that all transactions are recorded accurately.
In contrast, the CFO operates within the broader scope of finance, making high-level decisions based on comprehensive analyses that affect overall business strategy. Various studies prove that integrating accounting data into strategic decision-making enhances transparency and accountability, critical elements for any business owner aiming for growth.
3. Internal controls vs. market patterns
The controller specializes in establishing internal controls that protect your company’s assets and ensure accurate reporting. They focus on operational efficiency within your finance department and handle day-to-day accounting tasks. The IRS highlights that effective internal controls not only safeguard assets but also enhance compliance with tax regulations, key to maintaining your company’s integrity.
Conversely, the CFO analyzes market patterns to identify growth opportunities or mitigate risks. By leveraging this information, they craft financial strategies aligned with your company’s vision. Research indicates that companies conducting proactive market analysis can adapt more swiftly to economic changes, providing a significant competitive advantage.
4. Management vs. forecasting
The controller’s role heavily emphasizes management, overseeing daily activities within the finance team and ensuring compliance with policies. They’re responsible for closing books on time and preparing accurate monthly reports reflecting your company’s financial status.
In contrast, the CFO focuses on forecasting, using historical data to predict future trends and prepare for potential market shifts. This forward-thinking approach is essential for developing robust financial strategies that guide your company toward sustainable growth. By investing in forecasting tools, businesses can enhance their decision-making processes significantly, something you should consider when evaluating your financial leadership.
Now that you know the key differences of each role, let’s explore what everyday duties look like in both positions.
Daily responsibilities and duties
Here’s what you can expect from each role in your business:
CFO duties
The Chief Financial Officers (CFOs) play a pivotal role in steering your company’s financial strategy. Their daily responsibilities include:
- Advising the CEO and board on financial matters.
- Attesting to the accuracy of financial reporting.
- Leading all financial operations through the controller and finance directors.
- Managing treasury activities, including investments and debt agreements.
- Planning for revenue growth.
- Contributing to discussions around corporate culture.
- Overseeing risk management, including insurance, fraud prevention, and cybersecurity.
- Leading hiring and training programs for finance department staff.
- Driving automation efforts within the finance department.
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Financial controller duties
The controller focuses on the operational side of finance, ensuring that day-to-day accounting processes run smoothly. Here’s what you can expect from their daily duties:
- Managing accounts payable and receivable functions.
- Approving invoices.
- Maintaining the chart of accounts.
- Coordinating external audits.
- Developing and monitoring internal controls and company policies.
- Ensuring compliance with legal, financial, and tax regulations.
- Handling internal financial reporting and analysis.
- Managing payroll processing.
- Supervising day-to-day activities of accounting staff.
- Acting as the primary user contact for accounting technology systems.
- Identifying cost-saving opportunities.
- Setting up bank accounts and supervising bank reconciliations.
- Ensuring external reporting meets GAAP standards.
With a clear understanding of their respective duties, let’s now assess whether your business needs a CFO or a controller.
Does your business need a CFO or controller?
As you assess your company’s needs, understanding when to hire a CFO versus a controller can significantly impact your operational efficiency.
When to hire a CFO?
You should consider hiring a CFO if:
- Strategic growth is your focus: If your business is at a stage where strategic planning is essential for growth, such as entering new markets or launching new products, a CFO can provide valuable insights and guidance.
- Complex financial needs: As your company grows, so do its financial complexities. A CFO can navigate issues like mergers, acquisitions, or significant capital investments, areas where their expertise can save you money in the long run.
- Regulatory compliance requirements increase: If your business is subject to more stringent regulations due to its size or industry, having a CFO ensures compliance with laws set by governing bodies like the IRS or PCAOB.
When to hire a controller?
You should consider hiring a controller if:
- Daily accounting operations need oversight: If managing day-to-day accounting processes has become overwhelming or prone to errors, bringing in a controller can ensure accuracy in financial reporting and compliance with accounting standards.
- Internal controls are lacking: If you notice discrepancies in financial records or if fraud risks are increasing, hiring a controller can help establish robust internal controls to protect your assets.
- Your business is growing but not yet complex enough for a CFO: If you’re experiencing growth but don’t yet require the strategic oversight of a CFO, a controller can manage your accounting department effectively until you’re ready for that next step.
- For smaller companies, hiring a full-time CFO or chief financial controller might not suit their budget in the budding phase of their business so they can hire them part-time or outsource them rather than simply having them in-house.
Wrapping-up
In short, both the CFO and controller play crucial roles in ensuring your company’s financial health. The CFO focuses on strategic planning and long-term growth while the controller manages day-to-day accounting operations. Understanding these distinctions will help you make informed decisions about hiring based on your business’s current needs.
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