Often I get involved in the hiring of accounting staff for clients. This can be an accounting clerk, a specialized accountant (such as payroll or accounts payable), a full-charge bookkeeper, a degreed accountant or a Controller.
All of these positions I consider part of the accounting staff and are involved with the accounting records. These records are the basis for the financial statements of the business. Without timely and accurate financial statements, you’ve got nothing. This role is first and foremost for the accounting staff and the Chief Financial Officer.
The difference between a Controller and a CFO is that the Controller’s duties typically end at the financial statements. The CFO’s role is to ensure the integrity of those statements via a robust system of internal controls but that is only the beginning.
The CFO is the financial partner of the CEO. The CFO is involved in strategy and asking the hard questions. Questions such as, “Should we be in this business? Should we be doing it this way? Does this branch/store/subsidiary make sense within the context of our overall strategy?”
The other way I like to think about it is this: The Controller looks backwards. S/he has the responsibility for historical financial statements. The CFO looks forward. The CFO has the responsibly (with the CEO) for the future; for where the business is going.
Let’s look at the roles of the Controller and CFO on more of a task level.
Accounting Input
The Controller or their staff will be responsible for all the input of transactions and data into the accounting records. The CFO’s only involvement would be to ensure a good system of internal controls are in place to provide confidence that the output can be trusted.
Financial Statements
The Controller will typically be responsible to deliver the financial statements in a timely and accurate manner. The CFO will analyze those statements to gain insights that aid in running the business. This is where the CFO really comes into their own as the financial partner of the CEO. Further, strategy and planning will use the financial performance as a starting point.
Budgets
The Controller will usually be charged with budget preparation in a small business. But the CFO will lead the strategic direction and be thinking out much further into the future. Budgets are usually done in detail for the next twelve to eighteen months. High level budgets may extend out three to five years. The CFO’s time horizon may be twenty-five years. For a small business, the time horizon should be until the current owner/operator exits the business.
Risk Management
While the Controller may be involved in the annual insurance review the CFO’s perspective is much broader. The CFO worries about IT security, the security of the physical assets, the competitive situation and positioning the company for the next decade or two.
Where Do CFOs Come From?
Most CFOs came up through the accounting ranks and were once Controllers themselves. Many Controllers are what I would call ‘lifetime Controllers.’ But some make the leap from being an accountant to being a businessperson with an accounting and financial background. A Controller worries about how much the sales and marketing department costs. A CFO knows that nothing happens in a business until somebody sells something.
Controllers like to say ‘no’ to new things. CFOs tend to be agents of change, knowing that change is essential to a sustainable business.
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