As a company scales, it faces increasingly complex financial challenges that necessitate hiring experts to manage specific financial tasks efficiently. This growing demand for skilled financial professionals is highlighted by the Bureau of Labor Statistics, which projects a 7% increase in employment for financial managers, a category that includes controllers and CFOs, from 2022 to 2032. As organizations expand, the scope of these tasks often requires the establishment of dedicated departments.
Consider the roles of controllers and CFOs within a medium to large company’s finance team. Although their titles may sometimes be used interchangeably, and they share certain skills, their primary responsibilities differ significantly.
So, how do you decide if your business needs a CFO or a controller? Let’s talk about that.
Who is a CFO?
A Chief Financial Officer (CFO) is the top financial leader in a company. Their job is to oversee a team of accountants and financial analysts. They handle important tasks such as forecasting, planning, and analysis.
Usually, the controller and their Financial Planning & Analysis (FP&A) team work under and report to the CFO.
A CFO has many important roles, but three main responsibilities significantly affect the company:
- Reporting – The CFO and the FP&A team are in charge of creating all the financial reports the company needs to share with shareholders, lenders, employees, and regulatory agencies. This includes making sure that the profit and loss statements, cash flow statements, and balance sheets are accurate and completed on time.
- Cashflow – The CFO makes sure the company has enough money available to pay its bills. They often supervise a smaller team focused on:
- Paying bills (accounts payable)
- Collecting payments owed to the company (accounts receivable)
- Managing stock (inventory)
- Handling debts
- Managing investments
- Financial strategy and forecasting – One of the CFO’s main goals is to help the company get the highest possible returns on its assets and capital. The FP&A team supports the CFO by forecasting future financial scenarios, which the CFO uses to make strategic business decisions.
In the company’s leadership structure, the CFO typically reports to the CEO and the board of directors and acts as the main financial spokesperson.
What Is a Controller?
A controller, or financial controller, is a high-ranking executive who oversees a company’s accounting tasks. Their main job is to make sure that payments are made and received on time and in a legal manner. If there is a CFO in the company, the controller usually reports to them.
Originally, a controller mainly handled the company’s financial records and accounting. However, the role has grown, and now controllers have more important responsibilities.
A controller might be responsible for a range of tasks aimed at overseeing the company’s finances, including:
- Managing internal controls
- Ensuring the company follows laws and regulations through internal audits
- Analyzing past and current financial data of the company
- Helping to prepare the company’s budget
Although the roles of a controller and a CFO can overlap, the controller’s main duty is to make sure that the company’s financial reporting and accounting are correct and reliable.
Controller vs CFO: 3 Key Differences
CFOs and controllers both play crucial roles in managing a company’s finances, each bringing specialized skills to finance-related tasks. The difference between controller and CFO lies in their primary responsibilities. Controllers focus on maintaining accurate records and managing the company’s books, whereas CFOs leverage this information to make strategic decisions about the company’s future direction.
Qualifications And Skills
The educational background and skill sets required for CFOs and controllers differ significantly, reflecting their unique roles within the company.
Controller:
- Controllers typically hold a bachelor’s degree in accounting, economics, finance, or statistics.
- They often pursue further qualifications, like an MBA or a Master of Accountancy (MAcc).
- Most controllers also pass the CPA exam to become certified public accountants.
- They need strong mathematical and problem-solving skills, attention to detail, and the ability to organize data effectively.
- Good communication skills and leadership abilities are important, as they often start as entry-level accountants and work their way up to the controller position.
CFO:
- CFOs usually have a bachelor’s degree in finance, economics, business administration, or accounting.
- It’s common for CFOs to also earn an MBA, frequently focusing on finance.
- They need to be capable of making tough decisions and should possess strong leadership and decision-making skills.
- A CFO must see the bigger picture and understand the future impacts of decisions.
- Skills in financial analysis and risk management are crucial, along with excellent communication and managerial abilities.
Decision-Making Authority
The level of decision-making authority varies between CFOs and controllers, influencing the scope and impact of their roles within the company.
Controller:
- Controllers lead teams of accountants and have authority over these teams.
- They decide how to prepare and safeguard reports and sensitive data.
- However, their decision-making authority is limited to ensuring accurate and detailed data management, which aids others in making strategic decisions.
CFO:
- CFOs have significant decision-making power.
- They develop strategies for growth and create plans to engage more investors and shareholders.
- CFOs use the data provided by controllers to make informed strategic choices about the company’s direction.
Reporting Structure
The reporting structure for CFOs and controllers outlines their roles and responsibilities within the company’s hierarchy, impacting how they communicate and collaborate with other executives.
Controller:
- In many organizations, the controller reports directly to the CFO.
- They provide the necessary data and accounting reports that the CFO uses to formulate insights and strategic decisions.
CFO:
- CFOs typically report directly to the CEO of the company.
- They work closely with the CEO, crafting financial analyses and strategies that are crucial for the company’s future direction.
Controller vs CFO: When To Choose
Choosing between a CFO and a controller can be challenging. It depends on the specific needs of your company, how quickly it is growing, and the expertise of your existing staff. A new startup typically has different requirements than a larger, established company.
1. Startup And Early Growth Phase
In the startup and early growth phases, a company’s finances can become complex due to rapid expansion and new investments, making the financial records complicated. This stage exceeds the capabilities of just having an accountant, necessitating the need for a more dedicated financial overseer.
Controller:
- The startup and early growth phases are ideal times to hire a controller.
- A controller helps manage complicated finances, often brought on by rapid expansion and new investment.
- They implement an effective accounting system and establish record-keeping procedures.
- Controllers also handle regulatory requirements and prepare for audits.
- They assess the company’s financial status, ensuring budgets are realistic and aligned with projected income to maintain the course for desired growth.
CFO:
- Typically, the need for a CFO’s strategic input is not as critical in the initial phases of startup growth.
2. Mature And Scaling Phase
As your startup matures and begins to scale, the need for strategic financial leadership becomes critical for handling more complex funding and investment strategies.
Controller:
- At this stage, a controller remains vital for managing daily financial tasks.
- However, controllers may lack the necessary experience to develop a financial growth strategy that the company needs during this phase.
CFO:
- This is when hiring a CFO becomes crucial.
- A CFO has the expertise to make cash flow projections and perform predictive analytics, which is vital for planning the upcoming years.
- They provide direction and leadership in financial matters, helping the company meet its targets and achieve the desired growth.
- CFOs create financial strategies and plans to attract more investors and shareholders, guiding the company through more complex financial landscapes.
Who is a Fractional CFO?
When you ask what is a fractional CFO or who is a fractional CFO, then here’s a simple answer. A fractional CFO is a financial leader who works part-time or on specific projects to help a company with its financial strategy and needs. This type of CFO brings a wide range of financial and business knowledge. They are tasked with creating financial plans, analyzing financial data, and providing advice on financial issues.
Fractional CFO Services
To better understand what does a fractional CFO do and how they enhance your business, consider the specific services they offer. The insights below will highlight how these services can directly contribute to the financial health and strategic direction of your company.
- Financial Operations Oversight: Primarily manages the overall financial operations of the company, which includes crucial aspects like cash flow management and financial planning.
- Strengths and Weaknesses Analysis: Identifies areas where the company’s financials are strong and where they need improvement to aid in strategic planning.
- Strategic Decision Making: Utilizes data from financial statements to make informed strategic decisions, helping guide the company’s growth and future direction.
What is a Fractional Controller?
A fractional controller is a financial expert who handles the everyday financial tasks of a company. This professional is in charge of preparing financial statements, managing budgets, and making sure the company follows financial rules and regulations.
Fractional Controller Services
To see how a fractional controller can strengthen your business, let’s look at the key services they offer. Each of these services plays a vital role in enhancing your company’s financial management and compliance, helping to ensure your business remains financially healthy.
- Head of Accounting: Oversees the accounting department, ensuring the preparation of essential financial reports such as balance sheets and income statements.
- Financial Reporting: Responsible for the accuracy and timely creation of all financial reports.
- Compliance Audits: Conducts audits to ensure compliance with financial regulations, maintaining the integrity of financial data.
- Internal Controls Management: Manages and oversees internal controls to safeguard the company’s financial operations.
- Budgeting Support: Assists in the budgeting process, helping to plan and allocate resources effectively.
- Financial Data Analysis: Analyzes financial data to provide critical insights that support business decisions.
- Technology Oversight: Charged with evaluating and selecting technological solutions for the finance department to improve efficiency and effectiveness.
Difference Between Fractional CFO and Controller
Now that we have a basic understanding of each role, let’s look at some key differences between a fractional CFO and a fractional controller:
Scope of Responsibility
The range of duties varies significantly between these two roles.
- Fractional CFO: A fractional CFO is in charge of developing long-term financial strategies and providing advice on financial matters. They are responsible for the broader financial planning and strategic direction of the organization.
- Controller: A fractional controller focuses on the daily financial management of the organization. Their role is centered on ensuring that regular financial activities are conducted efficiently and accurately.
Level of Expertise
The depth and type of expertise required for each role are distinct based on their responsibilities.
- Fractional CFO: Fractional CFOs generally have a deeper level of expertise because of their broader responsibilities. They often have a background in finance, accounting, or business, and may possess additional qualifications like a CPA or MBA.
- Controller: Controllers also have strong expertise in finance or accounting but are typically more focused on managing day-to-day financial operations rather than formulating high-level financial strategies.
Cost of Hiring
The cost of hiring each type of financial professional correlates with their level of expertise and the scope of their responsibilities.
- Fractional CFO: Due to their higher level of expertise and a broader scope of responsibilities, fractional CFOs tend to be more expensive than fractional controllers.
- Controller: Fractional controllers are usually less costly compared to fractional CFOs, reflecting their more focused and operational role in financial management.
So, how do you determine which one is right for your organization? Here are a few factors to consider:
- Size of Your Organization: If your business is small to medium-sized, a fractional controller might be the right choice. Controllers manage the daily financial operations, which allows you to concentrate on other business areas. However, if your company is larger and has more complex financial requirements, you might need a fractional CFO instead.
Stage of Your Business: For startups or businesses in the early stages, a fractional CFO can be very beneficial. A CFO helps develop financial strategies and plans that support your business’s long-term growth. On the other hand, if your business is more established, a fractional controller might be better suited to handle your everyday financial management.
Financial Needs: Think about your current financial needs and goals. If you need assistance with developing financial strategies and plans, or if you are dealing with complex financial challenges that require advanced financial expertise, a fractional CFO could be a better option. If your needs are more focused on routine financial management, then a fractional controller might be what you need.
Who is the comptroller and what do they do?
Comptrollers manage the governmental and nonprofit sectors’ financial operations. Sometimes the terms “controller” and “comptroller” are used interchangeably because of how much their responsibilities overlap.
In situations where their responsibilities diverge, a comptroller is in charge of both strategic and daily operations.
Together with a controller’s responsibilities, a comptroller may also:
- Create financial forecasts and models.
- Keep an eye on investments
- Control both outside and internal auditors
- Put cost-cutting measures into practice.
Let’s compare Comptrollers with the controller and CFOs to understand it in a better way.
What is the difference between a comptroller and a controller?
Comptrollers and controllers are both senior-level professionals. Their training, background, and accreditations are comparable to those of a controller.
The main difference between the two positions is pay.
The controller earns from the lowest $75,085 to the highest $162,814, even though comptrollers frequently have greater responsibilities than their counterparts. Since they work in the nonprofit or government sectors, they earn from the lowest $55,614 to the highest $130,810
However, those differences may not be readily apparent to everyone. This is largely due to the number of similarities between roles, and many businesses uses the two words interchangeably.
Differences include:
- Comptrollers work for government agencies or nonprofits, while controllers are typically employed in the for-profit sector.
- Controllers are under the direction of a corporate board, and comptrollers are answerable to taxpayers or nonprofit boards.
- Comptrollers make less money than controllers do.
What is the difference between a comptroller and a CFO?
The difference in these roles depends on the organization and sector. Sometimes a comptroller is equivalent to a controller, and other times a CFO. However, comptrollers are usually in the nonprofit sector and will report to the CFO in organizations with both professionals present.
End Note!
Technology is crucial for both financial controllers and CFOs today. The old days of manual accounting in leather-bound ledgers are over. Now, advanced financial management systems handle tasks like billing, accounting, and compliance automatically. These systems offer real-time insights and streamline processes throughout the financial department, making them essential for competitive businesses.
Many businesses delay hiring a CFO or controller, often to their disadvantage. Historically, this delay made sense because the cost of a full-time senior executive could be too high, especially for early-stage companies.
At Focus CPA Firm, we’ve changed that. We offer outsourced CFO services, virtual CFO services, controller services, and accounting services. No matter what stage your business is in, we can provide a seasoned CFO or controller that fits your unique needs. Other than these services we also have incorporation services, family office services, bookkeeping services, and QuickBooks accounting services.
