Knowing the difference between a financial controller and a CFO is critical to the size of your business.
However, properly managing the growth of your business requires you to shift how you operate your business in tandem. When you first start a company, you can get away with managing certain business functions in-house or with a small team. But as your company scales, you’ll need to bring in experts on board so you can focus on the core business functions that actually bring in the money.
That’s where financial controllers and CFOs come in—when you need to take steps to improve your financial department and make more informed business decisions.
A financial controller works as the lead accounting executive of a business. They're a senior-level manager responsible for the accounting function and record-keeping of an organization.
Put simply, a controller is essentially a company’s lead accountant. They oversee a company’s day-to-day financial operations and are often tasked with ensuring accuracy and also improving efficiency in the accounting department.
A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company. Their full-time job is to analyze the financial strengths and weaknesses of your company and propose corrective actions.
In smaller companies, the CFO role can seem similar to the controller because they’re responsible for the financial management and accounting divisions. However, the responsibilities of the CFO don’t stop at ensuring accurate reporting as they often extend to capital raising and finance strategy.
An easy way to distinguish between the two roles is to remember that: A financial controller looks at the history of business operations, while a CFO is concerned with the future of the business.
While a controller is usually more focused on ensuring accurate financial reporting, the CFO works as a financial planner. More specifically, the controller plays a tactical role, but the CFO role is more strategic.
In the tactical position, controllers are responsible for compliance and reporting. They also monitor internal controls, manage taxes, handle audits and assist with budgeting. To a certain degree, controllers develop the data that guides CFOs in strategic decision-making.
Like the controllers, CFOs can handle everything relating to cash flow, financial planning, and taxation issues. That said, a CFO brings skills and experiences that cross multiple finance disciplines, from budgeting and forecasting to business formation and capital formation.
As such, they have significant input in the company's investments and capital structure. They develop and implement scalable financial processes and solutions to support a company’s growth and work closely with the CEO and COO to develop financially viable growth strategies.
In some smaller companies, there may be some overlap between controller and CFO duties. But the CFO services require a more advanced skillset.
The role of the financial controller varies with the size of the business. In small companies, controllers handle the accounting tasks that lie beyond the skills of the average bookkeeper.
Often, small business owners believe that they can bypass the need for a controller. However, if the bookkeeping tasks are becoming too complex, a controller can oversee the accounting and bookkeeping functions and take on other tasks like auditing, financial reporting, and payroll management.
In midsize enterprises, a controller’s duties are likely to include project management and regulatory and compliance functions. However, the primary difference is that a CFO will analyze your financials from the context of your business goals.
A small company might be able to combine the controller and CFO into one. The separation of duties begins when a company starts contemplating complex financial market transactions like mergers and acquisitions. In small-to-medium enterprises, the CFO interprets financial data, handles capital acquisition, and implements cost control measures. They can also be the only financial figure.
Whether a company needs a CFO depends on several factors, not just the amount of revenue it brings in. A company generating $10 million in revenue might be ready for a CFO, while one generating $20 million may not be. It's best to bring in a CFO when a company is experiencing rapid growth, acquiring more employees, or undergoing a change of operations, such as in a merger or acquisition.
CFO and controller salaries vary depending on experience, the size and location of the company as well as the complexity of operations.
According to Salary.com, the median base salary for a CFO in the United States is $362,030, with a median total compensation package of $506,386. For controllers, the median compensation package is $80,296, and the complete range of salaries varies from $50,500 to $133,400.
Because the salary of a CFO greatly exceeds that of a controller, it's important to assess whether your company needs a CFO. Additionally, if you want the benefits of a CFO without the price point, a fractional CFO can streamline your financial functions and provide the financial insights needed to make informed business decisions.
A fractional CFO works with your frontline team to strategize the future of your company, better manage growth, and when implementing changes such as management reorganizations. They provide all the expertise and benefits of a CFO with the added advantage of flexibility and favorable costs.
Accounting varies by industry. Considerable complexity can arise from the intricacy of commercial transactions and the size of a business. However, a controller’s daily tasks often encompass:
CFOs and controllers can begin their careers as accountants. However, this is generally where the similarities end. There’s no regulatory directive that says controllers and CFOs need to be certified public accountants, but gaining CPA certification can provide the accounting acumen required to succeed in these positions.
When seeking to hire a controller, look for candidates with auditing, cost control, or accounting backgrounds and a degree in accounting or a related field. Ideally, they should also have at least five to ten years of experience, and their portfolios should show a progression in their responsibilities. Look for strong math skills and certifications in industry-specific accounting standards.
The role of Chief Financial Officer requires extensive experience. Look for a similar background as a controller but with an added Master's degree in Accounting, Finance, or Business. When it comes to experience, a minimum of 8, preferably 10, years of experience in a senior role will ensure they have the analytical skills to guide the financial functions of your company.
Controllers do not often make good CFOs. They work at a detailed level, understanding every nuance of the accounting process. For this reason, they may not have the innovative thinking required to succeed in the CFO role.
Most startups and small businesses start the process of reinforcing their financial functions by hiring a controller. The full-time controller manages complex accounting processes, supervises your bookkeeping team, and helps when implementing controls to prevent errors, fraud, and security breaches.
That said, you’ll need either a part-time or full-time CFO when your company starts experiencing rapid growth. In this case, your accurate numbers won't cut it – you'll need someone who can see and interpret the story behind those numbers. Opt for a CFO when you’re in need of financial strategy and direction guidance.
But rather than hiring either a CFO or controller, you can take the fractional approach and experience all the benefits both roles have to offer. If you’re interested, schedule a consultation with us!