CFO or Controller? Which is Right for your Business?
As a company scales, its affairs become more complicated. At a certain point, onboarding specialists to properly manage specific business tasks is a necessity. And with continued growth, entire departments need to be built around these distinct components.
For instance, controllers and CFOs both play integral roles in a medium- to large-sized company’s financial management team. Although they may be used interchangeably and have some skill and job crossover, they’re different positions.
But how do you know whether a CFO or controller is right for your business? Let’s discuss.
What Is a CFO
A Chief Financial Officer (CFO) is the financial general of the company. It’s their job to manage and monitor a department of accountants and financial analysts. In that capacity, they oversee mission-critical tasks like forecasting, planning, and analysis.
Typically, the controller and their FP&A team work with and report to the CFO.
While a CFO is tasked with many responsibilities, there are three primary duties that have the most significant impact on an organization:
- Reporting – The CFO and the FP&A team prepare all of the company’s financial reports that are required to be shared with shareholders, lenders, employees, and regulatory bodies. This includes ensuring that the P&L, cash flow, and balance sheets are accurate and finished on time.
- Cashflow – A CFO is responsible for ensuring that the business is liquid and able to meet its financial obligations. They often oversee a smaller treasury group that handles:
- Financial strategy and forecasting – One of a CFO’s chief concerns involves helping the business earn the highest possible return on assets and capital. The FP&A team helps the CFO forecast and then leverage the analytics to make business decisions.
Within the business’ hierarchy, a CFO will usually report to the CEO and the board of directors while acting as the primary financial spokesman.
What Is a Controller?
A controller, also known as a financial controller, is a senior-level exec responsible for managing a company’s accounting activities. It is their job to ensure that money is being paid and received promptly and legally. If the company has a CFO, the controller typically reports to them.
Historically, a controller’s main focus was managing the company’s financial records and accounting. But the role has evolved, and now they play an even more critical role. According to Deloitte:
“Every controllership role has a mix of strategy and traditional responsibilities. But the challenge is maintaining a balance, especially when circumstances tip the scales to favor traditional tasks.”
A modern controller may be charged with an array of financial oversight tasks, including:
- Managing internal controls
- Ensuring compliance by conducting internal audits
- Analyzing the company’s historical and present financial data
- Assisting with the budgeting process
While there can be some grey area between a controller and CFO, a controller’s primary role is to ensure that the company’s financial reporting and accounting are accurate.
What Are the Primary Differences Between CFOs and Controllers?
When it comes to hiring, there are notable similarities and differences between the two jobs. But there are three primary areas where the roles diverge, including:
- Hierarchy – A CFO is above a controller on the company’s pecking order. As a result, a CFO typically commands a higher salary in exchange for greater responsibilities. They handle the entire company’s financial direction, whereas the controller manages the accounting department.
- Job scope – A CFO is the company’s primary financial strategist. They use the business’ financial statements to make business decisions, strategic investments, and mitigate risk. A controller handles the financial accounting—both the major and minor details—while streamlining and optimizing internal accounting processes.
- Daily tasks – A CFO manages overall business strategy, reporting, and day-to-day operations. A Controller operates beneath a CFO, managing reporting and day-to-day bookkeeping.
When Should You Hire a CFO?
Generally, your company should be making—at a minimum—$1 million in annual revenue before bringing in a part-time CFO. According to a Lancor study, companies typically hire a CFO for the first time when they reach:
- 100 employees
- Annual revenue of $25m
- A revenue growth rate of 111%
A company will hire a CFO when it needs financial guidance that goes beyond accurate accounting and reporting. Often, a business reaches a critical juncture in its growth cycle where having a senior finance leader can help make and then execute key strategic decisions.
Some reasons you might want to hire a CFO include:
- Management of the finance team
- A need for sophisticated reporting and analysis
- Help with fundraising or growth efforts
- Financial strategy guidance
- Stakeholder reporting
When Should You Hire a Controller?
Although you can hire a controller at any point, most businesses wait until their company produces enough transactions that it needs to handle accounting based on Generally Accepted Accounting Principles (GAAP).
The earliest you would likely hire a part-time controller would start at the $500,000 revenue threshold. But most companies will have one by the time they hit the $10 million mark. And at that stage, the job is far more concentrated on managing internal controls, report generation, and closing processes.
A controller may be an attractive hire if you need:
- Better CPA support
- Bookkeeping supervision
- Accurate financial reports
- Optimizing the month’s end close and report delivery
- Mitigating potential errors, fraud, or security issues
CFO Hub — Outsourced Financial Professionals for All Your Business Needs
Whether you require the services of a CFO, a controller, or both, it’s now easier than ever to find the professional your company needs to keep progressing.
Many companies wait too long to hire a CFO or controller, much to their detriment. In the past, this was understandable. Hiring a full-time senior executive can be cost-prohibitive, particularly for companies in their early maturity.
Here at CFO Hub, we shift this paradigm by providing outsourced CFO, controller, or accounting services. No matter where you’re at in your growth process, we can tailor an experienced controller or CFO to your specific needs profile. From there, you can scale your team up or down.
Interested? Reach out today to learn how we can help guide your enterprise.