It’s not uncommon for small business owners to use “controller” and “CFO” interchangeably. But while they have similar roles, they’re quite different.
A CFO is responsible for all financial aspects of the company. This can include setting the company’s overall long-term financial goals, overseeing various departments within the company, preparing budgets and financial reports, and more.
In comparison, a controller is responsible for all accounting transactions within a company. This can include payroll, accounts payable, accounts receivable, bank reconciliations, etc.
Controllers need to have a strong understanding of accounting to make sense of financials for the company. CFOs are usually upper management that oversees other members of the finance department.
This article aims to clear up some of the confusion between these two jobs and outline the differences in their roles, responsibilities, reporting structures, and more.
What Is a Controller?
A controller is a company’s chief accounting officer and often serves as the head of the accounting department. A controller manages the accounting department and supervises people like accountants, tax managers, and payroll managers. A controller usually reports to the chief financial officer (CFO), and the CFO distributes the financial management responsibilities to the controller.
In smaller companies, it may be the case that the controller is the only accountant available to report directly to the CEO. There may also be an accounting clerk to help assist with some accounting.
Controllers are also responsible for setting budgets and managing cash flow, as well as the preparation of financial statements. They also monitor accounts receivable and payable, revenue, payroll, and inventory records to ensure accuracy. They may also supervise a staff of accountants or bookkeepers who handle day-to-day accounting activities, such as journal entries, payroll processing, or billing invoices.
To become a controller, you will need a bachelor’s degree in accounting, finance, or business administration and several years of experience in management roles in an accounting department. Certification can also be taken for better pay and more work opportunities, such as the Certified Public Accountant or Certified Management Accountant designation.
Other financial controller duties may include:
- Implementing policies and procedures
- Creating budgets
- Approving invoices
- Preparing financial statements
- Managing strategic planning
- Handling risk management
- Planning and handling risk management
- Safeguarding company assets
- Processing payrolls
- Reviewing financial statements
- Working with CPAs on audits and tax returns
What Is a CFO?
CFO stands for Chief Financial Officer and is essentially a financial manager in charge of the company’s entire accounting department. Its role is to oversee and improve its operations and economic activities.
If a company has a controller or an accounting manager, that person reports to the CFO (although these roles might be combined). In larger companies, there can be more than one CFO. For example, there might be a CFO for each subsidiary or division within the company.
CFOs spend most of their time applying revenue strategies, assessing financial opportunities and risks, and keeping an eye on cash flow – both day-to-day and in the long term. The CFO role also requires an understanding of business strategies, risk management, and financial analysis. Because of this, finance officers often have extensive experience working as accountants or in other positions within the finance department before being promoted to CFO.
CFOs must have strong leadership skills to manage a team, execute tasks, and set goals for specific projects. They must also demonstrate excellent communication skills to report critical information to upper management and shareholders.
Other CFO duties may include:
- Overseeing the company’s finance team, including accountants, controllers, auditors, etc
- Planning with project managers on ways to increase revenue
- Supporting the sales and marketing team
- Raising capital from investors
- Mergers and acquisitions
- Managing the cash flow of the company
- Long term strategic planning for the company
What Are the Main Differences Between a Controller and a CFO?
Although controllers and CFOs manage finances within a company, their responsibilities can be quite different. The finance department is an essential part of a company’s functionality.
They organize the most critical aspects of business, such as accounting, tracking sales and expenditures, and managing payroll. Within this department, two key roles are controller and CFO (Chief Financial Officer).
The primary role of a controller is to oversee the accounting department’s daily activities and make sure that established financial goals are met. This includes creating budgets, approving invoices, working on audits and tax returns, processing payrolls, etc. A controller also ensures sufficient cash flow to fund operational needs. This person will also be responsible for drafting financial reports to present to upper management or board members.
The role of a CFO varies depending on the company’s size and industry. Typically, their duties include:
- Analyzing data about the company’s finances.
- Creating financial plans for the future.
- Improving efficiency.
Managing internal controls and risk assessment is another critical function of a CFO, supervising financial staff members and preparing reports for investor relations purposes.
Here are four more critical differences between a controller and a CFO:
Accounting vs. Finance: Controllers are usually experts in accounting and are well-versed with GAAP and tax rules. In most cases, they hold a CPA title or similar professional titles. CFOs, on the other hand, have a broader understanding of finance, investing, and the capital markets. They don’t necessarily need to be CPAs or have a solid grasp of accounting practices. CFOs usually have strong backgrounds in investment banking and management positions.
Internal controls vs. External controls: Controllers are also responsible for monitoring the company’s internal controls and helping protect its assets of the company. As such, they focus more on the internal processes and workflow of the company. In contrast, CFOs spend more time looking externally for investment opportunities, partnerships, and acquisitions that will help grow the company for the future.
The face of accounting vs. face of the company: Controllers usually oversee and work with the company’s accounting department and, as such, are seen as the face of accounting. The CFO is the face of the company financially to outside parties. They handle all the acquisitions, partnerships, and networking with banks and other financial brands.
When a Company Might Need a Controller
As a company grows, so do its financial needs. When enough growth occurs, someone must be hired to handle the company’s finances. This person is usually called a controller.
A controller is essentially a chief financial officer for smaller businesses. In some cases, controllers are also called accounting managers or accounting directors.
Controllers oversee all day-to-day accounting operations and procedures in smaller companies that do not have enough revenue or business transactions to warrant hiring a CFO.
A controller’s responsibilities include, but are not limited to:
Supervisions of Bookkeeper or Staff Accountants
The controller is responsible for overseeing the work of lower-level accounting employees. In a smaller company, the controller may be responsible for supervising only one person, whereas, in a larger company, they may supervise multiple accountants and bookkeepers.
Accuracy of Financial Reports
The controller is responsible for the accuracy of the company’s financial statements (income statement, statement of retained earnings, and balance sheet) and maintaining internal controls to keep the business’s financial records in compliance with accounting and tax regulations.
Fixing the Period Close and Report Delivery
One of the most overlooked aspects of any accounting department is delivering information in a timely and accurate manner to executives or other members of management. A controller can be a good investment for a company that needs to improve how its financial statements are prepared and delivered.
Preventing Errors, Fraud, and Security Breaches
A controller is responsible for the accuracy of financial information. The controller ensures that the business has proper controls to prevent errors, fraud, and security breaches. In addition, a controller will often play a role in identifying business and financial risks.
Better Support of CPA (Tax Preparation)
If you are starting with CPAs, a controller can help support your tax preparation efforts so that you can focus on growing your practice.
Ownership of Accounting Department
A controller oversees the accounting department the same way a CFO manages the entire financial department. Controllers manage the day-to-day operations of the accounting department and assist in general accounting practices. They must ensure that the accounting team complies with generally accepted accounting principles.
When a Company Might Need a CFO
The chief financial officer (CFO) is an executive responsible for managing and overseeing your company’s finances. While many small businesses can get by with a controller initially, you will eventually need to consider hiring one if you plan on growing your business.
When should you hire a CFO? Here’s when you should consider bringing on a CFO:
Supervision of the Finance Team
Like any other department in a company, the finance team (e.g., controllers, accountants, and bookkeepers) requires strong leadership and guidance. It is the job of the CFO to ensure that the financial team is performing to expectations, both for the short-term and long-term success of the company.
Need for Sophisticated Reporting and Analysis
Once a company begins to grow exponentially, controllers and other finance experts may not have enough experience or knowledge to handle the company’s sophisticated reporting and analysis requirements. A qualified CFO help steer the finance team in the right direction and help drive a positive impact on the team.
Financial Strategy and Guidance
A business might need help with expert financial strategies such as long-term projections and strategy formulation. The CFO becomes therefore participates and often leads those important planning sessions.
Stakeholder Reporting and Communication
Partners of the company, including investors, banks, and boards, might want to see all the financial data laid out in a meaningful and attractive manner. CFOs are often required to prepare these materials and help present this data to CEOs and managers.
Fundraising (Capital Markets) Assistance
CFOs are usually knowledgeable in investments and market research and are often hired to take the lead on fundraising duties.
What Size Companies Bring In Controllers?
The size of your company often determines how quickly you bring in a controller, a CFO, or both.
The controller’s role is to manage the entire finance team and a company’s resources. Most companies will hire a controller when they reach $1 million in annual sales, says Stephen Beatty, managing strategic advisory partner at S.G. Beatty & Co.
In contrast, companies will typically hire a CFO when they reach the $10MM, and almost all companies will have a controller by the time they get that revenue.
The controller is usually hired to handle more accounting tasks and oversee the accounting department. And if no CFO is present, they also act as the manager, reporting directly to the CEOs of the company.
At the $10MM mark, the controller is almost always in a management role instead of handling other accounting tasks.
What Size Companies Bring In CFOs?
Generally speaking, the $10MM in annual revenue is when companies will consider bringing in a CFO.
Controller vs. CFO Salaries
Both the controller and CFO are financial leaders in an organization, but they have different responsibilities. A chief financial officer (CFO) is above the controller, overseeing the finance department. A controller is often just below the CFO and leads the accounting team.
As such, CFOs have more responsibilities than controllers and tend to earn more. For example, Career Explorer reports that the median salary is around $100K per year, while the top 20% earners in the U.S earn an average of $229K per year.
According to Career Explorer, the average cash compensation for a controller is $71K, while the top 20% of earners are compensated an average salary of about $135K per year.
Salaries for both roles vary depending on the company size and the location, but both careers are compensated very well compared to similar financial positions.
The Qualifications of Great Controllers
A great controller is essential for an organization to be successful. A controller must have a solid understanding of business and accounting principles that can be applied to businesses’ financial issues every day.
A suitable controller will have an excellent judgment in applying principles and practices to situations. A controller should have experience with managing internal controls, budgets, financial statements, and general ledger structure. But most importantly, a great controller must have the ability to lead other people and communicate effectively with management.
The following qualifications are essential for a controller:
- Bachelor’s degree in accounting or finance
- Certified Public Accountant (CPA) certification preferred
- Experience in financial statement preparation
- Experience with budgeting and analytical tools
- Experience with internal controls
- Experience working with auditors
- Experience managing staff members
- Exhibit excellent verbal and written communication skills
The Qualifications of Great CFOs
The CFO of a business is a vital part of the strategic team. They are responsible for financial planning and analysis, forecasting, budgeting and reporting, cash management, and risk management. The CFO is also responsible for formulating strategies to ensure that the company can meet its obligations.
The CFO is also involved in raising capital to help the company grow and prosper. In addition, the job entails working with outside banks and investors to establish relationships.
To be successful in this position, a CFO must have excellent communication skills, both verbally and written. They must be able to understand complex financial issues while explaining them in easy-to-understand terms. They also need to have strong analytical skills and a thorough knowledge of computer systems and accounting software programs.
Conclusion
Both a controller and a CFO are members of the finance department, but they play very different roles in the management of an organization.
The controller is responsible for overseeing the work of lower-level accounting employees. In a smaller company, the controller may be responsible for supervising only one person, whereas, in a larger company, they may supervise multiple accountants and bookkeepers.
The CFOs role is much broader. Their part is to oversee and improve its operations and financial activities, both short-term and long-term.
How do you know if you need one of these specialists or both? It can vary from one organization to another, but you’ll want to prioritize both positions depending on your specific needs and the size of your business.
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