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Controller vs CFO. This is another interesting dynamic. In smaller finance teams, the controller and CFO may even be the same person. The CFO is both the leader of the finance team and a member of the executive leadership. On the one hand, they have to ensure that the finance team is well run and that everyone all the detailed work is done. The biggest difference between a controller and a CFO is that a controller manages and measure historical financials while a CFO strategizes and executes a forward-looking financial strategy. A controller’s main duties include organizing your existing books, keeping them in order, and providing timely and accurate financial reporting.
Chief financial officers (CFOs) and financial controllers have a lot in common — and some significant differences, too. In midsize to large companies, they can be a dynamic duo, working hand-in-hand to put a company on its best possible financial footing.
Smaller companies tend to opt for one role or the other, often as a matter of controlling labor costs. Other firms, especially startups, may outsource one or both finance functions or hire fractional or interim professionals.
Understanding the two roles can help you determine which direction is best for your company — and when it might be time to embrace both.
What Is a Financial Controller?
A financial controller is a company’s lead accountant. The controller, also referred to as a comptroller in government and nonprofit businesses, is responsible for maintaining accurate books and records and for running the day-to-day activities of the accounting department.
Typically, the controller is a senior manager, with a sharp acumen for numbers and formal training in accounting. The controller reports to either a CFO or CEO and supervises staff accountants and bookkeepers.
What Is a CFO?
A CFO is the top financial executive in a firm, responsible for its overall financial strategy. A CFO’s purview covers overall market conditions, competitive analysis — in some cases — and the company’s equity structure. The CFO leads all financial areas, including the historical accounting processes managed by the financial controller, if there is one, and prospective financial activities, such as budgeting, forecasting, cash flow, mergers and investments.
Most important, because CFOs are the only other corporate executive with a companywide focus, they are primary advisers to their CEOs.
That broad view of the business means only a small fraction of CFOs are focused solely on dollars and cents. The vast majority juggle responsibilities beyond finance and accounting, such as identifying strategic partnerships, evaluating technology and representing the company in public forums.
|Let’s look at the hierarchy of some common accounting and finance roles to get all that done:|
|CFO: A chief financial officer reports directly to the CEO and the board of directors. CFOs aren’t just about closing the books — they serve as reality checkers, strategists and risk mitigators for their companies. The CFO typically supervises a diverse finance/accounting team and is responsible for the overall financial health of the business. CFOs in publicly traded companies formally attest to the accuracy of financial statements and shareholder reports.|
|VP of finance: The VP of finance typically has a deep accounting background — essentially, a CPA with leadership skills — and understands in-depth the current and historical financial data of the company. Generally paid less than a CFO, VPs of finance may also be promoted into the CFO role.|
|Controller: The controller is a CPA and, often, holds an MBA. Controllers are senior accounting experts and oversee a company’s cash flow and AR/AP. In smaller companies, they may help with financial planning & analysis, though generally FP&A is a finance function versus accounting.|
|Accountant: These professionals hold CPAs and may be in-house or contractors who work with a number of companies, sometimes within one industry. They prepare audited financial statements and oversee financial records, such as tax returns, balance sheets, employee expenses, and cash flow and income statements.|
|Bookkeeper: This position is your first financial hire and, again, may be a contractor or an in-house staffer. These professionals have accounting backgrounds and they are responsible for putting together monthly income statements and balance sheets for the company.|
|Other staff roles: Within the finance team, companies may have specialists who focus on auditing, FP&A, human resources, bookkeeping, taxation, budget analysis, accounts receivable/accounts payable and inventory or other operational aspects.|
6 Key Differences Between a Controller and a CFO
Controllers and CFOs have related but different skill sets that support their individual roles. When both are present within an organization, controllers and CFOs are interdependent, leveraging their talents to work together and help the entire financial organization achieve its objectives.
Here are six key differences between a controller and a CFO.
Accounting vs. finance: Controllers are experts in accounting who must stay current on Generally Accepted Accounting Principles (GAAP) and tax rules. They are highly technical and precise. Controllers are almost always CPAs or hold similar professional licenses, whereas CFOs operate in the broader discipline of finance, such as financial planning, capital markets and investing. While CFOs need to understand accounting — the language of business — they don’t necessarily need to be CPAs. CFOs hail from a variety of backgrounds, from investment banking to managing a line of business.
Tactical vs. strategic: Controllers are tactical operators, adhering to procedures and deadlines and focused on accuracy. Their duties can be described as finite, such as running weekly payroll or the monthly accounting close process. CFOs have a longer line of sight, working on more strategic issues that affect where the company is headed. They advise CEOs and other executives on how to keep the company economically healthy and how growth might happen in the short, medium and long terms.
Heads-down vs. heads-up: Controllers spend most of their time in a “heads-down” position — that is, working to keep ledgers accurate and accounting systems working smoothly, analyzing variances and balancing debits and credits. The focus is mostly on historical data and ensuring results are accurately reflected. It’s an essential role, guaranteeing that data and reporting remain accurate for decision-makers.
In contrast, CFOs take a “heads-up” posture: scanning markets, economic forecasts and the competitive landscape for opportunities and threats. They also identify areas of inefficiency, make recommendations and develop action plans. In addition, CFOs generate forecasts and run scenario analyses, so the company can be predictive and proactive for the future.
Internal controls vs. market trends: Controllers are responsible for developing, disseminating and monitoring the internal controls that safeguard a company’s assets and prevent and detect errors and fraud. As a result, they are ingrained in internal processes and workflow. While CFOs, especially those in public companies, must attest to the adequacy of those internal controls — and thus must have full confidence in their controllers — they spend more of their time looking externally; CFOs investigate partnerships, investment opportunities and acquisitions.
Executing tone vs. setting tone: The controller and CFO are both responsible for managing finance staff. The controller has direct responsibility for the accounting team and, in turn, reports to the CFO, who directly or indirectly manages the rest of the financial staff. The CFO sets the tone for the entire financial team and shapes its culture. The controller translates that vision into day-to-day management of direct reports.
Face of accounting vs. face of the company: Controllers are the face of the accounting function to all the other department managers in the company. They collaborate within the company to educate and enforce accounting policies. The CFO is the face of the company to outside parties. Examples of a CFO’s tasks include leading quarterly earnings conference calls and liaising with banks or large suppliers.
|Focus||Internal controls||Market trends|
|Leadership||Executes tone||Sets tone|
|Image||Face of accounting||Face of company|
Roles & Responsibilities
What Does A CFO Do? - Overview Of The CFO's Responsibilities
CFOs and controllers are both seasoned professionals, with backgrounds in accounting or finance. In small companies where there is only one role, responsibilities tend to blur together, based on the needs of the company and its CEO. When there are distinct roles, their respective duties tend to line up as follows.
Financial controller duties
From the highest level, financial controllers are senior accounting experts who have ownership of the financial close process, producing financial statements and reports to guide decision-making. Responsibilities include:
- Manage accounts payable and accounts receivable functions.
- Approve invoices.
- Maintain chart of accounts.
- Manage external audits.
- Develop and monitor internal controls and company policies.
- Debt management and collection.
- Compliance with legal, financial and tax regulation.
- Internal financial reporting and analysis.
- Payroll processing.
- Day-to-day management of accounting staff.
- Primary user contact for accounting technology systems.
- Identify cost savings.
- Set up bank accounts.
- Supervise bank reconciliations.
- External reporting, including tax and GAAP financial statements, and public filings with the Securities and Exchange Commission (SEC).
In companies with both roles, the controller often provides advice and counsel to the CFO, especially in areas related to accounting standards, taxation and other regulations.
The CFO role has broadened significantly beyond its core responsibilities to also encompass corporate portfolio management and capital structure. Responsibilities include:
- Advise the CEO, board of directors and executive team on all financial and operational matters.
- Attest to all financial reporting.
- Lead all financial operations, usually through the controller and finance directors.
- Manage treasury activities, including investments, debt and equity agreements.
- Plan revenue growth.
- Contribute to the conversation around corporate culture.
- Change management to capture efficiencies and incremental revenue.
- Oversee risk management, including insurance, fraud and cybersecurity.
- Lead hiring and training programs for finance department staff.
- Be responsible for automation and other technology efforts.
- Drive scenario-planning.
- Represent the company in external financial matters.
When to Hire a Financial Controller
Most companies bring in a financial controller when they need to generate accurate, timely financial statements that comply with GAAP. (GAAP financial statements are required by various stakeholders, such as partners, investors, bankers and public markets.) Business owners or CEOs may not have the expertise or time it takes to perform this function themselves or be able to train a bookkeeper to fulfill this need.
Another driving force behind hiring a controller occurs when company expansion — either in terms of transactions or employees — requires implementation and monitoring of internal controls. Financial controllers are the keepers of policies and procedures that protect a company’s assets.
When to Hire a CFO
Hiring a CFO is a big step. Bringing on someone in this strategic role typically happens when an owner is ready to take the company to the next level, whether through M&A, seeking public or private investments or launching new product lines or other growth initiatives.
Such transitions usually arise in tandem with staff and business expansion, when advanced predictive modeling, cash-flow forecasting and spending control become more critical. Other common catalysts include international expansion, adding a subscription model or considering big technology investments.
What Size Companies Use a Financial Controller?
Companies of all sizes use financial controllers; the need is often more dependent on industry than size. For example, startups may engage a financial controller if they are required to do so by venture capitalists, while a company with millions of dollars in revenue may be satisfied with a staff of bookkeepers assisted by external CPA services if the nature of its business allows for simple transactional accounting.
As a general rule of thumb, most companies hire their first financial controller when annual revenue exceeds $5 million.
What Size Companies Use a CFO?
There are two schools of thought regarding how big a company should be before hiring a CFO. One uses revenue as a measurement, with multiple studies coalescing around a $25 million threshold, while others recommend $50 million to $100 million. In most cases, the nature of the business, the financial savvy of its owner and its capital structure inform where in that wide range a company will need a CFO’s expertise.
The second approach recommends hiring a CFO at the startup phase of business. The reasoning: CFOs can play a key role in directing company strategy, setting up capital structure and business systems and guiding the business owner.
Practically speaking, an experienced CFO can also provide access to an important network of other professionals.
Financial Controller vs. CFO Salaries
Not surprisingly, CFO and controller salaries tend to be commensurate with the breadth of their roles and responsibilities; most financial controllers’ salaries will be lower than those of CFOs. For either position, compensation depends on factors including company size, industry, whether the business is public or private, staff size and location.
What Does A Financial Controller Do In A Company ...
For example, CFO compensation can vary by as much as 50% depending on whether a company is public or private, according to a CFO.com survey. And that’s just one factor. Overall, CFO compensation is wide-ranging: A finance chief at a small, private company outside major metropolitan areas averages $194,000 in cash compensation, while a CFO at a large, public company in a major U.S. city averages about $725,000.
Non-cash compensation can also greatly affect compensation. A senior CFO joining a startup might receive significant stock options, for example.
For financial controllers, median annual salaries range from $90,000 to $110,000, according to several studies. As with CFOs, bonuses, stock options and other non-cash incentives are variable and increase overall compensation.
Financial Controllers, CFOs and Technology
Technology plays a vital role in the jobs of both financial controllers and CFOs. Gone are the days of leather-bound accounting ledgers. Now, robust financial management systems that automate billing, revenue recognition, accounting, financial reporting, financial planning, consolidation and compliance are the norm in competitive companies. These systems provide real-time visibility and efficient processing at all levels within the financial organization.
Financial controllers are heavily involved in the selection of accounting software and are the power users of financial management systems and their integrated programs, including inventory, payroll, billing and compliance.
Bottom line, financial controllers and CFOs enjoy a symbiotic relationship. The two jobs have many similarities, and in small companies these roles are often combined. However, differences in focus, execution and duties are apparent when the positions are distinct. Understanding the differences can be helpful when evaluating which professional best meets the needs of a company, or whether both might be necessary.
Financial Controller vs CFO FAQs
Q: Can a controller become a CFO?
A: Yes, a controller can become a CFO. About half of controllers view this as a desirable career progression, according to EY.
Q: Who is higher, a finance manager or a financial controller?
A: Finance managers tend to have finite responsibilities and can be viewed as subordinate to financial controllers, who have broad responsibility for the entire accounting process. In instances where a finance manager works more closely with a CFO on strategic initiatives, the finance manager position may be more senior than the financial controller.
Q: Is a COO higher than a CFO?
A: Chief operating officers (COOs) oversee the day-to-day operations of all facets of a company and are often considered to hold the second-highest corporate position, behind the CEO. Chief financial officers (CFOs) usually interact with company operations through a more specific financial filter. Companies do not always have a COO, and some combine the CFO/COO position.
Q: What size company needs a CFO?
A: In terms of revenue size, companies over the $25 million threshold tend to have CFOs. Alternatively, many startups hire CFOs right away to help develop company strategy and set up capital structure and business systems.
Savvy business decisions based on solid financial data is the key to success. As a small business owner, you may be handling your own bookkeeping and accounting duties, financial reporting, and planning. But best-in-class financial strategy requires focus and expertise. Large corporations have a finance team, with a controller and a chief financial officer (CFO). How do these roles differ, and what does your company need?
What is a Controller?
A controller is a company executive that is responsible for all the organization’s accounting activities. They typically report to the company’s CFO if there is one. In a larger organization, a controller will oversee payroll processing and financial reporting, and they might help the CFO to prepare operating budgets.
Controller vs. CFO? Smaller companies might combine these two roles. If there is no CFO, the controller must handle many different financial tasks, from routine bookkeeping to financial planning. They might get involved in company recruiting and training.
Depending on the company, a controller may:
- Prepare monthly financial statements
- Supervise accounting and bookkeeping staff
- Prepare budgets
- Outline budgeting schedules
- Collect and analyze financial data
- Monitor the company’s budget for trends, variances, and deficiencies
- Help companies meet tax, licensing, and other requirements
- Monitor legislation that can affect business operations
- Help with tax filings
What Are the Main Differences Between a Controller and a CFO?
A controller is a tactical position responsible for compliance and reporting, whereas a CFO is a strategic leader responsible for all financial tasks including forecasting, planning and analysis. Controllers often do not make good CFOs, as they lack the out-of-the-box thinking required to innovate financial strategy; whereas CFOs often lack the discipline and rigor required to be a good controller.
A controller prepares financial reports like income statements and balance sheets. They also monitor internal controls, handle compliance audits, assist with budgeting and, to a certain degree, analyze financial information. Some controllers might evaluate and choose the technology to be used in the company’s financial departments.
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CFOs tend to be involved in higher-level financial strategies and planning. A CFO will track the company’s growth and capital, provide an analysis of where the business is strong or weak, and develop a plan of action for improvements. While the controller is more typically focused on accurate financial reporting, the CFO is a financial planner.
The difference between controller and CFO duties, in some organizations, may not be well-defined and there may be some overlap.
Do I Need a CFO or a Controller?
The Financial Controller And Cfo' S Toolkit Pdf Free Download Windows 10
Hire a controller if you:
- Want verification and supervision of your bookkeepers and accountants
- Want to ensure financial reports are accurate
- Need someone to oversee the close of each financial period
- Desire stronger processes to avoid mistakes, fraud, and security breaches
- Need someone to assist the CPA during tax season
- Are ready to hand-off your involvement in accounting
Hire a CFO if you:
- Are looking to collaborate with an executive on business direction
- Need higher-level reporting and analysis to drive company decisions
- Are unsure of the correct financial strategy for your company
- Need help managing cash shortfalls
- Need help designing a workforce reduction or turnaround plan
- Would like to improve relationships with investors and lenders
- Need assistance with equity or debt activities
Financial controller vs. CFO—which do you need? Most small businesses need both, which brings us to the third option.
A Complete Finance and Accounting Department through Outsourcing
Do you wish you could hire a part-time CFO and a controller without the cost and time commitment of a new employee? A factional CFO and fractional controller is a complete solution for most small businesses. By outsourcing our finance and accounting department, you get the benefits of both professionals for less than the cost of a single full-time employee.
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