CFO vs Controller: How to choose the right one for your business

If you’re operating a startup, then you already know that keeping your finances in order is crucial. But you may be wondering whether you need a chief financial officer (CFO) or a controller to manage your financial operations. If you’re not quite sure, don’t worry — you’re not alone. Many entrepreneurs hesitate between hiring a CFO vs controller.

This blog post will discuss the key differences between CFOs and controllers, also known as financial controllers. It will also outline the chief functions of a CFO vs controller, and help you decide how to choose which role to hire for.

What is a CFO?

A CFO is responsible for making the major financial decisions for a business. CFOs work closely with CEOs to ensure that the company is meeting its financial targets and obligations. CFOs are essential finance directors, and they take ultimate responsibility for all the financial matters that impact the company.

CFOs take a big-picture view of the company’s financial health. They keep tabs on daily operations, but they are chiefly concerned with long-term financial planning, forecasting, and investing.

CFO responsibilities

CFOs are responsible for developing a long-term financial plan and setting goals for the business. They regularly liaise with other departments to assess progress and share key data.

For example, CFOs meet regularly with members of the accounting, sales, and marketing departments to ensure that the company is achieving steady growth. CFOs also meet with board members or shareholders, where relevant, to share financial forecasts.

Strategic financial planning

CFOs set financial priorities and allocate resources accordingly. Strategic planning, budgeting, forecasting, and production goals all fall within the CFO’s responsibilities.

The CFO must establish benchmarks to determine whether the company is staying on track with its financial strategy and vision. Finally, the CFO should monitor the competition to ensure that the company is keeping up with the market. If necessary, they should make adjustments to the company’s strategy to stay competitive.

Investment and funding decisions

CFOs set investment strategies throughout the company. They make decisions about portfolio strategies and create investment plans.

They also work with the CEO to seek out new investors where relevant. CFOs maintain regular communication with investors and make sure that the company follows all relevant regulations about financial disclosure.

Typically, CFOs are at the head of a finance department, and part of their responsibility is to maintain open, clear communication with everyone on the team.

Risk management

CFOs monitor potential disruptions and risk factors that could impact the company’s operations. Shifts in consumer attitudes, economic upheavals, supply chain snarls, and new regulations are all potential risk factors. CFOs must keep an eye on these and other factors. That involves staying in close communication with contractors, suppliers, customers, and members of the broader community.

The CFO must also work with the financial team to assess the company’s risk tolerance, which won't remain static over time. They create action plans and establish financial controls to mitigate risk.

What is a controller?

A controller manages the company’s accounting operations. They are responsible for record-keeping, taxes, and insurance. They are also responsible for ensuring that the company meets its accounts payable requirements.

Where relevant, controllers are also responsible for handling audits and compliance. They may be in charge of producing regular financial reports to meet compliance standards. A controller is the company's accounting manager, and they supervise all the operations of the accounting department.

Controller responsibilities

In a startup or small company, a controller typically takes on a wide range of responsibilities. Depending on the business, the financial controller may help make decisions about the company’s financial path and investment strategy. Most of the time, though, the controller is responsible for accounting policies and accounting standards. They manage the day-to-day operations of the finance team, oversee accounts payable, and complete financial reporting correctly.

Financial reporting and compliance

Today’s businesses have a heavy regulatory burden to meet. Publicly traded companies must submit regular financial reports and face third-party audits. Companies in the finance sector have additional regulatory requirements, especially concerning the protection of customer data. The Sarbanes-Oxley Act and the Gramm-Leach-Bliley Act, for example, set standards for financial institutions to manage sensitive data.

Controllers are responsible for organizing and presenting the necessary reports and making sure that auditors have access to all the information they need. Controllers also must stay up-to-date on any changes in regulations to make sure that the company is maintaining compliance.

Record keeping and bookkeeping

Publicly traded companies, as well as any company over a certain size, are required by law to keep accounts in line with Generally Accepted Accounting Principles (GAAP). Accounting records must be accurate and accessible. They must constitute a fair and accurate portrayal of the company’s financial position.

As the senior executive in the accounting department, the controller is responsible for maintaining accounting records correctly. To this end, the controller oversees the accounting team — accounts payable, accounts receivable, payroll, and inventory. The controller also determines the accounting methodology and stores records appropriately.

If the company is large enough to have subsidiaries, the controller must also oversee the subsidiaries and make sure that their record-keeping and bookkeeping practices align with the parent company.

Budgeting and cost management

The controller works to ensure that the company’s budgeting is realistic. They seek out cost savings and check that expenditures align with the projected revenue. Controllers must take into account accounts payable, inventory, and company debt.

The controller’s role will depend, in part, on the size of the company. Ultimately, though, the controller will always be responsible for maintaining a realistic budget. In larger companies, this means overseeing a team of accountants, including perhaps an accounts payable manager. In startups and smaller businesses, the controller will likely play a more hands-on role in handling accounts payable and budgeting.

In many cases, the controller will also work closely with the company’s leadership to forecast the coming year’s budget.

Key differences between CFO and controller roles

CFOs and controllers both help keep businesses on the right financial course. Both are financial analysts who carry out important finance functions. However, the two roles are very different. Controllers are chiefly concerned with record keeping and bookkeeping, while CFOs use those records to make informed decisions about the future of the company.

Here are some of the key differences between CFOs and controllers.

Qualifications and skills

Controllers usually earn a BA in accounting, economics, finance, or statistics. They go on to earn an MBA or a MAcc (Master’s of Accountancy). Most controllers then take the CPA exam to become certified public accountants.

Controllers need to have strong mathematical and problem-solving skills. Attention to detail and the ability to organize data is helpful. Good controllers also possess solid communication skills and know how to lead teams. In many cases, controllers start their careers as entry-level accountants and eventually get promoted to the role of controller.

CFOs usually earn a BA in either finance, economics, or business administration, although some get their degree in accounting. It’s common for aspiring CFOs to earn an MBA as well, often with a concentration in finance.

CFOs are often tasked with making difficult decisions. A good CFO should have strong leadership and decision-making skills, with the ability to see the big picture and the future impact of each decision. CFOs should also be proficient in financial analysis and risk management. Of course, since they are leading a team, they must have excellent communication and managerial skills.

Decision-making authority

Controllers often lead teams of accountants and have authority over their subordinates. They make decisions about how to prepare and store reports and sensitive data.

However, controllers do not have extensive decision-making authority. They are usually focused on data, and on getting every accounting detail in place correctly so that others can make the right decisions for the future of the business.

CFOs, in contrast, exercise a good deal of decision-making authority. They build strategies to drive growth. They create plans to reach more investors and shareholders. CFOs take the data prepared by controllers and use it to make informed choices about the direction the company should be taking.

Reporting structure

Reporting structures might vary from one organization to another. In many companies, though, the controller reports directly to the CFO. The two roles have a linear relationship: the CFO depends on the controller to provide data and accounting reports that they use to generate insights and decisions.

CFOs often report directly to the CEO of the company. CFOs and CEOs work closely together. CFOs create analysis and financial strategies which they present to the CEO as a key part of the company’s path forward.

CFO vs Controller: When to choose

It can be difficult to decide between CFO vs controller. Making the right choice depends on the specific needs of your company, your growth rate, and your existing staff. Typically, a new startup has different needs from a larger company, and as such, has different personnel requirements.

The following considerations can help determine whether you need a CFO vs controller for your team.

Startup and early growth phase

The startup and early growth phase is an ideal time to hire a controller.

At the startup and early growth phase, companies typically have complicated finances. This is a period of rapid expansion and new investment, and it often results in complicated financial records.

At this stage, the company can no longer manage with just an accountant. It’s time to hire a financial professional to oversee the business’s finances and make sure that records are being kept. This is also the time to start following GAAP. Technically, GAAP is not required until your annual revenue rises to at least $500,000, but in practice, it is a good idea to follow GAAP as early as possible.

A controller can restore order to your tangled finances. They can create and implement an effective accounting system and a record-keeping procedure. They can also put a plan in place to deal with regulatory requirements and audits.

Your controller will carefully assess your company’s financial status and determine whether your budgets are realistic. They will balance accounts payable against projected income so that you stay on course for the growth you want to experience.

Mature and scaling phase

As your startup matures and begins to scale, your business needs strategic financial leadership so that you can achieve complexity in funding and investments.

As your business scales, your need for financial leadership increases. You may find that your controller lacks the necessary experience to craft a financial growth strategy for the stage you’re in.

You also need a finance professional who is capable of making cash flow projections and carrying out predictive analytics to help plan for the coming years. A good CFO can provide direction and steer your company’s financials so that you meet your targets and achieve the growth you want to see.

Future-proof your financial team by making the right choice

Many companies don’t have enough work for a full-time CFO, and hiring one might not make sense from a budgetary standpoint. However, the benefits of a Fractional CFO can help solve these issues.

You may be wondering what is a Fractional CFO? They handle all of your company’s part-time CFO needs, plus bookkeeping and accounting functions. These services are cost-effective and efficient, allowing you to reap the benefits of a great financial team without damaging your bottom line.

Your CFO advisor handles financial planning and analysis for your firm, including:

• Scenario modeling and cash flow projections
• Variance tracking between budget and actuals
• Ongoing financial consultation
• Preparation for key financial reporting
• Presentation of your business financials in board meetings.

Want to learn more? See how Zeni's Fractional CFO services can support your business.