Financial Controller vs CFO – Which One Do I Need?

It is not surprising that many presidents, CEOs, and business owners struggle to understand the difference between the role of a controller and chief financial officer (CFO). After all, the two unique skill sets commonly become blurred, especially in many smaller companies where administrative costs are kept as low as possible. However, the differences between a controller vs CFO are important and a clear distinction between the two can provide value that has not previously been realized.

Role of the Controller

A controller (or accounting manager) tends to be very technical and less operational in nature. They will ensure your financial statements are complete, accurate, and presented within the guidelines of GAAP. Essentially, they are crucial to having a successful financial reporting function. A controller will:

1. Accurately report the historical performance of the business
2. Stay up-to-date on technical accounting pronouncements to make sure financial statements are presented accurately
3. Be the lead individual to coordinate and handle various audits of historical information within the business

All of the above items are a must. Prior financial information and metrics are critical for developing budgets, projections, and future analysis. No one wants to be basing business decisions on data that’s not accurate!

Role of the CFO

A CFO takes on a more operational focus in regards to financial management:

1. Turning numbers into issues that drive action
2. Management of processes to ensure the utmost efficiency
3. Eliminating surprises so other members of the C-Suite can focus on the most important thing – running and promoting the business

Consider this. The CEO/business owner and other key managers focus on company vision and strategic planning for growth, profitability, and operational process improvement to ensure the business is responding appropriately to the current environment. Often what’s missing is someone who can turn numbers into meaning and build a picture of how this future vision will translate back into a financial model. That’s where the CFO comes in.

A controller will hand over the income statement, balance sheet, cash flow, A/P aging, A/R aging, and inventory sheets to the CFO. Their job is to then turn that information into five to ten primary operational metrics of past performance to help guide future decisions. Often this is done with enough lead time that the necessary staff can take steps to impact future performance.

A Clear Vision Forward

Does your company perform any sort of budgeting? If not, how do you know where your business is headed? A CFO drives this future planning process, with assumptions that can be defined. These defined assumptions for the future allow you to fully understand your business plan, as well as give you a basis for future management discussion and analysis if budgeted numbers are not achieved. Again, a CFO is there to hold key management accountable to defined assumptions.

Ultimately, the CFO ensures that the CEO is never surprised by an issue with significant financial consequences. Critical issues will be identified long before they occur, along with mitigation plans in place to address risks.

Virtual CFO

While a CFO’s value cannot be denied, it’s not always in the budget for a company to pay the salary and benefits of a full time CFO. Enter the virtual CFO. A virtual CFO is an outsourced service provider offering the same guidance outlined above. Long term contracts are not necessary and you pay only for services and time rendered. Often the investment for a virtual CFO ends up being a fraction of the cost of a full time hire.

Of course, just like a full time hire, it’s important to do your homework when hiring a virtual CFO. Make sure they have experience with similar businesses or have previously worked in your industry. Someone who is already familiar with the financial issues facing your particular field won’t require much time to get up to speed. Ask many of the same questions you might in a job interview to get a feel for the virtual CFO’s personality, approach to business, skill level, etc. And of course, it’s always a good idea to call a few references to verify their clients’ experiences.

If you’re looking to add a strategic financial partner to your team, contact Kruggel Lawton today to schedule a free consultation. Our goal as a virtual CFO is to truly to assess the needs of your business through a flexible, scalable approach. If a full time CFO makes sense, we can get the right systems in place and identify candidates who would be an ideal fit for your organization, culture, and management team.

Adam Schwelnus, CPA, CGMA
Senior Manager, CFO Services
aschwelnus@klcpas.com | 574.289.4011 x256