The structure of a small business is often intricate. Finance and accounting teams are made up of many roles with different levels of authority and responsibilities. As such, it can be difficult to pinpoint the exact tasks of any given position.
Small business owners are often confused when they try to determine the difference between these roles, or what each does individually. Specifically, the difference between a chief financial officer (CFO) and a controller can be hard to distinguish, since both are senior members of a company’s financial team and work closely together. Below, we’ll help by describing the roles and explaining their differences.
What is the role of a CFO?
A company’s CFO is the leader of its financial team, and manages all of the company’s financial operations. This means that the CFO has many responsibilities including the company’s accounting department, which handles the company’s payroll, billing, expenditures, and tax obligations, among other things.
Maybe most crucially, though, the CFO defines and implements a company’s overall financial strategy. A CFO’s strategic guidance is based on a deep understanding of both the company’s finances and the wider business sphere in which the company operates. The strategic initiatives of a CFO include:
- Broad financial analysis. CFOs are tasked with developing a nuanced understanding of a company’s financial position. To do so, a CFO will analyze market trends and customer data, interpet business metrics, and investigate competitor strategies. Because financial information can be dense and complicated, a CFO needs a strong financial background and be able to communicate this analysis so that all functions of the company can understand them.
- Proactive budgeting and forecasting. A CFO is responsible for a company’s budget, but modern CFO’s don’t simply crunch numbers. A budget is a strategic opportunity, and a CFO will consider financial targets and company goals in order to budget for growth.
- Investment Management. Managing assets is a complex process that requires a CFO to think strategically about company goals, as well as current and projected market conditions. A CFO will develop a comprehensive understanding of a company’s ongoing investments, resources, and needs. The CFO will ensure that a business is poised to capitalize on future investment opportunities.
- Guiding Growth. It is a CFO’s job to strategize for the financial growth of a company. To do so, a CFO needs to be forward-looking, and to regularly forecast both financial setbacks and successes. Creating an overall plan for the growth of a company is difficult, and it is maybe a CFO’s most important function.
So, a CFO is the strategic head of a company’s finances, and makes decisions that will critically impact the company’s success. How, then, is the role of a controller different?
What is the role of a controller?
Whereas a CFO guides a company’s financial strategy, a controller is responsible for the company’s general bookkeeping and reporting. A controller is what most people probably think of when they imagine a financial officer: A skilled accountant and number cruncher who keeps financial data in order.
Put simply, the controller is the manager of a company’s accounting department, and reports to the CFO. A controller’s specific duties include:
- Creating and presenting financial statements. The controller manages all of a company’s accounts, and is responsible for collating financial data. Financial reports that show which accounts a company has paid or owes are created by the controller, and they present a complete overview of the company’s finances.
- Implementation of financial processes. A company’s controller is the person who is charged with overseeing the accounting processes of a company. When a process must be implemented, it is the controller that oversees it. Examples of such processes might be cash receipts, billing, and payroll. These processes often touch many other functions of a business so it is important to have a strong controller who can communicate across the organization.
- Documenting financial performance. In order for executives like the CFO to make sound business decisions, they need to understand where the company stands. Enter the controller, who prepares a company’s balance sheet and income statement, and develops an overall picture of the company’s financial position.
While not as senior an executive as a CFO, a controller is nevertheless a crucial member of a company’s financial team. The controller carefully keeps a company’s books and handles reporting, so that the CFO and other executives have the data they need to develop financial strategies.
Financial executives and small businesses.
Now that you better understand the roles of CFOs and controllers, you may understandably wonder if your business needs one or both. Many small businesses begin by hiring out the accounting services of a virtual CFO or bookkeeper, in order to enjoy strategic insight and financial peace of mind while avoiding excessive costs.
Have questions about how a CFO or controller can benefit your business? Krieger Analytics partners with businesses to provide virtual CFO and bookkeeping services and offer actionable growth strategies. Conversations are free, so don’t hesitate to reach out at [email protected].