CFO vs Financial Controller: Which One Does Your Business Need?

At any size and level of growth, long-term financial strategy and day-to-day financial monitoring are vital to the health of a business. Failure to conduct due diligence in finance and accounting most especially impacts the long-term performance of small businesses and start-ups. However, being able to afford a CFO or a Financial Controller, or both, is one of the largest factors preventing businesses from hiring these vital finance roles.

We will briefly cover the key differences between a CFO and a Financial Controller, then evaluate at what point in the growth of your business either service would be most necessary or beneficial, and finally help you to understand how to implement a plan that fosters the long-term financial health and performance of your company.

Understanding the Roles

At a high level, many may believe that a CFO and Financial Controller are interchangeable, but in taking a deeper look they have very different perspectives and areas of expertise.

CFO

Chief Financial Officers specialize in high-level financial planning and analysis, are future-focused, drive growth, and lead forecasting and financial innovation. This is a financially strategic role that does not get bogged down with number crunching and bookkeeping, but rather sets a financial vision for the company based on market insights and the company’s performance in the market to-date. They also manage investors and are responsible for keeping the board of directors informed and on-track with company goals.

Financial Controller

Controllers are much more focused on the details of the day to day financial status of your business. They are accountants and CPAs who own financial reporting, focus on historical data, manage all of the bookkeeping and deal with implementing accounting processes across departments. These detail-oriented, tactical power houses make the growth plans happen and ensure that all programs are on track with the budgets necessary to achieve success.

Both of these roles are important to meet different company needs throughout the different lifecycle stages of your business.

Business Lifecycle and Financial Needs

Startups and Small Businesses

Smaller businesses and startups need financial vision to move forward but require sound accounting reports and practices to sustain their day-to-day operations. Hiring a full accounting department is expensive and can pull resources away from business operations that need cash flow more urgently. This is the point or size at which hiring a financial controller, either in house or part-time, can set business owners up for long-term success.

Controllers build out sound financial infrastructure that will carry your company through every stage of growth and standardize the financial reporting necessary to remain in compliance with state and federal tax guidelines for your business. Hiring a part time controller is the most cost- effective at the beginning to ensure your accounting processes are solid without distracting from running and growing the business. As the company grows — usually beyond the $20 million revenue mark — hiring a full-time, in house controller will be best as you will have someone fully invested in growing an appropriate accounting team and set of procedures.

Mid-Sized Companies

At this stage in the growth or life of a company, business owners will need to think about expanding the controller role from accounting and financial record keeping to more long-term budgeting and dynamic forecasting. While controllers can assist with forecasting, their role ultimately focuses on relationships with department stakeholders and building sound financial operations. They are not going to be able to make business decisions and build the meaningful relationships with the executive team necessary to continue the growth of a company without sacrificing their focus on building and maintaining a strong financial infrastructure.

A CFO can come in and take the amazing controller reports to build out financial vision and long term KPIs for the business. They monitor those metrics to reduce risk and increase profit, while building revenue. Freed up from looking at the financial statements, these visionaries are empowered to monitor the market and identify new opportunities for growth or for a necessary shift in the business as a whole. The CFO role is responsible for collaborating with the board of directors and the rest of the executive team to build out roadmaps and actions plans that will sustain the business for years to come.

The only downside of bringing on a full-time CFO role on your team at this point is that they are a costly investment. On average a full-time CFO salary is $229,000 per year, not including vacations, bonuses and other benefits. This is a lot for a medium-sized business to add to annual salaries. Thankfully, virtual or fractional CFOs are economical solutions to a full time Chief Financial Officer, with all of the benefits.

Large Corporations

Once a company has scaled to tens or hundreds of millions of dollars in revenue, it makes the most sense for them to have both a full time CFO and Financial Controller that work together in lockstep to ensure that the business is thriving, financial processes across departments are uniform and efficient, cash flow is positive, and roadmaps are laid out for future success and resilience.

Decision-Making Process

So how do you decide when you need to build out your finance team throughout the lifecycle of your business with these crucial but different roles?

Best practices show that below $5 million in annual revenue your company should really focus on sounds accounting practices and accounts payable/receivable. Outsourcing your accounting practices can help you save money and time, while bypassing the vetting process.

Once the $5 million threshold is passed, it is best to begin with a fractional CFO who can build high level strategy, develop bank relationships, hold weekly financial meetings, conduct forecasting and analysis, set company-wide KPIs, and much more. As you near the $10-$20 million mark, looking to hire in house can help your business solidify your financial vision and goals.

As the market fluctuates it is wise to reevaluate your business needs and budget, then outsource to professionals who can meet your finance department needs without negatively affecting your bottom line. This will empower your business to meet its long term growth goals.

If you have any questions about how a fractional CFO or an outsourced controller can help meet your business needs, you can book a free consultation where we can share more information about the services we offer and if we’d be a right fit for your business.