What is the difference between a controller and CFO? While there are functions of both a controller and CFO that support each other, both positions make distinctly different contributions to the organization.
What is the Difference Between a Controller and a CFO?
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 and analysis. Conversely, a CFO provides high-level strategy to improve profitability, accelerate growth, maximize assets, minimize inefficient activities and spend, and increase shareholder value.
A controller will provide a clear and accurate view of where the company has been. A CFO will look at where the company is, where it wants to go, and strategize exactly how the organization can meet or exceed those goals in the most timely way possible and with the least amount of wasted time and money.
The difference between a controller and CFO is not only their job roles, but also their depth and breadth of experience. A controller usually has bookkeeping or even CPA experience. (Read about the difference between a CPA and a CFO here). This means they have a strong historical background. Controllers provide cleaner, more accurate, and more dependable historical reporting. Many controllers can also provide budgeting services and projections based on historical numbers. However, because of their more limited experience and expertise, a controller has a decreased ability to provide high-level financial strategies.
Conversely, a CFO not only has historical financial expertise, they also have years (or even decades) of high-level strategy and operational experience. This means they have the ability to provide high-level financial strategy to move the needle in terms of growth, profitability, and shareholder value. Not only can they provide projections based on historical numbers, they can also provide short- and long-term forecasts based on hypothetical numbers and adjustments. They are key components in optimizing a company’s current assets to maximize profitability, can help streamline the process for capital raises or transactions, provide key relationships and management for connections such as vendors or lenders, and can make strategic suggestions for updating systems and operations to increase revenues and decrease wasted spend.
Functions of a Financial Controller
- Managing information technologies
- Financial & regulatory compliance
- Cash balances
- Financial report preparation
Functions of a CFO
- Accelerate stagnated growth or sustain high growth
- Analyzing numbers to improve future performance
- Establishing efficient, scalable operations
- Short- and long-term forecasting to achieve goals
- Optimize vendor relationships & contracts for improved terms and cash flow
- Optimizing cash flow & minimizing wasted spend
- Measuring & maximizing profitability
- Increasing shareholder value
- Facilitating debt & equity fundraising
- Providing financial risk assessments & advisory
- Establishing policies and procedures to optimize business performance
- Manage and & strengthen shareholder relationships
- Provide strategic relationships with lenders, investors, vendors, and more
- Prepare for transactions such as capital raises, mergers, acquisitions, or strategic exits
How to Know Whether You Need a Controller or CFO
Knowing whether you need a controller or CFO depends on your needs. You may need a controller if your books are late or inaccurate, if you need additional assistance interpreting reports, or if your financial team lacks experience. However, if your company is in needed of elevated financial strategy to sustain high growth, push through a growth plateau, overcome a financial challenge, or prepare for a transaction, then you most likely need a CFO.
Many companies see building their financial team as a hierarchical process. They hire a bookkeeper and accountant first, then controller to manage them, and then a CPA for tax strategy, and finally a CFO. However, this is not always the most strategic way to manage your company’s finances. Instead, you should look at your company’s needs, the capabilities of your existing team, and your goals.
Often, a bookkeeper and accountant can perform similar duties, depending on their level of expertise. Low-level bookkeepers may be best at processing transactions, payroll, and AR/AP, while accountants prepare financial statements, close out at the end of the month, and perform reconciliations. This, at a part-time or full-time level, is a standard need for most companies.
Because of the differences between a controller and a CFO, the next hire is contingent on your company’s goals. If your historical financials are complicated and need extra management to oversee them, then you may be in need of a financial controller. If your goals and needs are based on growth, pivots, transactions, or if your company is currently facing financial challenges, then you are most likely in need of a CFO. However, unless your company or needs are large enough to merit a full-time CFO (usually $30-40M+ in annual revenue and 150-250+ employees), you may be better off hiring an outsourced, fractional CFO. This gives you the high level of financial strategy your company needs, but without the in-house salary, bonuses, and benefits that come with a full-time hire.
As a separate consideration, if what you really need is tax strategy–minimizing tax burden, keeping records, and filing taxes, then you may actually be in need of a CPA.
3 Signs You May Need a Financial Controller
If you’re still not sure whether you need a controller or CFO, consider the points below.
1. You Don’t Have Financial Information/Reports You Need When You Need Them.
Controllers are responsible for providing timely financial information and reports so you can make intelligent, information-based business decisions. Since all major business decisions are contingent on numbers, it’s important to have someone around who can answer those questions quickly and provide you relevant financial reports and information when you need it.
2. Your Financial Reports are Behind or Inaccurate.
If you haven’t been operating your organization or making business decisions with up-to-date financial information, then you’re not running your organization as efficiently as you could be. A powerful change you can make in your organization is enlisting a full- or part-time controller who can provide accurate reports within 15 days of month-end. This helps you make more strategic and intelligent business decisions while keeping a steady pulse on the health of your organization.
3. Your Spending or Accounts Receivable/Payable are Out of Control
If you’re not confident that your team is on top of billing customers, collecting and applying client payments, paying invoices, or keeping records updated, then it’s time to add a full- or part-time controller to your organization. A controller will clean up your current financial records and make sure processes moving forward are streamlined according to your current needs.
If you have regular cash flow issues, however, you may want to consider a consulting CFO.
3 Signs You May Need a CFO
If your company is in need of elevated financial strategy, you may be in need of a CFO. Here are some signs you should consider:
1. You’re Raising Capital or Preparing for Another Transaction
If your company is preparing to raise capital, pursue a merger or acquisition, or planning for a strategic exit within the next 5 years, it’s time to hire an outsourced CFO. A CFO will ensure your finances are in a position to support a transaction. They will also provide the analysis and experience to determine whether the transaction you’re pursuing is the most beneficial for your company and your shareholders. In addition, the CFO can help with preparing the documents needed to pursue the transaction, will assist in due diligence, negotiate as needed, and help review the final documents.
Having a CFO at the table also helps to validate your company. It may also open up the possibility of valuable introductions and contacts as most CFOs have raised capital or participated in other significant transactions for many organizations over several years.
2. Margins are Tight or You Have Consistent Cash Flow Problems
How efficiently is your company running right now? If your margins are tight, it could be a sign your company isn’t working at its peak performance. A part-time CFO will dig into your numbers and your existing systems and figure out where improvements can be made. Are there materials or services that could be purchased more inexpensively by renegotiating contracts or considering other vendor relationships? Or are there terms that could be changed to improve cash flow? Are materials being wasted in any part of the organization or are you focusing on products or services that are less profitable or unprofitable for your business? Are there inventory adjustments to be made? Departments that seem to be spending too much or too little? Systems that could be changed or optimized? Are your prices too high or too low?
A CFO brings with him or her years of experience in organizations just like your own, which means they’ve seen and solved challenges similar to those your organization faces. Having their experience and insight on your team can elevate your systems, processes, and strategy more than almost any other single hire has the power to do.
3. You Need to Improve Your Financial Strategy
A full- or part-time CFO brings a level of strategy, insight, and execution for which small or inexperienced financial teams may not be qualified. CFOs have a wide range of industry, operations, and corporate finance experience. They focus on future cash flow more than historical data, and are experts in long-range operational planning and making sure every arm of the company is performing sustainably at peak performance.
One of a CFO’s most important tools is the long-term forecast. A financial forecast goes down to the detail to determine where money should be spent, where money should be coming from, and when. This forecast will guide budgeting, fundraising, sales, marketing, purchasing, and operations.
The Difference Between a CFO and a Controller – Final Thoughts
While a controller can be essential to keeping your current records organized and preparing timely and accurate reports, a CFO is your secret weapon for growth. With their tools, relationships, and expertise, your company gains insider knowledge from someone who has already helped dozens of companies just like your own succeed. They are the architect who takes your dreams and shows you exactly how to build them; they help you know who and what you need to get the job done in the most efficient ways possible, and help guide the implementation from start to finish.
How Can We Help?
Preferred CFO is regarded as one of the most experienced outsourced CFO firms in the United States. Our full-service fractional financial team includes bookkeepers, controllers, and CFOs. To learn more about how Preferred CFO can help elevate your financial strategy and create real, measurable difference in your business, contact Preferred CFO today.
About the Author
Michael Flint is an experienced CFO with over 20 years in financial management. His expertise includes budgeting and forecasting, business process and systems improvement/automation, and technical accounting compliance. Michael is a VentureCapital.org Mentor and holds a Master’s in Accounting from Brigham Young Utah.
You may also be interested in…
What is Cost of Goods Sold (COGS)? Cost of Goods Sold is also known as COGS or Cost of Sales. It is a critical financial metric that indicates the direct cost of creating or acquiring the goods a company sells during a given time period. This figure helps companies...
Strategic CFO, Bradford Pack, discusses the 7 most common financial challenges faced by construction companies. With long project times, sizable material orders, and upfront labor costs, the construction industry often faces a variety of financial challenges. Below...
An axiom in business is that CEOs and founders must “know what they don’t know.” It’s rare that a CEO or founder has expertise in all arms of the business. Instead, they must rely on identifying their weaknesses and make strategic adjustments—usually by hiring someone...
The year 2020 has impacted businesses of all kinds in extraordinary ways, leading some to stunning windfall profits and others to utter ruin. This is especially true in the case of software-as-a-service (SaaS) companies. For instance, Covid-19 restrictions have kept...
On Sunday, December 20, Congress passed a $900B stimulus package. One week later, on Sunday, December 27, Trump signed the bill into law. While there are many aspects of the bill offering moratoriums on evictions and extending unemployment benefits, the bill also...
Preferred CFO has worked with hundreds of businesses from startups and small businesses to medium-sized businesses or businesses looking to fundraise. While many of these are companies experiencing high levels of growth, many are not yet in a position to afford or...
CFOs are high-level, strategic experts who optimize financial resources in a company while using those resources to achieve company goals more efficiently and effectively. Unlike bookkeepers, controllers, and accountants whose primary functions are rear-facing,...
It’s not uncommon to have difficulty differentiating between the main financial professionals. Not only are the names similar, but they are also often unintentionally used interchangeably. However, despite how the titles may be used colloquially, there are distinct...
When is the best time to make a new hire? Hiring too late can mean work (and clients) falling through the cracks; hiring too early can mean unnecessarily increasing your expenses. Payroll is one of the largest expenses a company will face, which makes the decision to...
It’s becoming increasingly common to see companies turning to an outsourced CFO instead of a traditional in-house CFO. This is especially true for the dynamic, high-growth SaaS industry. SaaS companies are finding that outsourced CFOs specializing in SaaS are often...
When your organization decides it’s time to bring in a new chief financial officer, is it better to hire a virtual CFO or an in-house CFO? When many companies think of CFOs, they default to the expectation of a long-term hire requiring an office, six-figure salary,...
Business Valuation Methods & Determining What Your Business is Worth Whether you're preparing for a sale or acquisition, seeking debt or equity financing, or evaluating other strategic business decisions, it's helpful to have a good pulse on the value of your...