November 11, 2020

Controller vs cfo- the right choice for your business;

The terms Controller and Chief Finance Officer are often confused by most people. Some firms have CFOs working as controllers and vice versa. However, as the business grows in size, these roles become well defined as the individuals will have different roles to play.

As a business owner, you may first need a bookkeeper only. But as it grows, you will find yourself requiring a more experienced officer to run your finance activities, and at this point, you will get a financial controller. Later, you will need a CFO who will help you mobilize funds and help in investment and capital structure decisions.

Depending on the company’s needs and size, some companies will have a controller only, while others will only have a CFO. Others may also have both. It’s important to note that most of the roles for financial controllers and CFO overrun each other.

In this post, you will be able to see the different roles of each of these officers. With this, you will choose the person that is the right choice for your firm and identify at what stage these people will be required in your company.

Controller;

According to Investopedia, a controller is responsible for all the companies’ activities relating to accounting. The accounting activities include management accounting, high-level, and finance activities in a company. The financial controller of a company mostly reports to the chief finance officer (CFO).

Duties;

A financial controller’s duty will vary depending on the size of the company. However, there are general duties that a financial controller ought to carry out.

  • Responsible for the Preparation of the company’s operational budgets. Budgets allow firms to control their expenditures on a weekly, monthly, and also annual basis. The firms’ controller should analyze the firms’ expenses and variances, therefore assisting in preparing the firms’ budget.
  • Responsible for the Preparation of the firms’ financial statements. Financial controllers are responsible for financial reports of the company on a day to day basis.
  • The controller should manage the company’s receivables, controls, Payroll, payables, and interdepartmental communications. It is done monthly, quarterly, and also annually.
  • Ensure internal control auditing is completed. As a trained CPA, the financial controller should prevent all frauds, security breaches, and possible errors that could be committed.
  • They are tasked with the training and hiring of the finance department team. The CFO is tasked with supervising the book keeps in the finance department. They also run and assign duties to other staff in that department.
  • Ensure future legislation of a firm impacting taxes and operations are monitored. Through this, they ensure the firm has the required licenses, permits, and all operational requirements are fulfilled. Filling of government taxes, industry taxes, and federal taxes is also a role they undertake.

Requirements

  • Have ten years of experience in finance or accounting.
  • Have a Bachelor’s degree in finance, accounting, or business administration.
  • A Master’s degree is preferable in most cases.
  • Professional certificates and licenses as a certified public accountant are also preferable.

CHIEF FINANCE OFFICER (CFO)

The chief finance officer (CFO) is an individual whose responsibility is to manage firms’ financial actions. The CFO is considered as a senior executive. Often the CFO is the 3rd highest rank manager in a company. The CFO reports directly to the CEO, and together with other firms senior executives, they can make significant decisions regarding the company.

The CFO is delegated to create financial plans and track cash flows while analyzing its weaknesses and strengths and then proposing corrective actions. They are also tasked with managing the accounting and finance divisions and ensuring that the firm’s financial statements are accurately completed in the time required.

Duties

  • The CFO is the head of the finance department. They are therefore tasked with the team’s supervision and ensure that they monitor all the finance staff performance, ensuring they run their roles appropriately.
  • Ensure the firm’s financial statements are accurately completed on time. They will also ensure they are packaged in a manner that all stakeholders can understand.
  • She or he is overseeing taxation issues.
  • Assist CEO in forecasting. The company will need a financial strategy on strategy implementation, pricing, and projections of long term investments. The CFO will be very vital in these roles.
  • Assist CEO in mobilizing funds for various activities. The CFO can be asked to join the team mobilizing the firms’ funds as they can provide expertise in predicting the company’s future needs.
  • The management of government funds and its financial policy. In the case of a firm funded by the government, the CFO will be responsible for ensuring the government funds are well managed and used as per the requirements.
  • They are tasked with advising the CEO on capital structure, investments, and management of expenses and income. The CFO should advise the CEO on the perfect capital structure for the company and the benefits and disadvantages that each portfolio holds.

Requirements

  • Shows that they can act as controller and CFO.
  • They have the capability of creating chemistry with firms’ owners.
  • Has had alot of experience in the management of a finance team.

What is the right choice for your business?

Small businesses will typically hire bookkeepers. As their revenue grows, they hire controllers. When companies get a revenue of approximately £10MM and above, they usually employ financial controllers. If the company has not hired a CFO, the controller will act as the CEO financial advisor. When the company is making approximately £10mm, the controller will be more involved in more time consuming and intensive economic activities.

Commonly, firms with only a minimum of £1mm annual revenue employ CFO part-time. At approximately £50MM yearly income, the firm should consider a full-time controller as the firm has so many complicated finance activities.

According to payscale.com, the average annual pay for financial controllers is £48,650 and for CFOS is £97,583 annually. Therefore, it’s prudent for a company owner to determine whether they need to employ both or could do with one. Small businesses can also consider hiring a part-time CFO to get their input after some time.

It’s noted that tech firms usually employ CFOs earlier than other companies as they have expected rapid growth, and investors have invested a lot of money.

In conclusion, a company owner should weigh the cost of hiring these officers and how many benefits they bring to the firm.