James E. Early

Interim CFO / Controller Services

Full Service Accounting • Tax • Finance • Administration

What is the difference between a CFO and a controller?

Posted on January 9, 2012 under Updates | Comments Off

What is the difference between a CFO and a controller? I am often asked this question, especially by business owners and entrepreneurs. Usually I can explain it in brief fashion, having worn both hats at various times, but even I realize that every so often these functions cross over, particularly when a business is just starting or moving to a new level when more focus on accounting is needed. The last time I was asked, it was by an officer in a new and fast growing startup. They needed both a CFO and a controller, really, but they were only planning to hire one. Which one? This got me thinking. So, for any with the same question, here are a few of my thoughts in writing.

We all know there’s more to a person than a title, and a job title doesn’t often tell all that a person does for a company. To some, titles mean nothing. It’s commitment, performance and results that count. All of this is true, but by and large in the accounting profession and in the American economy as a whole, these titles have taken on connotations and meanings that refer to individuals who are trained and have the experience necessary to perform certain accounting and finance functions that are important for any company and important for anyone in business to know. The crossover usually happens in companies that are growing, are involved with outside lenders or investors, yet have limited resources to dedicate to the accounting function.

Typically in a mid-size to large corporation that has sufficient resources, the controller is responsible for managing the day to day accounting operations (billing, cash receipts, payments) and financial reporting. He or she may also oversee the budgeting process, prepare ad hoc reports and analysis for specific needs, be involved with the tax return, year-end audit preparation and for a public company, an endless number of SEC filings.

Again for the mid-size to large company, one which has the resources sufficient to staff the accounting and finance function in-house, the CFO, as the company’s “chief” financial officer, not only has the ultimate responsibility for the controller’s work but also for a broad number of strategic items that are not always quantifiable. The latter category would include maintaining relationships with investors, bankers, suppliers and business partners, supporting and being the occasional sounding board to the CEO, presenting and interpreting financial plans and audit results to the audit committee and board of directors, and many other intangibles, not to mention financing the company’s capital or ongoing working capital needs. Thus, a larger role, more big-picture, and one full of responsibility and accountability, particularly with public companies where Sarbanes-Oxley regulation applies in addition to the normal, good-faith accountability to the company’s financial stakeholders.

Much more could be said about each role and exceptions can always be found to the above scenarios, but in general the controller has responsibility for the day to day accounting operations and the preparation of financial reports (so, “production” in a sense). The CFO has the ultimate responsibility for all of that as well as for providing strategic financial direction to the company, fundraising in the capital markets as needed, and maintaining important relationships with the company’s financial stakeholders and business partners (“planning and overseeing” in a sense).

Now to answer the original question as it applies to a new business, although there may be one person performing the task, the CFO/Controller for a new or smaller company will be one very used to wearing two hats. I think any who recognize the functions described above, who are in the position of needing to hire a CFO/Controller (the two-in-one function), would quickly see that that person needs to be trained, experienced, have a fair amount of maturity and, of course, all the integrity that goes along with that. Unspoken but equally important is their ability to work well with the senior team and be able to make finance, system and staffing changes as needed, when the company begins to grow.

My recommendation to small or newer companies considering how to address their accounting and financing needs with a CFO, controller, or CFO/Controller is to be sure to talk to an accounting professional before taking on a long-term hire. You may know a CPA or audit professional already. Talk to one or more, who preferably would take an interest in helping your business and who have been in the profession awhile. Describe your company, its current needs for accounting services, its financing needs and its resources. If they are experienced, they can guide you in several ways: either to recommend a person they know to interview for hire, or if it is too soon to hire someone full-time, they might recommend an interim CFO/Controller they know personally to provide services on a part-time basis. The latter course is designed to save your company money, meet your current accounting and finance needs and if the person is right, help your business accommodate its growth until reaching the point where a permanent hire is the next solution.

Your inquiries and comments are welcome.

Jim Early
January 9, 2012