The job description for a financial controller and a CFO are eerily similar. A controller (or comptroller in government roles) is the company’s lead accountant and the one in charge of running day-to-day activities of the accounting department. They maintain accurate financial records and are usually senior managers with lots of accounting experience and responsibility.
A CFO is the top financial executive in a firm whose responsibilities encompass the controller and include the overall financial strategy and vision of the company. In addition to accounting processes, the CFO leads prospective financial activities that are part of the vision: forecasting, budgeting, mergers, and investments.
Both the CFO and controller are financial experts and can be relied upon to accurately report data and finances. The CFO should focus less on dollars and cents and more on analysis, evaluating technology, and even representing the company in financial forums. In many organizations, the controller reports to the CFO, while in others they work closely together. For smaller companies on a budget or in the development stage, there is often a debate about which one should be hired: CFO, financial controller, or a combination of both?
The case for a controller
For small companies or those whose budget doesn’t allow both, a controller can seem far more attractive. According to Payscale, the average salary for a CFO is 1.5 times higher than that of a controller, and this number can reach closer to twice as much depending on the experience and location. That is a significant difference for a company on a budget that needs to choose between one or the other.
Besides technical differences, characteristics and personalities are also a big factor. A Harvard Business Review article researched what makes a CEO successful based on the 16 personality types. Other than the characteristics of impatience and intensity which creates a red flag, independence, quick thinking, and the ability to analyze nonlinear situations are some of the top qualities that give a CEO the best chance to lead the company. While listening to advice from other executives is always beneficial, if the CEO’s character is one of independence and quick action, then a CFO is less critical and a controller may be a better choice.
In addition to the characteristics of the CEO, the nature of the business also comes into play. An organization which is small, well established, and not looking to make drastic changes in the near future would be fine going with a controller over a CFO, and perhaps even benefit more from a controller. In addition, a business that focuses more on numbers and complex taxes rather than industry changes and long term outlook, would be better off with a controller who can focus on accounting and crunching numbers.
If your company’s accountant can’t keep up with the workload, a controller would be more beneficial than a second accountant, and more directly involved than a CFO who is probably not needed in this situation. In addition, if the company is growing rapidly and you require accounting records based on Generally Accepted Accounting Principles (GAAP) then a controller would be the better choice.
The case for a CFO
When to hire a CFO is one of the most pressing issues for a young company, as bringing another executive on board is a big step. When the time is right, it is best not to wait, and if the budget is available then it is even more worth it to act on hiring one. Another C-suite onboard the company can do wonders, especially a financial expert who brings leadership and a long term perspective that is hard to match. If the budget allows and the time is right, why not both?
If the company is in a transition stage such as a merger, acquisition, or relocation, the financial insights of a CFO are incredibly valuable. Hiring the CFO well before the transition occurs will ensure that they have enough time to delve into the company’s vision and culture in order to make the best decisions.
Forecasting is another reason to choose a CFO over a controller. Scenario planning and forecasting have become one of the most pressing issues for young companies in response to the constant changes, which can affect the business from all angles. In addition, CFOs have a unique combination of short and long term perspectives on investments that are very valuable to the CEO.
Other than the classic CFO hiring, other options are available as well. Outsourcing CFO’s have become a popular option and can be the answer to the dilemma of whether to hire a controller or CFO. Outsourcing is perfect for time sensitive projects or when the budget is tight and an outside, experienced perspective is needed.
How to make the Decision?
Many experts try to put a numerical scale of when to hire a CFO. Reaching $1 million in revenue used to be the standard for many business categories, but this method is outdated. In the world of technology and startups, the fast paced environment requires more forward and dynamic thinking. This encompasses investors, growth, expectations, and market outlook, creating the need for a CFO much earlier than before.
To make the decision even more difficult, some companies opt to go with positions that are similar to CFOs and controllers, but cater to certain niches for individualized business needs. A treasurer or tax manager can be interchangeable with the controller and improve business processes that have tax heavy implications or an unusual amount of money flowing through them. In regards to the CFO, a COO or even a CIO might be a better choice for the company if the current decisions are more tech related or operations focused instead of financial.
If a company comes to the conclusion that a controller is the best choice, then the CEO should look for a professional who has experience in leading multiple accountants at the same time. This will ensure that the controller holds a good level of leadership abilities and can take on the additional flexibility of CFO and bookkeeper responsibilities in a pinch.
On the other hand, if a CFO is decided on as the best option, then downward flexibility needs to be part of the game plan as well. The CFO should be willing and able to step down to handle the responsibilities of a controller or accountant when needed, even if this means spending less time on the more classic CFO job description activities. In this case, interpersonal skills are more critical than usual, as this requires the potential CFO to work with employees on all different levels.
Brian Sweeny, a CPA and partner at Redpath sums it up well:
"A CFO is more forward-looking, advising on the moves a company needs to make to remain financially viable in the near term and beyond. Controllers, on the other hand, typically focus on historical information and the present state of your finances."
No matter which one you choose, the decision should be calculated and fit for the personalized needs of your company. Most importantly are the characteristics of the hiree. Flexibility and belief in the company, along with a willingness to expand the responsibilities when necessary will be key for financial success no matter which job title is given.