Knowing Controller Responsibilities & Common Mistakes in Modern Finance

Financial Controllers (FCs, or just controllers) have experienced some significant new developments in their role in a finance team. They are more engaged with the c-suite and leadership responsibilities, and are also affected by the development of new technological resources in corporate finance. It is particularly important to note the specificity of the development of this role in relation to the C-suite, because many organizations have made the mistake of treating their controllers like CFOs. In order to get more out of the performance of your finance team’s controller, it is important to understand the difference between the CFO and the FC, as well as some of the most common mistakes controllers make and how to avoid them.

The Critical Difference Between Controllers & CFOs

A finance controller is necessary for bookkeeping in your finance department, and is particularly important in the beginning stages of a business. However, as a business grows and scales, you might eventually need to bring on a CFO. A critical mistake to avoid is thinking that your controller will make a good CFO/laying CFO responsibilities on your controller. The reason this is so important is that the skills needed to be a good controller are vastly different than that required of a great CFO. A lot of entrepreneurs don’t get this, particularly if their gift isn't finance.

A controller's job is to make sure your books are in perfect order, as well as analyzing your accounts. FCs must also ensure that everything is debited or credited accurately, and that there are no mistakes when it comes to the cash inflow and outflow of your business. If the numbers from your finance team aren’t accurate, your organization may end up making a critically bad decision.

A CFO, on the other hand, is a traditionally number crunching role that has adopted much more c-suite responsibilities than a financial controller has. He or she is a businessperson, who also has a finance background. While they have a responsibility to ensure that the numbers are accurate, CFOs don’t directly do that work themselves; this is where the controller steps in.

Rather, the CFO's job is to analyze the root stories behind the numbers, and explain why revenue is down, for instance, while profits are up and what to do about it. The CFO is also a role player who is significantly more engaged with the balance sheet of the business. They serve as an adviser to the CEO in regards to determining if the business is too asset heavy, or whether you should be renegotiating your covenants with the bank. The CFO is also focused on the company’s long term finances in terms of forecasting, as well as how the business might fund, say, an acquisition by borrowing or other means.

These are all high-impact duties that most FCs would not be suited to. While there are a few controllers who can make the leap to taking on the role of a CFO, it's actually a bit rare. Part of the reason is that many controllers don't have a solid understanding of how the CFO role differs from that of working heads down on the books. This is particularly true for controllers starting out at small companies, unless they have aggressively developed themselves.

The above is precisely why most companies eventually look outside for someone with the experience and skill-set they need when they want to install a CFO. That said, if your business is on a fast-growth path, and you're looking for that next level of financial and strategic adviser in your business, don't just automatically promote your controller to that role. Stop and consider if they understand how their job would be different--and if they have the aptitude to make that leap. If not, then you and your business will be much better off by looking outside to find the ideal CFO.

10 Common Mistakes Made By FCs

Aside from understanding the differences between CFO and controller responsibilities, finance professionals should also be aware of the most common mistakes FCs make. The mission of a controller is to perform proper management oversight of the company, and their main functions are roughly monitoring, analysis, planning and strategic decision making. The most notable mistakes are as follows:

1. Poor planning/lack of: This leads to the wrong decisions being made about growth, investment or financing. Such low quality of planning can also signify a lack of coordination between departments and people.

2. Economic losses due to theft or mismanagement of risks: This entails one or more of the control mechanisms of the company's financial management have not been working properly, with obvious consequences.

3. Lack of control of deviations from the budget: So you do not take timely corrective action.

4. Problems in the routine work of the team due to not using techniques that encourage people to participate, meaning people are not given the right incentives, which leads to a lack of motivation.

5. Budgets are not prepared, or the budgets used are prepared poorly, which creates imbalances and the misuse of resources.

6. There is no information on costs or the information available is incorrect, so the wrong decisions are taken regarding sale prices or discounts.

7. The regular information on the progress of the company is incorrect or generated very late, so you cannot make a correct assessment of what is happening.

8. Lacking proficiency in new technologies, or not implementing them at all: The competitive edge for finance professionals in 2021 is the proper use of new technological tools, in order to automate your work and create new insights. Sticking to only spreadsheets and manual tasks that could be automated is against your interests.

9. Putting out too much information. Financial data is often duplicated or even triplicated, but key data can often be missing. This prevents you from taking timely measures to optimize the performance of the company.

10. Designing an excessively complex management control system.